Rule 25 — Depreciation. Made under s.33, s.263 of the Income-tax Act, 2025.
Rule 25 gives effect to Section 33 and Section 263 of the Income-tax Act, 2025. A rule cannot go beyond the section it serves: where the two seem to differ, the section governs.
Sub-rule (1) is the main charge of the rule: subject to sub-rule (7), the allowance under section 33(3) for depreciation of any block of assets specified in column (2) of the Table in Appendix I is calculated at the percentages in column (3) of that Table, on the written down value of the block, for assets used for the purposes of the business or profession at any time during the tax year.
Sub-rule (2) puts a ceiling on that allowance for the persons in column B of its Table where the conditions in column C are met: a domestic company that has exercised the option under section 199(3), 200(5) or 201(2); an individual or Hindu undivided family, an association of persons or body of individuals whether incorporated or not, or an artificial juridical person referred to in section 2(77)(g), whose income is chargeable to tax under section 202(1); and a co-operative society resident in India that has exercised the option under section 203(5) or 204(2). For these persons the allowance shall not exceed 40% of the written down value of the block.
Sub-rule (3) is the separate straight-line route: the allowance under section 33(2) for assets acquired on or after 1st April, 1977 and specified in column (2) of the Table in Appendix II is calculated at the percentage in column (3) of that Table on the actual cost to the assessee, for assets used for the purposes of the business at any time during the tax year. Sub-rule (4) caps the aggregate: depreciation allowed under section 33(2) for an asset across different tax years shall not exceed its actual cost.
Sub-rule (5) gives the undertaking specified in section 33(2) an option to take depreciation under sub-rule (1) read with Appendix I instead of Appendix II, exercised on or before the due date for furnishing the return under section 263(1)(c) for the tax year in which it begins to generate power. Sub-rule (6) makes that option, once exercised, final and applicable to all subsequent tax years.
Sub-rule (7) creates the 40% block for indigenous technology. New machinery or plant installed during a tax year commencing on or after the 1st April, 1987 for manufacture or production of an article or thing, where the article or thing is made using technology or know-how developed in, or is invented in, a laboratory owned or financed by the Government, owned by a public sector company, or a University or an institution recognised by the Secretary, Department of Scientific and Industrial Research, is treated as part of a block qualifying for depreciation at 40% of written down value, if three conditions are met: the right to use the technology or to manufacture the article was acquired from the owner of the laboratory or a person deriving title from him; the return for the tax year of acquisition is accompanied by a certificate from that Secretary to that effect; and the machinery is not used for manufacture or production of an article or thing specified in the list in Schedule XIII to the Act. Sub-rule (8) defines "laboratory financed by the Government", "public sector company" and "University" for sub-rule (7).
Section 33 grants the depreciation allowance but leaves the rates and the Tables to be prescribed. This rule supplies both, and keeps the two statutory routes apart: the written down value route on blocks of assets under section 33(3) with Appendix I, and the actual cost route under section 33(2) with Appendix II for the undertaking that route is meant for. Sub-rule (2) then holds the allowance down for taxpayers who have opted into the concessional regimes, and sub-rule (7) uses the rate as an incentive for plant built on Indian laboratory technology.
| What | Figure | The condition on it | Where |
|---|---|---|---|
| Ceiling on the depreciation allowance for the persons listed | Shall not exceed 40% of the written down value of the block | Applies only where the conditions in column C are fulfilled — the concessional-regime options under sections 199(3), 200(5), 201(2), 203(5) and 204(2), or income chargeable under section 202(1). It is an upper limit on the allowance, not the rate itself; the rate comes from Appendix I | Sub-rule (2), Table |
| Rate for the indigenous technology block | 40% of written down value | New machinery or plant installed during a tax year commencing on or after the 1st April, 1987, all three conditions in sub-rule (7)(i) to (iii) being fulfilled | Sub-rule (7) |
| Assets covered by the Appendix II route | Acquired on or after 1st April, 1977 | Allowance under section 33(2), calculated on the actual cost to the assessee | Sub-rule (3) |
| Cap on aggregate depreciation under section 33(2) | Shall not exceed the actual cost of the asset | Aggregate across different tax years | Sub-rule (4) |
| Last date to opt for Appendix I instead of Appendix II | On or before the due date for furnishing the return of income under section 263(1)(c) | For the tax year in which the undertaking begins to generate power; the option once exercised is final | Sub-rules (5) and (6) |
| Rates themselves | As specified in column (3) of the Table in Appendix I, or of the Table in Appendix II | The rule does not state the rates; it points to the Appendices | Sub-rules (1) and (3) |
Sub-rule (2) is a cap and nothing more. It does not give the listed persons a 40% rate; it says the allowance shall not exceed 40% of written down value, so the Appendix I percentage still governs and only a higher Appendix I entry is cut down to 40%. Sub-rule (7) is the opposite: it is a rate, but it is conditional, and the condition that most often fails is documentary — the return for the tax year of acquisition must be accompanied by the Secretary's certificate, and the machinery must not be used for anything in the Schedule XIII list. The two Appendices are not alternatives an assessee picks between year by year: Appendix I runs on written down value of a block under section 33(3), Appendix II runs on actual cost under section 33(2), and the only choice between them is the one-time election in sub-rule (5), which sub-rule (6) makes final for all subsequent tax years. Sub-rule (4) is what stops the actual cost route from over-allowing over time.
A power undertaking commissions its plant in the tax year 2026-27 and wants Appendix I written down value depreciation rather than the Appendix II actual cost rates. It must exercise that option on or before the due date for its return under section 263(1)(c) for 2026-27, the year it begins to generate power. If it does, sub-rule (6) binds it to Appendix I for every later year as well; if it lets the due date pass, Appendix II applies and, under sub-rule (4), the total allowed over the plant's life cannot exceed its actual cost.
You meet it in the depreciation schedule attached to the return and in the block-wise computation the Assessing Officer checks, and again in any assessment where a concessional-regime option under sections 199 to 204 has been exercised and the allowance has to be held to the sub-rule (2) ceiling.
The allowance under section 33(3) in respect of depreciation of any block of assets with respect to the persons mentioned in Column B of the following Table shall not exceed 40% of the written down value of such block of assets, if conditions mentioned in column C thereof are fulfilled
The aggregate depreciation allowed under section 33(2), in respect of any asset for different tax years shall not exceed the actual cost of the said asset.
Any option under sub-rule (5) once exercised, shall be final and shall apply to all the subsequent tax years.