Rule 5 of Income Tax Rules, 1962: Depreciation
Updated: Oct 4, 2022
5. (1) Subject to the requirements of sub-rule (2), the allowance under clause (ii) of sub-section (1) of section 32 in respect of depreciation of any block of assets shall be calculated at the percentages specified in the second column of the Table in Appendix I to these rules on the written down value of such block of assets that are used for the purposes of the assessee's business or profession at any point during the previous year:
88a [Provided that where a domestic company has exercised an option under section 115BA's subsection (4), the allowance under subsection (1)'s clause (ii) in relation to depreciation of any block of assets entitled to more than forty per cent shall be restricted to forty percent on written down value of such block of assets.]
89[(1A) The allowance specified in clause I of sub-section (1) of section 32 of the Act with respect to depreciation of assets acquired on or after April 1, 1997 shall be calculated at the percentage specified in the second column of the Table in Appendix IA of these rules on the actual cost thereof to the assessee as are used for the assessee's business purposes at any time during the previous year:
As long as the total amount of depreciation permitted with respect to any asset overall assessment years does not exceed the actual cost of the asset in question:
Furthermore, if the option to deduct depreciation under sub-rule (1) read with Appendix I is exercised before the deadline for filing the return of income under sub-section (1) of section 139 of the Act, the undertaking specified in clause I of sub-section (1) of section 32 of the Act may, at its option, be allowed depreciation under sub-rule (1) read with Appendix I in place of the depreciation specified in Appendix IA,
(a) In the case of an undertaking that started producing power before the first day of April 1997, for the assessment year 1998–99; and
(b) In the case of any other undertaking, for the assessment year pertinent to the year in which it first starts generating power:
Additionally, any such option must be final once it has been exercised and must apply to all the subsequent assessment years.
(2) Any new equipment installed during the prior year for the assessment year beginning on or after April 1, 1988, for the purpose of manufacturing or producing any article or thing, and such article or thing—
(A) Is produced or manufactured using technology (including any process) or other knowledge that has been developed in.
(b) Is a product or item created in.
a laboratory that is owned or funded by the government, one that is owned by a public sector company, one that is located at a university, or one that has been approved by the secretary of the department of scientific and industrial research of the government of India in this regard.
If the following conditions are met, such plant or machinery shall be treated as a part of a block of assets eligible for depreciation at the rate of 90 percent of written down value:
1. The ownership of such laboratory or any person deriving title from such owner has granted the holder the right to use such technology (including any process), other know-how, or to manufacture or produce such article or thing;
2. A 91certificate from the Secretary, Department of Scientific and Industrial Research, must be included with the return submitted by the assessee for his income, or the income of any other person for whom he is liable, for any prior year in which the said machinery or plant is acquired, shall be accompanied by a 91certificate from the Secretary, Department of Scientific and Industrial Research, Government of India, stating that the item was created using the technology (including any processes), other know-how, or item invented in the laboratory; and
3. The machinery or plant is not being used for the manufacture or production of any item.
Explanation: In order to comply with this sub-rule,
(a) "laboratory financed by the Government" refers to a facility owned by any organization, including a society recognized by the Societies Registration Act of 1860 (21 of 1860), and supported entirely or primarily by the Government;
(b) Government company92 as defined in section 617 of the Companies Act, 1956 (1 of 1956), or any corporation established by or under any Central, State, or Provincial Act; and
(c) "University" includes any institution designated under Section 3 of the University Grants Commission Act, 1956 (3 of 1956), as a University for the purposes of that Act. It also includes any institution established or incorporated by or pursuant to a Central, State, or Provincial Act.