There is no depreciation rate on construction machinery written anywhere in the Income-tax Act 2025. Section 33(3)(a) allows the deduction at “such percentage of its written down value, as may be prescribed” — the percentage lives in the Rules, not the Act. What the Act does fix is the method: a block of assets written down each year, a 50% restriction on a machine used under 180 days in the year you bought it, and a 20% additional claim that most machine hire businesses are shut out of.

Search for this and you will be handed a confident percentage within seconds. The honest position is less tidy, and it matters more now than it did two years ago, because the law under it changed. The Income-tax Act 2025 replaced the 1961 Act with effect from 1 April 2026. Anything quoting a section in the 194 or 32 series is quoting repealed law, and any rate quoted alongside it was never in the Act to begin with.

So this piece does the part that is actually knowable: what the statute says, where the number comes from, and the three places owners lose money through a rule they did not read.

Why the depreciation rate on construction machinery is not in the Act

Section 33 is the depreciation section. Sub-section (1) allows the deduction on buildings, machinery, plant or furniture owned wholly or partly by the assessee and used wholly and exclusively for the business. A backhoe loader, an excavator, a crane or a mixer sits squarely inside “machinery or plant”.

Then sub-section (3)(a) does the work:

“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.”

That phrase, “as may be prescribed”, appears over three hundred times across the Act. It is the drafting device that pushes a number out of the statute and into the Rules, where it can be changed without amending the Act. A full-text reading of the Act returns no percentage figure for plant and machinery depreciation at all.

Which means two things for you. The rate is real and it is binding, but it is not a fact you should take from a blog, including this one. It is a fact to confirm for your tax year with your chartered accountant or against the Income Tax Department‘s own material. We are deliberately not quoting it, for the same reason we do not quote you a tender percentage: the version you find circulating is usually a year or two stale, and depreciation compounds the error forward.

The block of assets, and why your machine stops being yours

The single idea that confuses most first-time owners is that tax depreciation does not follow the machine. It follows the block.

Assets carrying the same prescribed percentage are pooled into one block. Depreciation is computed on the written down value of that whole pool, not machine by machine. Buy a second excavator and its cost goes into the pool. Sell the first one and the money received comes off the pool. The pool’s closing value becomes next year’s opening value.

The consequence owners trip over is on sale. Because the machine is not tracked individually, selling it does not produce a neat profit or loss on that machine in your tax computation; it reduces the block. The gain is handled under the capital gains provisions instead, and that is where the result surprises people — a machine you owned for six years can still throw a short-term gain. The mechanics of that sit in our note on capital gain on the sale of machinery, and the GST side is separate again in GST on the sale of old machinery.

One carve-out worth knowing: sub-section (3)(b) lets the Assessing Officer restrict the claim to a fair proportion where the machine is not used wholly and exclusively for the business. If the tipper does family work at weekends, that is the clause that gets quoted at you.

The 180-day rule: the most expensive date on your invoice

This is the one that costs real money and is entirely within your control.

Section 33(4) restricts the deduction to 50% of the prescribed rate where the asset is both acquired during the tax year and put to use for the purposes of the business for less than one hundred and eighty days in that year. Both limbs have to be true. A machine bought in an earlier year and used for two days this year is not caught; a machine bought and commissioned in February is.

When you commission the machine Days in use that year First-year claim
April to early October 180 or more Full prescribed rate
Mid-October to March Under 180 Half the prescribed rate
Bought in March, commissioned in April Nil in the year of purchase Claim starts the next year, in full

Read the third row twice. “Put to use” is the trigger, not the invoice date and not the delivery date. A machine sitting on your yard uncommissioned on 31 March earns you nothing that year, but it also does not burn the half-rate restriction — the following year it can run a full twelve months and claim the full percentage. Owners buying in the last quarter of the year are often better off commissioning deliberately in April than scrambling to switch on in March.

Nothing is forfeited either way. The unclaimed part stays inside the block’s written down value and comes back through in later years. What the restriction changes is the timing of your cash, which is the thing that actually matters when an EMI starts the month the machine lands. If you are weighing how to fund the purchase in the first place, the trade-off between the three routes is worked through in loan, lease or cash for construction equipment.

Before you commit to a machine and a date, it is worth putting the funding and the first-year tax position side by side. Compare equipment finance options and indicative EMIs and work the commissioning month into the sum rather than discovering it in October.

The 20% additional depreciation most machine owners cannot claim

Here is where a lot of bad advice circulates, and where the Act is unusually specific.

Sub-section (8) allows an additional deduction on new machinery or plant, and sub-section (9) sets it at 20% of actual cost in the year the asset is acquired and put to use, or 10% where it is put to use for under 180 days with the remaining 10% allowed in the immediately following year. Those are exact figures, stated in the Act itself.

The catch is who qualifies. Sub-section (8)(a) restricts it to an assessee “engaged in the business of manufacture or production of any article or thing” or in the generation, transmission or distribution of power. A contractor who hires out a crane, moves earth or carts concrete is supplying a service. He is not manufacturing an article or thing, and the additional claim does not reach him.

Then sub-section (8)(d) adds exclusions that bite even on a qualifying manufacturer. The new plant must not have been used by anyone else before installation, must not be installed in office premises or residential accommodation, and must not be “in the nature of any office appliances or road transport vehicle“.

Your business The asset 20% additional claim?
Earthmoving or machine hire contractor Excavator, backhoe, crane No — service, not manufacture
Civil contractor on works contracts Any plant No — works contract is a service
Manufacturer with an in-house plant Transit mixer, tipper No — road transport vehicle
Manufacturer or power producer New factory plant, not second-hand Yes, subject to all of (8)(d)

That third row is the one to carry into your next conversation about a mixer purchase. Even where the business qualifies, a vehicle that runs on the road is carved out by name. Anyone promising you 20% on a transit mixer is reading the rate and skipping the conditions. If you are running mixers commercially, the economics that do work are in transit mixer business profit.

Where the Companies Act gives you a different number

Owners who run a private limited company keep two sets of depreciation figures and assume one of them is wrong. Both are right.

The company law route depreciates the asset over a useful life, spreading cost across the years the asset is expected to serve, which is an accounting judgement about your books. The tax route applies a prescribed percentage to the written down value of a block, which is a policy instrument. Different basis, different purpose, different answer. The gap is a reconciliation item in your computation and nothing more sinister than that.

We are not quoting the useful life figure either. The schedule that carries it is company law material that we could not verify against an official source while writing this, and a useful life guessed from memory is worse than no figure. Your auditor has it.

Two practical points do carry across. Depreciation is not optional: section 33(7) applies the section whether or not you claimed it, so leaving it out to show a better profit to a bank is not available to you. And where your profits are too small to absorb the allowance, section 33(11) carries the unabsorbed amount forward into the next year’s allowance rather than cancelling it — which is why a lean year does not waste the claim.

If you file under the presumptive route instead, the arithmetic above mostly stops applying to you, because the presumed margin is taken net of these allowances. That boundary is set out in presumptive taxation for contractors.

Tax depreciation is not the same thing as value loss

One last distinction, because the word does two jobs and owners conflate them constantly.

Tax depreciation is an allowance. It reduces taxable profit at a percentage somebody else sets, on a pool rather than a machine, and it has nothing to do with what your machine is worth. Economic depreciation is the real loss of resale value as hours and years accumulate, and it is the single largest cost of owning a machine over five years. The second one is what decides whether the purchase was sound; the first only decides your tax.

The resale curve, with the hours and the condition that drive it, is worked through in excavator cost of ownership. Treat that as the ownership question and this page as the compliance question. Confusing them is how an owner ends up pleased about a tax allowance on a machine that is losing value faster than it is earning.

The bottom line

The depreciation rate on construction machinery is prescribed by the Rules, not stated in the Income-tax Act 2025, so the only honest source for the percentage is your chartered accountant or the department’s current material. What the Act fixes is more useful anyway: depreciation runs on a block of assets rather than a machine, the claim halves where a newly bought machine runs under 180 days in that year, the 20% additional deduction is closed to service businesses and to road transport vehicles by name, and an allowance you cannot absorb this year carries forward instead of lapsing.

Decide the machine and the commissioning month together, then fund it with the first-year position already in the sum. Compare equipment finance and indicative EMI options, and take the prescribed percentage from your accountant before you build it into a projection.

Rates, schemes, specifications and prices change — confirm current terms with the OEM, dealer, bank or insurer before deciding. Tax positions depend on your own facts; nothing here is tax advice for your specific case.