Fixed Asset Depreciation FY2025-26 Update: Here’s the Breakdown!
Just give a thought: you are about to close Q1 of the financial year 2025-26, and your CA flags errors in your depreciation report. You just identified that; the report has depreciation rates based on last year’s slab. Looks like a minor mismatch, but it urges you to pay more taxes than you actually owe. You might even miss eligible deductions.
For businesses to stay compliant, fixed asset depreciation isn’t just a need any more. It is a strategic move for cost-saving. The CBDT report says that multiple asset categories have witnessed realignment of rates in 2025-26.
The changes in depreciation rates on fixed assets affect your tax planning and asset valuation. And if overlooked, higher tax payments or a red flag during financial audits.
In this article, we will unfold everything right from updated rates under the IT Act to what they mean to your business. Scroll below to optimise every rupee you invest in the fixed assets.
What is the Depreciation of Fixed Assets?
Depreciation is simply used to steadily deduct the value of a physical asset above its operational lifespan. This allows for the distribution of the asset expense over the period it contributes to business operations.
Fixed asset depreciation is the methodical process of spreading the cost of a tangible asset over the duration it is expected to be used in the business. It depicts the value deduction due to factors like damage, wear and tear, etc.
What are the Updated Depreciation rates for Popularly Used Assets in FY2025-26?
Which Factors Influence Depreciation Rates on Fixed Assets?
1. Physical Asset:
- These are tangible assets that are anticipated to last for more than a year.
- These resources are normally termed as capital assets.
- We cannot consider a land under this category, as it continues to live forever and has no depreciation value.
2. Operational Life:
- It generally predicts the time frame for which the equipment will remain operational for a business.
- The time span doesn’t necessarily mean how long it will live; instead, it just depicts till when the business can use it.
- Operational life often aligns with accounting and tax standards.
- Cost:
- This factor mainly caters to purchasing cost and other expenses that are required to put the equipment to use.
- It includes shipping expenses, installation charges, setup fees, etc.
What is a Block of Assets?
A block of assets is generally considered to be a cluster of assets that fall under the same roof of resources.
- Tangible Assets: These include buildings, equipment, or furniture.
- Intangible Assets: These include copyrights, patents, trade mark, commercial rights, etc.
We identify these assets based on their life span, use, and nature. Also, the depreciation rates on fixed assets vary for every block. This must be considered for classification. Assets having the same rates are categorised under the same block.
Assets that don’t fall under any class lose their identity as fixed asset depreciation doesn’t apply to individual properties according to the IT Act.
How to Calculate Depreciation on Fixed Assets?
Straight Line Method
This is the easiest and popularly used method to compute fixed asset depreciation. An equal depreciation expense is charged every year throughout the asset’s operational tenure. It mainly applies to building, furniture, etc, assets that give equal benefits for the tenure.
Formula:
Depreciation Every year = [(Asset Cost – Residual Value) / Operational Life]
How to Calculate Depreciation of Fixed Assets with the Straight Line Method?
- Identify the asset cost.
- Subtract the residual value from the asset cost. Residual value refers to the estimated cost incurred by selling the asset after its use. At this step, you get the depreciable amount.
- Proceed to calculate the asset’s expected usable life span.
- Divide the depreciable amount by the operational life, and you get the fixed asset depreciation for every year.
Written Down Value Method
WDV, or the Written Down Value method, is commonly used to determine how an asset’s value decreases over time. It is different from the straight line method, as it considers the assets’ deteriorating value for the period. The idea behind this method is that most assets lose value quickly at the beginning of their usage period. Let’s see the formula.
Formula:
WDV = Book Value at Beginning of the Year X Depreciation Rate%
You can also calculate depreciation instantly using our easy-to-use depreciation calculator.
What is the Depreciation Rate for FY 2025-26 For Most Commonly Used Assets?
| Sr. No | Asset Class | Asset Type | Rate of Depreciation |
|---|---|---|---|
| 1 | Building | Homes or apartments intended solely for private living, excluding boarding houses and hotels. | 5% |
| 2 | Building | Communal housing units like boardings and hotels | 10% |
| 3 | Building | Short-duration structures, often assembled using wood | 40% |
| 4 | Furniture | Movable and fixed items, including electrical accessories and fixtures | 10% |
| 5 | Plant and machinery | Motor cars not employed in rental or hire-based operations. | 15% |
| 6 | Plant and machinery | Motor cars not engaged in hire services, provided they were bought on or after August 23, 2019, and used before April 1, 2020. | 30% |
| 7 | Plant and machinery | Commercial vehicles such as lorries, taxis, and motor buses operated as part of a hire or transport business. | 30% |
| 8 | Plant and machinery | Vehicles used in the business of providing transportation on hire—such as lorries, taxis, and buses—purchased on or after August 23, 2019, and operational before April 1, 2020. | 45% |
| 9 | Plant and machinery | Computer hardware and related software applications | 40% |
| 10 | Plant and machinery | Books in the nature of yearly publications owned by a person engaged in a profession. | 40% |
| 11 | Plant and machinery | Non-periodic books purchased for professional reference purposes. | 40% |
| 12 | Plant and machinery | Books used as stock-in-trade by an assessee managing a commercial lending library. | 40% |
| 13 | Intangible assets | Commercial and intellectual property rights, such as franchises, trademarks, patents, licenses, copyrights, and technical knowledge, along with other rights of a similar business nature. | 25% |
Depreciation Rates for Tangible Assets and Intangible Assets!
| Asset Class | Sr. No. | Asset Type | Rate of Depreciation |
|---|---|---|---|
| Part A Tangible Assets | |||
| Building | 1 | Buildings used mainly as dwellings, not including accommodations such as boarding houses or hotels. | 5% |
| 2 | Buildings that are neither predominantly residential nor classified under subitems 1 and 3. | 10% | |
| 3 | Structures purchased on or after September 1, 2002, for housing plant and machinery that are components of water treatment or supply systems, and utilized in infrastructure facility businesses as per section 80-IA(4)(i). | 40% | |
| 4 | Provisional constructions, for example, wooden structures meant for temporary purposes. | 40% | |
| Furniture and fittings | Furniture items along with associated electrical fixtures. | 10% | |
| Plant and machinery | 1 | All plant and machinery except for those referenced in sub-items (2), (3), and (8) in the subsequent list. | 15% |
| 2 | Motor cars, excluding those deployed in rental or hire services, that were acquired or put into operation on or after April 1, 1990. | 15% | |
| 3 | Cars not used in hire-based businesses, acquired within the period from August 23, 2019, to March 31, 2020, and made operational before April 1, 2020. | 30% | |
| 3(i) | Aeroplanes and the engines used in their operation | 40% | |
| 3(ii) | (a) Motor transport vehicles utilized in rental or hire services, including lorries, buses, and taxis. | 30% | |
| (b) Motor lorries, buses, and taxis used for hire operations, acquired during the period from August 23, 2019, to March 31, 2020, and made operational before April 1, 2020. | 45% | ||
| 3(iii) | A commercial vehicle acquired by the assessee on or after October 1, 1998, but before April 1, 1999, and used at any time before April 1, 1999, for business or professional purposes, in accordance with the third proviso to clause (ii) of sub-section (1) of section 32. | 40% | |
| 3(iv) | A new commercial vehicle acquired on or after October 1, 1998, but before April 1, 1999, in replacement of a condemned vehicle that was over 15 years old, and used at any time before April 1, 1999, for the purpose of business or profession, in accordance with the third proviso to clause (ii) of sub-section (1) of section 32. | 40% | |
| 3(v) | Commercial vehicle newly purchased between April 1, 1999, and March 31, 2000, in substitution of a scrapped vehicle older than 15 years, and brought into business or professional use before April 1, 2000, as per the second proviso to section 32(1)(ii). | 40% | |
| 3(vi) | A commercial vehicle newly procured during the financial year 2001–02 and brought into use before April 1, 2002, for professional or business activities. | 40% | |
| New commercial vehicles purchased between January 1, 2009, and September 30, 2009, and brought into use within the same period for business or professional purposes, subject to the provisions laid out in paragraph 6 of the Notes below the Table. | 40% | ||
| 3(vii) | Moulding equipment employed in the manufacture of plastic and rubber products. | 30% | |
| 3(viii) | Equipment used for controlling or reducing air pollution | 40% | |
| Felt maintenance system | 40% | ||
| Electrostatic air cleaners | 40% | ||
| Scrubber | 40% | ||
| Opposing-flow wet/ Packed column gas absorbers / Narrow-throat / Spiral-flow gas cleaning units | 40% | ||
| Pollutant capture systems | 40% | ||
| Residue evacuation and ash disposal systems used in industrial combustion processes. | 40% | ||
| 3(ix) | Wastewater purification units | 40% | |
| Air-agitated sedimentation tanks, including associated compressor systems | 40% | ||
| Self-cleaning screening units | 40% | ||
| Mechanical oil and grease skimming units | 40% | ||
| Rapid mixing tanks integrated with precision chemical feed equipment | 40% | ||
| Mechanical treatment vessels for reaction and flocculation processes | 40% | ||
| Mechanically agitated and air-diffused wastewater aeration units | 40% | ||
| Biofilters | 40% | ||
| Aerated stabilization basins | 40% | ||
| Gas flotation equipment | 40% | ||
| Methane | 40% | ||
| Energy recovery anaerobic systems | 40% | ||
| Thermal or air-assisted contaminant removal units | 40% | ||
| Marine effluent release systems | 40% | ||
| Urea hydrolyzer modules | 40% | ||
| Carbon adsorption tower | 40% | ||
| Bio | 40% | ||
| Disc-based secondary treatment reactor | 40% | ||
| Ocean discharge pipelines | 40% | ||
| Ion exchange bed reactor | 40% | ||
| Sludge solids separation system | 40% | ||
| 3(x) | (a) Waste minimization and resource reclamation systems (for cryolite, lime, caustic, and chrome) (b) Recovered material processing and recycling infrastructure | 40% | |
| 3(xi) | Equipment used in semiconductor fabrication for ICs from SSI to VLSI, and discrete devices like diodes and transistors, excluding hybrid ICs and items listed under specific sub-items (viii), (ix), (x), and (8). | 30% | |
| 3(xi)a | Vital lifesaving healthcare equipment | 40% | |
| Implantable or surgical-grade D.C. defibrillation devices compatible with pacemakers | 40% | ||
| Colour Doppler | 40% | ||
| Haemodialysis | 40% | ||
| Cobalt therapy unit | 40% | ||
| Vascular imaging system incorporating Digital Subtraction Angiography (DSA) technology for real-time visualization of blood vessels. | 40% | ||
| Heart lung machine | 40% | ||
| Spect Gamma Camera | 40% | ||
| MRI scanner system | 40% | ||
| Mechanical ventilator for use with anaesthetic apparatus | 40% | ||
| Non-anaesthesia integrated ventilator | 40% | ||
| Surgical laser | 40% | ||
| Gamma knife | 40% | ||
| A range of fibre-optic endoscopic tools used for minimally invasive diagnostics and procedures, including resectoscopes (audit and paediatric), arthroscopes, peritoneoscopes, and various flexible scopes such as nasopharyngoscopes, microlaryngoscopes, video laryngoscopes, and laryngobronchoscopes. | 40% | ||
| A set of diagnostic endoscopic instruments used for visualizing the respiratory and upper gastrointestinal tracts, including bronchoscopes, video-based oesophago-gastroscopes, video oesophago-bronchoscopes, and flexible fibre-optic oesophago-gastroscopes. | 40% | ||
| 4 | Reusable refill units made of glass or plastic materials | 40% | |
| 5 | Computing hardware and licensed software packages | 40% | |
| 6 | Textile industry equipment for processing, weaving, or garment manufacturing, procured through TUFS between April 1, 2001, and March 31, 2004, and operational before April 1, 2004. | 40% | |
| 7 | Equipment installed from September 1, 2002 onward in water treatment or supply projects, used specifically for infrastructure facility development under Section 80-IA(4)(i). | 40% | |
| 8 | 1. Wooden mechanical elements employed in artificial silk processing units | 40% | |
| 2. Factory-grade wooden frames employed in matchstick manufacturing processes. | 40% | ||
| 3. Film stock and illumination components, including bulbs for studio lighting systems | 40% | ||
| 4. Salt production units and associated structures built from clayey, sandy, or earthen materials. | 40% | ||
| 5. Quarries and mines | 40% | ||
| Pipes for sand stowing, along with ropes used for winding and hauling, and tubs for material transport in mining operations. | 40% | ||
| Safety lamps | 40% | ||
| 6. Flour mills, rollers | 40% | ||
| 7. Sugar works, rollers | 40% | ||
| 8. Steel and iron industry, rolling mill rolls | 40% | ||
| 9. Energy saving devices | 40% | ||
| (A) Special-purpose boilers and thermal processing furnaces | 40% | ||
| (i) Ignifluid and fluidized bed boilers engineered for improved heat transfer and reduced emissions | 40% | ||
| (ii) Automated continuous-feed furnaces and flameless thermal units for manufacturing processes | 40% | ||
| (iii) Low-consumption, high-performance boilers used in industrial and commercial applications | 40% | ||
| (iv) Fluidized particle bed technique for precise and efficient material heat treatment | 40% | ||
| (B) Automated systems for measuring and recording energy usage and distribution | 40% | ||
| (i) Digital devices for detecting and calculating thermal energy loss | 40% | ||
| (ii) Automated systems for real-time monitoring and control of electrical consumption | 40% | ||
| (iii) Infrared thermography | 40% | ||
| (iv) Digital control systems incorporating microprocessor architecture | 40% | ||
| (v) Energy monitoring instruments including heat loss analyzers, steam and oil flow meters, power factor meters, and digital energy meters. | 40% | ||
| (vi) Gas analyzers used for monitoring combustion by-products in exhaust systems | 40% | ||
| (vii) Instruments for recording maximum electrical demand and conducting clamp-on power measurements without disconnecting circuits | 40% | ||
| (viii) Fuel oil pump testing equipment used for diagnostic and performance verification | 40% | ||
| (C) Energy-saving equipment for reclaiming waste heat from exhaust or flue gases | 40% | ||
| (i) Heat exchangers designed to transfer residual heat to incoming air streams, improving combustion efficiency | 40% | ||
| (ii) Energy recovery devices including economisers and feedwater preheaters for enhancing boiler efficiency | 40% | ||
| (iii) Rotary heat exchangers engineered for efficient recovery of low and high-temperature waste heat | 40% | ||
| (iv) Heat pumps | 40% | ||
| (D) Co-generation systems | 40% | ||
| (i) Turbine systems including controlled extraction and condensing variants used with high-pressure boilers in industrial cogeneration setups. | 40% | ||
| (ii) Energy conversion systems that recover waste or renewable heat through the Organic Rankine Cycle for power generation | 40% | ||
| (iii) Vapour absorption refrigeration systems | 40% | ||
| (iv) Low inlet pressure small steam turbines | 40% | ||
| (E) Electrical equipment | 40% | ||
| (i) Synchronous condenser systems and shunt capacitors | 40% | ||
| (ii) Relays (automatic power cut off devices) | 40% | ||
| (iii) Power factor controller for AC motors | 40% | ||
| (iv) Automatic voltage controller | 40% | ||
| (v) Solid state devices for controlling motor speeds | 40% | ||
| (vi) FACT (Flexible AC Transmission) devices, Thyristor controlled series compensation equipment | 40% | ||
| (vii) Thermally energy-efficient stenters | 40% | ||
| (viii) Series compensation equipment | 40% | ||
| (ix) TOD (Time of Day) energy meters | 40% | ||
| (x) Integrated systems comprising IEDs, RTUs, IT hardware/software, networking tools, and communication frameworks to support real-time monitoring and control in power transmission. | 40% | ||
| (xi) ABT-compliant energy metering devices that capture energy usage in 15-minute intervals with real-time frequency-based tariff calculations. | 40% | ||
| (F) Burners | 40% | ||
| (i) Low excess air combustion burners designed for enhanced fuel efficiency and minimal flue gas losses | 40% | ||
| (ii) Burners configured for high-efficiency operation using preheated air at temperatures greater than 300 degrees Celsius. | 40% | ||
| (iii) Emulsion burners | 40% | ||
| (G) Other equipment | 40% | ||
| (i) Mechanical vapour recompressors | 40% | ||
| (ii) Wet air oxidation equipment for recovery of heat and chemicals | 40% | ||
| (iii) Automatic microprocessor based load demand controllers | 40% | ||
| (iv) Thin film evaporators | 40% | ||
| (v) Fluid couplings and fluid drives | 40% | ||
| (vi) Coal based producer gas plants | 40% | ||
| (vii) Super-charges/turbo charges | 40% | ||
| (viii) Sealed radiation sources for radiation processing plants | 40% | ||
| 10. Gas cylinders including regulators and valves | 40% | ||
| 11. Glass manufacturing concerns, Direct fire glass melting furnaces | 40% | ||
| 12. Mineral oil concerns | 40% | ||
| (i) Plant used in field operations (above ground) distribution, returnable packages | 40% | ||
| (ii) Below-ground infrastructure employed in oil field distribution processes, with the exception of kerbside fueling units, but including field-use tanks and connection fittings | 40% | ||
| (iii) Oil wells not covered in (i) and (ii) above | 15% | ||
| 13. Renewable energy devices | 40% | ||
| (i) Pipe type and concentrating solar collectors | 40% | ||
| (ii) Flat plate solar collectors | 40% | ||
| (iii) Solar cookers | 40% | ||
| (iv) Air/fluid/gas heating systems | 40% | ||
| (v) Solar water heaters and systems | 40% | ||
| (vi) Solar crop drivers and systems | 40% | ||
| (vii) Solar steels and desalination systems | 40% | ||
| (viii) Solar refrigeration, air conditioning systems and cold storages | 40% | ||
| (ix) Solar pumps based on solar-photovoltaic and solar-thermal conversion | 40% | ||
| (x) Solar power generating systems | 40% | ||
| (xi) Solar-photovoltaic panels and modules for water pumping and other applications | 40% | ||
| 14. Wind-powered generation units and associated devices purpose-built for wind applications, commissioned on or after April 1, 2014 | 40% | ||
| 15. Any special devices including electric pumps and generators operating on wind energy (installed on or after April 1, 2014) | 40% | ||
| 16. Books owned by assessees carrying on a profession | 40% | ||
| (i) Books, being annual publications | 40% | ||
| (ii) Books, excluding those covered by entry (i) above | 40% | ||
| (iii) Books owned by assessees carrying on business in running lending libraries | 40% | ||
| Ships | 4(i) | Seafaring vessels such as tugs, survey launches, dredgers, barges, and other comparable craft primarily engaged in dredging operations, as well as sighting boats constructed with wooden hulls. | 20% |
| 4(ii) | Vessels ordinarily operating on inland waters, not covered by sub-item (iii) below | 20% | |
| 4 (iii) | Vessels ordinarily operating on inland waters being speed boats | 20% | |
| Part B Intangible Assets | |||
| Franchise, trademark, patents, license, copyright, know-how or other commercial or business rights of similar nature | 25% | ||
Let’s Conclude
Understanding fixed asset depreciation isn’t just about compliance; it’s all about a strategic move. Doesn’t matter if you are investing in new machinery or building an IT infrastructure, depreciation rates on fixed assets for FY 2025-26 are a must-read. It helps you claim deductions, lower tax flows, and display asset values precisely on your balance sheet.
This blog is your go to manual right from understanding the current depreciation rates to computing values through straight line and WDV methods. So, before closing your accounts for this quarter, take a quick read.
Save this blog for future use and stay tuned until the next update.
FAQs on Fixed Asset Depreciation
How would you record fixed asset depreciation?
Enter the amount as a debit in the expense ledger and as a credit in the accumulated depreciation, which reduces the asset’s book value.
Which fixed assets are depreciated?
Machines, vehicles, and buildings that include both office and rented apartments fall under the depreciation of fixed assets.
How to calculate depreciation on sale of fixed assets?
- Identify original cost, purchase date, depreciation method, sale date, depreciation rate, and sale price.
- Calculate depreciation till the date on which the asset was sold.
- Straight Line Method:
Depreciation per year = (Cost – Residual Value)/ Useful life
- WDV Method
Depreciation=Book Value at Start of Year×Depreciation Rate
- Calculate the book value for the date on which the asset was sold.
- Compute profit/ loss on sale
How long do you depreciate fixed assets?
The number of years for which an asset can be depreciated is called classic life.
