Depreciation and the block of assets concept

Depreciation under Section 32 is allowed on a block of assets — a group of assets of the same class and depreciation rate — using the written-down value (WDV) method. Common rates are 15% for plant and machinery, 10% for furniture and buildings, and 40% for computers; assets used for under 180 days get half the rate in the first year.

The block-of-assets concept

Income-tax depreciation does not track individual assets; it groups them into blocks by class (building, plant and machinery, furniture, intangibles) and rate. Additions are added to the block and sale proceeds are reduced from it. Depreciation is charged on the block's WDV, so individual-asset profit/loss is generally not computed unless the block ceases or empties.

Common rates and the half-year rule

An asset put to use for less than 180 days in the year of acquisition gets half the normal depreciation that year. Verify the current rate for a specific asset.

Additional depreciation

A manufacturing business can claim additional depreciation of 20% of cost on new plant and machinery under Section 32(1)(iia), over and above normal depreciation (10% if used under 180 days, with the balance in the next year). Note that the concessional-regime sections restrict additional depreciation — check the regime opted.

When a block empties or turns negative

• If the entire block is sold and a balance remains, it is a short-term capital loss; if sale proceeds exceed WDV plus additions, a short-term capital gain (Section 50).
• Depreciation is allowed only if the asset is owned and used for business.
• Unabsorbed depreciation can be carried forward indefinitely and set off against any income.
• Reported in Form 3CD clause 18.