Claiming Depreciation in ITR-3 for AY 2026-27

Depreciation can reduce your taxable business or professional income, but only when you report it correctly in the ITR-3 schedules. For AY 2026-27, relating to FY 2025-26, you must calculate depreciation under the Income-tax Act, 1961, enter it in Schedule DPM or Schedule DOA, and ensure that Schedule BP contains the correct tax depreciation figure.

This guide explains claiming depreciation in ITR-3 for AY 2026-27, including depreciation under the new tax regime, depreciation under the old tax regime, depreciation on plant and machinery, additional depreciation, and the correct method of entering figures in the ITR utility.

What is depreciation under the Income-tax Act?

Depreciation is a deduction allowed for the reduction in the value of eligible business or professional assets because of use, wear and tear, or obsolescence.

Section 32 of the Income-tax Act allows depreciation on eligible assets used for business or profession. The Income Tax Department calculates depreciation on a written-down value basis, generally using a block of assets rather than calculating depreciation separately for every asset.

A block of assets means a group of assets carrying the same depreciation rate. For example, computers eligible for depreciation at 40% form one block, while general plant and machinery eligible for depreciation at 15% form another block.

The key rules are:

• The asset must be owned wholly or partly by the taxpayer.
• The asset must be used for business or professional purposes.
• If the asset is used for less than 180 days during the year, only 50% of the normal depreciation is allowed for that year.
• Depreciation is calculated on the opening written-down value, eligible additions and deductions from the block.
• Depreciation must be reported in the relevant ITR-3 schedule even if the taxpayer maintains books of account.

You can refer to Section 32 of the Income-tax Act and the Income Tax Department’s depreciation rate chart for the statutory framework and prescribed rates.

Income tax depreciation rates for ITR-3 AY 2026-27

The following are commonly used depreciation rates for business and professional assets in ITR-3:

Asset or block	Normal depreciation rate
Residential buildings used for business or profession	5%
Other buildings	10%
Furniture and fittings	10%
General plant and machinery	15%
Motor cars used for business, other than those used on hire	15%
Motor buses, motor lorries and motor taxis used in a business of running them on hire	30%
Computers and computer software	40%
Books owned by a professional carrying on a profession	40%
Energy-saving devices and certain specified equipment	40%

The rate depends on the classification prescribed under the Income-tax Rules. Do not automatically use the rate shown in your accounting records because the Companies Act and the Income-tax Act may prescribe different depreciation methods and rates.

Depreciation on plant and machinery in ITR-3

You generally report the following assets under Schedule DPM:

• Machinery used in manufacturing or trading
• Office equipment treated as plant and machinery
• Computers and computer software
• Business vehicles
• Medical or professional equipment
• Other eligible plant and machinery

Different assets may belong to separate blocks if they carry different depreciation rates. For example, a computer block at 40% should not be combined with general machinery at 15%.

Depreciation on other business assets in ITR-3

You generally report the following under Schedule DOA, Depreciation on Other Assets:

• Business buildings
• Furniture and fittings
• Professional books
• Other eligible assets that do not belong to the plant and machinery block

Correct classification is important because putting furniture or buildings in Schedule DPM can result in an incorrect depreciation calculation.

How to enter depreciation in Schedule DPM ITR-3 AY 2026-27

Schedule DPM is used for depreciation on plant and machinery. The exact display may vary slightly between the online filing portal and the offline ITR utility, but the calculation generally follows the same structure.

Step 1: Identify the opening written-down value

Enter the opening written-down value of each plant and machinery block as on 1 April 2025.

The opening value should generally be based on:

• The closing written-down value as on 31 March 2025
• The depreciation allowed or allowable in the earlier year
• Adjustments for assets sold, discarded or transferred

Do not enter the original purchase price of every old asset again. ITR depreciation works on the block’s written-down value.

Step 2: Enter additions made during FY 2025-26

Report eligible additions purchased during FY 2025-26 in the appropriate column.

Separate additions based on the date on which the asset was put to use:

• Assets put to use for 180 days or more
• Assets put to use for less than 180 days

The “put to use” date matters. If you purchased a machine on 1 January 2026 but started using it on 15 February 2026, the less-than-180-day rule applies based on its use during FY 2025-26.

Step 3: Report assets sold or discarded

Enter the actual money payable or receivable for assets sold, discarded, demolished or destroyed from the relevant block.

If the entire block ceases to exist and the sale proceeds are lower than the opening written-down value plus additions, the difference may generally qualify as a terminal depreciation loss, subject to the applicable provisions.

If the sale consideration exceeds the block’s written-down value, the excess can result in short-term capital gains under Section 50. It is not automatically treated as normal business income.

Step 4: Calculate normal depreciation

The ITR utility usually calculates depreciation after you enter:

• Opening written-down value
• Additions used for 180 days or more
• Additions used for less than 180 days
• Sale or other deduction from the block
• Applicable depreciation rate

For additions used for less than 180 days, the utility generally allows depreciation at 50% of the normal rate.

Step 5: Enter additional depreciation separately

If eligible, report additional depreciation separately from normal depreciation. Do not include it in the normal depreciation figure.

Schedule DPM may provide a separate column for additional depreciation or related adjustments. Use the relevant field shown in the AY 2026-27 ITR-3 utility.

How to enter depreciation in Schedule DOA ITR-3 AY 2026-27

Schedule DOA applies to depreciation on assets other than plant and machinery.

The process is similar to Schedule DPM:

1. Select the relevant asset block.
2. Enter the opening written-down value as on 1 April 2025.
3. Enter additions put to use for 180 days or more.
4. Enter additions put to use for less than 180 days.
5. Enter deductions for assets sold, discarded or transferred.
6. Apply the prescribed rate.
7. Review the calculated depreciation and transfer it to the relevant business or professional income computation.

For example, furniture acquired for an office normally belongs in the furniture and fittings block at 10%. A business building generally belongs in the applicable building block, usually at 5% or 10%, depending on its classification.

How Schedule DPM and Schedule DOA affect Schedule BP

Entering depreciation in Schedule DPM or DOA is only one part of the process. You must also ensure that the same amount flows correctly into Schedule BP, computation of income from business or profession.

The usual calculation works as follows:

1. Start with the net profit or loss as shown in the profit and loss account.
2. Add back depreciation debited to the profit and loss account.
3. Deduct depreciation allowable under the Income-tax Act as calculated in Schedule DPM and Schedule DOA.
4. Make other required tax adjustments.
5. Arrive at taxable business or professional income.

Example of Schedule BP depreciation adjustment

Assume:

• Depreciation charged in the books: ₹2,40,000
• Depreciation allowed under the Income-tax Act: ₹3,00,000

The Schedule BP adjustment will generally be:

• Add back book depreciation: ₹2,40,000
• Deduct tax depreciation: ₹3,00,000
• Net reduction in business income: ₹60,000

If the tax depreciation is lower than book depreciation, the taxable income will increase by the difference.

Do not deduct tax depreciation again without adding back the book depreciation. This can lead to a double deduction.

Depreciation under the new tax regime in ITR-3 AY 2026-27

Taxpayers carrying on business or profession can claim normal depreciation under Section 32 even when they choose the new tax regime under Section 115BAC.

However, the new regime restricts certain deductions. In particular, additional depreciation under Section 32(1)(iia) is not available under the new tax regime.

Therefore, under the new regime:

• Normal depreciation on eligible business assets remains available.
• Depreciation must still be calculated using the prescribed tax rates.
• The 50% rule for assets used for less than 180 days continues to apply.
• Additional depreciation cannot generally be claimed.
• Other deductions restricted by Section 115BAC must also be reviewed.

A business or professional taxpayer who wants to opt out of the default new regime generally needs to file Form 10-IEA within the prescribed time. The tax regime selection in the return must match the applicable form and the taxpayer’s earlier regime position.

The Income Tax Department provides the latest return forms and related instructions on its official ITR forms and utilities page.

Depreciation under the old tax regime for ITR-3 AY 2026-27

Under the old tax regime, taxpayers can generally claim normal depreciation and, where eligible, additional depreciation.

The old regime may be relevant for a business or professional taxpayer who has:

• Eligible investments in new plant and machinery
• Significant deductions unavailable under the new regime
• Eligibility for additional depreciation
• Other business-related deductions that are restricted under Section 115BAC

Choosing the old regime does not automatically allow additional depreciation. The asset, taxpayer, business activity and statutory conditions must all be satisfied.

A taxpayer carrying on business or profession should compare the tax result under both regimes before filing. The comparison should include:

• Normal depreciation
• Additional depreciation
• Interest and other business deductions
• Chapter VI-A deductions, where available
• Tax rates and rebate provisions applicable to the taxpayer

Additional depreciation claim in ITR-3 AY 2026-27

Additional depreciation is an extra deduction available in specified cases, mainly for eligible new plant and machinery acquired and installed by certain manufacturing or power-sector businesses.

The usual rate is:

• 20% of the actual cost of eligible new plant and machinery
• 35% in specified cases, subject to the conditions under the Income-tax Act

Additional depreciation is generally subject to conditions such as:

• The asset must be new.
• It must be plant and machinery, not a building, furniture, vehicle or office appliance.
• It must be acquired and installed for eligible business purposes.
• The taxpayer must carry on a qualifying business.
• The asset must not fall under excluded categories.

If the asset was used for less than 180 days in the year of acquisition and installation, only half of the additional depreciation may be claimed in that year. The balance may generally be claimed in the immediately succeeding assessment year, subject to the law applicable to the asset.

Example of additional depreciation

A qualifying manufacturing business purchases eligible new machinery for ₹10,00,000 and puts it to use for more than 180 days during FY 2025-26.

• Normal depreciation at 15%: ₹1,50,000
• Additional depreciation at 20%: ₹2,00,000
• Total depreciation deduction: ₹3,50,000

If the machinery was used for less than 180 days:

• Normal depreciation may be restricted to ₹75,000
• Additional depreciation may be restricted to ₹1,00,000
• The balance additional depreciation may be claimed in the following year, subject to applicable conditions

A taxpayer using the new tax regime cannot generally claim this additional depreciation.

Depreciation calculation for business income in ITR-3 AY 2026-27

The following formula helps you check the depreciation calculation:

Depreciation base = Opening WDV + eligible additions - sale proceeds or other block deductions

Apply the relevant rate to the applicable amount. For additions used for less than 180 days, apply only half of the normal depreciation rate for the first year.

Practical example

Suppose a consultant has the following computer block:

• Opening WDV on 1 April 2025: ₹4,00,000
• New computer purchased and used for more than 180 days: ₹1,00,000
• Computer purchased and used for less than 180 days: ₹50,000
• Depreciation rate: 40%

Calculation:

• Depreciation on opening WDV: ₹4,00,000 x 40% = ₹1,60,000
• Depreciation on addition used for more than 180 days: ₹1,00,000 x 40% = ₹40,000
• Depreciation on addition used for less than 180 days: ₹50,000 x 20% = ₹10,000
• Total depreciation: ₹2,10,000

The taxpayer should add back the depreciation charged in the books and deduct ₹2,10,000 as tax depreciation in Schedule BP.

Can you claim depreciation if you did not claim it in your books?

For business income, the Income-tax Act contains specific provisions concerning depreciation allowed or allowable. Depreciation can affect the written-down value of the block even when the taxpayer does not separately record the full deduction in the accounts.

In practice, taxpayers should:

• Record the asset in the books.
• Maintain a tax depreciation working.
• Reconcile book depreciation with tax depreciation.
• Report the correct figure in Schedule DPM or DOA.
• Avoid claiming depreciation on personal assets or assets not used for business.

If an asset has both business and personal use, claim only the reasonable business-use portion and maintain supporting records.

Common mistakes while claiming depreciation in ITR-3

Avoid these errors when filing the return for AY 2026-27:

• Entering the original asset cost instead of the opening written-down value
• Using Companies Act depreciation rates instead of Income-tax Rules rates
• Claiming full depreciation on an asset used for less than 180 days
• Combining computer assets with general plant and machinery
• Claiming additional depreciation under the new tax regime
• Claiming depreciation on land
• Claiming depreciation on assets not used for business or profession
• Failing to report sale proceeds from assets in the block
• Deducting tax depreciation in Schedule BP without adding back book depreciation
• Reporting the same depreciation in both Schedule DPM and Schedule DOA
• Claiming depreciation on an asset acquired but not yet put to use
• Ignoring the effect of a block becoming empty after sale of all assets

Documents and records to keep

You do not normally upload depreciation schedules with the ITR, but you should retain supporting records in case the Income Tax Department asks for them.

Keep:

• Purchase invoices
• Asset register
• Installation and commissioning records
• Date-of-use evidence
• Payment records
• Sale invoices for disposed assets
• Computation of opening written-down value
• Book depreciation working
• Tax depreciation working
• Details supporting additional depreciation
• Evidence of business use

The asset register should clearly show the block, purchase date, date put to use, cost, depreciation rate, depreciation claimed and closing written-down value.

Final checklist for claiming depreciation in ITR-3 for AY 2026-27

Before submitting your ITR-3, verify the following:

• You selected the correct assessment year, AY 2026-27.
• You reported business or professional income in ITR-3.
• You classified each asset under the correct block.
• You used the Income-tax Act depreciation rate.
• You separated additions used for 180 days or more from other additions.
• You reported asset sales and block deductions correctly.
• You claimed only normal depreciation under the new tax regime.
• You checked eligibility before claiming additional depreciation.
• You added back book depreciation in Schedule BP.
• You deducted tax depreciation from Schedule DPM and Schedule DOA.
• The closing written-down value agrees with your tax depreciation register.
• The tax regime selected in ITR-3 agrees with Form 10-IEA, where applicable.

Summary

For claiming depreciation in ITR-3 for AY 2026-27, calculate depreciation under the Income-tax Act rather than simply copying the figure from your books. Report plant and machinery in Schedule DPM, other depreciable assets in Schedule DOA, and reconcile both schedules with Schedule BP.

Normal depreciation is generally available under both the old and new tax regimes. However, additional depreciation in ITR-3 AY 2026-27 is generally available only when the taxpayer satisfies the statutory conditions and follows the old regime. Correct block classification, the 180-day rule, written-down value calculation and Schedule BP adjustments are essential for an accurate depreciation claim.