Sub-section (1) allows depreciation on two classes of asset owned wholly or partly by the assessee and used wholly and exclusively for the business or profession — tangible assets being buildings, machinery, plant or furniture, and intangible assets being know-how, patents, copyrights, trademarks, licences, franchises or similar business or commercial rights acquired on or after 1 April 1998, expressly not goodwill of a business or profession.
Sub-section (2) gives an undertaking engaged in generation, or generation and distribution, of power depreciation at a prescribed percentage of actual cost. Sub-section (3)(a) gives everyone else a prescribed percentage of the written down value of the block of assets; clause (b) restricts the deduction to a fair proportionate part determined by the Assessing Officer where the asset is used partly, or not wholly and exclusively, for the business; clause (c) bars any deduction where actual cost has already been allowed under section 54. Sub-section (4) halves the deduction to 50% of the prescribed rate for an asset acquired during the year and put to use for less than 180 days in that year.
Sub-section (5) caps the combined depreciation of predecessor and successor on a succession under section 70(1)(zd), (ze) or (zf) or section 313, and of the amalgamating and amalgamated or demerged and resulting company, at what would have been allowed had the event not occurred, split pro rata on the number of days the assets were used by each. Sub-section (6) treats capital expenditure on construction, renovation, extension or improvement of a building held on lease or other right of occupancy as a building owned by the assessee. Sub-section (7) applies the section whether or not the assessee has claimed depreciation.
Sub-sections (8) and (9) carry additional depreciation on new machinery or plant. The assessee must be engaged in manufacture or production of an article or thing, or in generation, transmission or distribution of power; must acquire and install the machinery; must be the first to put it to use; and the machinery must not have been used before by anyone in India or abroad, must not be installed in office premises or residential accommodation including a guest house, must not be an office appliance or road transport vehicle, and must not be an asset whose whole actual cost is allowed as a deduction. The additional deduction is 20% of actual cost, or 10% where the machinery is acquired and put to use for less than 180 days, with the remaining 10% allowed in the immediately succeeding tax year.
Sub-section (10) allows the shortfall between written down value and moneys payable including scrap value on an asset depreciated under sub-section (2), where the asset is sold, discarded, demolished or destroyed in a year other than the year it was first put to use, the moneys payable are less than the written down value, and the deficiency is actually written off in the books. Sub-section (11) rations the deduction to available profits: it is allowed only up to the profits and gains computed before it, no deduction at all if those are a loss, and the unallowed amount is added to the next year's allowable deduction and deemed eligible in that year, and so on — subject to sections 112(3) and 113(4). Sub-section (12) defines assets, know-how, sold, and written down value of the block of assets by reference to section 41(1)(c).
Why it is there
Capital assets lose value in earning business income, so the Act spreads their cost across years rather than allowing it at once, and does the spreading by block and written down value rather than asset by asset. Sub-section (7) makes the allowance compulsory rather than optional, so written down value cannot be inflated by simply not claiming. The additional depreciation in sub-sections (8) and (9) is a separate incentive for new plant in manufacturing and power, hedged with conditions that keep it away from second-hand assets, offices and vehicles.
Who it applies to
An assessee owning buildings, machinery, plant or furniture used wholly and exclusively for a business or profession
An assessee owning qualifying intangible assets acquired on or after 1 April 1998
An undertaking engaged in generation, or generation and distribution, of power
An assessee engaged in manufacture or production of an article or thing, or in generation, transmission or distribution of power, claiming additional depreciation
A predecessor and successor, amalgamating and amalgamated company, or demerged and resulting company in the year of the event
A lessee incurring capital expenditure on a building he does not own
The Assessing Officer determining the fair proportionate part under sub-section (3)(b)
The figures, and what each one turns on
Read the condition in the same row. A figure quoted without it is a wrong answer with a citation attached.
What
Figure
The condition on it
Where
Depreciation rate on the block of assets
Such percentage of written down value as may be prescribed
The section states no rate of its own; the percentage comes from the rules
Sub-section (3)(a)
Depreciation for a power undertaking
Such percentage of actual cost as may be prescribed
Undertaking engaged in generation or generation and distribution of power; again no rate in the section
Sub-section (2)
Half-year restriction
50% of the prescribed rate
Asset acquired by the assessee during the tax year and put to use for less than 180 days in that year
Sub-section (4)
Additional depreciation, full
20% of the actual cost of the new machinery or plant
In the tax year it is acquired and put to use, all conditions in sub-section (8) being met
Sub-section (9)(a)
Additional depreciation, split
10% in the year and 10% in the immediately succeeding tax year
New machinery or plant acquired and put to use for less than 180 days in the relevant tax year
Sub-section (9)(b)
Cut-off for intangible assets
Acquired on or after 1 April 1998
Know-how, patents, copyrights, trademarks, licences, franchises or similar rights; goodwill of a business or profession is excluded outright
Sub-section (1)(b)
What this means in practice
The section carries no rate. Both sub-section (2) and sub-section (3)(a) leave the percentage to be prescribed, so the only percentages actually stated in section 33 are the 50% halving in sub-section (4) and the 20%/10% additional depreciation in sub-section (9). Sub-section (7) matters more than it looks: depreciation is deducted whether or not claimed, so a year skipped still reduces written down value for every later year. The 180-day test bites twice and differently — under sub-section (4) it permanently halves the ordinary deduction for that year, while under sub-section (9)(b) it merely defers half the additional depreciation to the next year. And sub-section (11) is a rationing rule, not a disallowance: unabsorbed depreciation is rolled into the following year's allowance and deemed eligible there, so it survives even a loss year.
An example
Illustrative only, and invented for this page. The figures are chosen to show the rule biting, not taken from any real matter.
A company engaged in manufacture buys new plant for Rs. 5 crore and puts it to use on 1 February, that is for less than 180 days in the tax year. Ordinary depreciation on the block is restricted to 50% of the prescribed rate under sub-section (4). Additional depreciation is not 20% but 10% of Rs. 5 crore, that is Rs. 50 lakh, under sub-section (9)(b), with the balance Rs. 50 lakh allowed in the immediately succeeding tax year. If the same plant had been installed in the company's office premises, sub-section (8)(d)(ii) would deny the additional depreciation altogether.
Where you meet this section
A taxpayer meets this section on the depreciation schedule filed with the return and on the tax audit report; it surfaces in an assessment order when the Assessing Officer restricts the allowance to a fair proportionate part under sub-section (3)(b), disputes the date an asset was put to use, or disallows additional depreciation for failure of a sub-section (8) condition.
The words themselves
In case of any block of assets, deduction in respect of depreciation shall be such percentage of its written down value, as may be prescribed
Section 33(3)(a), Income-tax Act, 2025.
The deduction under this section shall be restricted to 50% of the prescribed rate
Section 33(4), Income-tax Act, 2025.
The provisions of this section shall apply whether or not the assessee has claimed deduction for depreciation in computing his total income.
Section 33(7), Income-tax Act, 2025.
What people get wrong
Quoting a depreciation rate as if it came from section 33. Sub-sections (2) and (3)(a) both say "as may be prescribed"; the only percentages the section itself fixes are 50%, 20% and 10%.
Claiming depreciation on goodwill. Sub-section (1)(b) and the definition in sub-section (12)(a)(ii)(G) exclude goodwill of a business or profession from the intangible assets covered.
Not reducing written down value for a year in which depreciation was not claimed. Sub-section (7) applies the section whether or not it was claimed.
Treating the 180-day rule the same way in both places. Sub-section (4) halves the ordinary deduction for that year outright; sub-section (9)(b) only defers the second 10% of additional depreciation to the following year.
Claiming additional depreciation on second-hand or office equipment. Sub-section (8)(d) bars machinery used before by anyone in India or abroad, machinery installed in office premises or residential accommodation including a guest house, and office appliances or road transport vehicles.
Assuming the terminal allowance in sub-section (10) is available generally. It applies to an asset on which depreciation was claimed and allowed under sub-section (2), needs the deficiency to be actually written off in the books, and is unavailable in the year the asset was first put to use.
What this replaced
The correspondence is the Income Tax Department’s own, from its comparison utility for the 1961 and 2025 Acts. A renumbering is the easy half; whether the words changed is the half that decides cases.
32 - Depreciation
38 - Building, etc., partly used for business, etc., or not exclusively so used
Rules of the Income-tax Rules, 2026 that work section 33. Where the rule’s own heading names the section we say so; the rest are marked on reading the rule, which is our derivation and not the department’s. A rule that serves the section silently and that we have missed will not appear here.
A circular binds the department, not you and not a court. Every one below was written under the 1961 Act; it reaches this section because the department’s own concordance carries the provision it names to this one.
Circular No. 20/2019 — Government of India Ministry of Finance Department of Revenue Central Board of Direct Taxes Circular No. 2.0/2019 New Delhi, dated 2019-08-19
Circular No. 622 — 244. Allowance of depreciation on motor vehicles owned and used by tour operators and travel agents in the business of running the 1992-01-06
Circular No. 609 — Allowance of depreciation on motor vehicles owned and used by tour operators and travel agents in the business of running these ve 1991-07-29
Circular No. 567 — 584. Admissibility of deduction in respect of income from units of the Unit Trust of India 1990-07-19
Circular No. 523 — Section 80 l Loss - Submission of Return for 1988-10-05
Circular No. 323 — 1370. Exemption of units under section 32(1)(ba) of Unit Trust of India Act - Whether over and above and independent of exemption 1982-01-22
Circular No. 314 — 255. Investment allowance on new machinery or plant installed in small scale industrial undertaking - Computation of aggregate val 1981-09-17
Circular No. 212 — 248. Terminal allowance under clause (iii) of sub-section (1) - Whether assessee is required to again write off amount equal to te 1977-02-26
Circular No. 137 — 393. Whether, in computing capital gains on sale of motor car to which proviso to section 43(1) applies for the purposes of deprec 1974-06-13
Circular No. 75 — 1353. Pettifogging enquiries into details of articles covered under the proviso to clause (viii) of sub-section (1) are not to be 1972-01-22
Circular No. 74 — 1364. Interpretation of expression "Initial issue of equity share capital" used in clause (xx) of sub-section (1) 1972-01-15
A notification is made under a power the Act gives and, within that power, is law. These too were made under the 1961 Act and are placed here by the department’s concordance.
Read this before you rely on it. Every decision below was decided under the Income-tax Act, 1961. It appears here because it is tagged to a 1961 provision that the department’s own mapping carries to section 33. That is an inference we have drawn, not a holding on the new section: where the words changed in the move, the reasoning may not survive. Treat this as the place to start looking, not as authority on the 2025 Act.
CIT v Smifs Securities LtdSupreme CourtHelps taxpayertagged s.32 Can I claim depreciation on the goodwill that arose when I took over another company on amalgamation?
CIT v Taj Mahal HotelSupreme CourtHelps taxpayertagged s.32(1) The officer says my fittings are part of the building, not plant. Is there a test, or is it just his impression?
CIT v Bharat AluminiumHigh CourtHelps taxpayertagged s.32 One machine in my block of assets was not used this year. Can the AO deny depreciation on it?
CIT v Yamaha Motor India P LtdHigh CourtHelps taxpayertagged s.32 I discarded machinery this year and did not use it. Can I still claim depreciation on it?
PCIT v Asian Mills P LtdHigh CourtHelps taxpayertagged s.32 I paid freight without TDS after taking the transporters' PANs. Can the AO still disallow the freight?
Sundaram Finance Ltd v ACITHigh CourtHelps departmenttagged s.32 The notice did not specify the default, but you clearly understood it. Does the defect still help you?
DCIT v Archroma India P LtdITATCuts both waystagged s.32(1) I bought a business on slump sale. Can I depreciate the assets at the price I paid?
Explainers
Fitting out premises you do not owntagged s.32(1) I am a tenant and I have spent on partitions, flooring, wiring and a false ceiling. Do I depreciate it, or deduct it?
Succession and business reorganisationtagged s.32(1) My business was taken over mid-year or merged under a court order. Who is assessed, and what happens to depreciation?
When a repair bill stops being a repairtagged s.32 How do I tell whether what I spent on my premises or plant is deductible as repairs or has to be capitalised?
What this page does not tell you. It does not reproduce the section. Everything above was written from the section’s own text as the Income Tax Department publishes it — the text is here, and nothing here is advice on your facts. Where a figure matters, read the sub-section it comes from.
