Income Tax: How to calculate depreciation on Motor Vehicles?

depreciation on Motor Vehicle

Depreciation on Motor Vehicle: Depreciation means a reduction in the value of an asset over time due to wear and tear. Depreciation is a way to allocate the cost of the asset over the useful life of the asset. Income Tax Act provides rate of depreciation to be provided on assets every year.

As per provisions of Section 32 of the Income Tax Act, 1961 these conditions must be fulfilled for availing depreciation as expenses from PBGP income-

  • The asset must be owned by the assessee either individually or jointly.
  • The asset should be used wholly for business or profession purpose.
  • Rate of depreciation must be prescribed in the Act.( If the rate is not mentioned, no depreciation is allowed)

Rates of Depreciation on Motor Vehicle

CBDT issued a Notification No. 69/2019 dated 20.09.2019 and amended the rate of Depreciation on Motore Cars and other Motor Vehicles under the Income Tax Rules, 1962 for FY 2019-20.

To calculate depreciation on motor vehicles, motor vehicles are divided into two groups-

Group 1- Motor vehicles not involved in the business of running on hire, include 4-wheeler motor car.

Group 2- Motor buses, motor lorries and motor taxis used in the business of running them on hire, include- Trucks.

ParticularBought and put to use after 1st April 2019 but before 23rd August 2019Bought and put to use on or after 23rd August 2019 but before 1st April 2020
Group 115%30%
Group 230%45%

Example- BabaTax bought motor truck for Rs 50,00,000 and put to use on-

Case 1 – 20th August 2019

Depreciation for the year = 50lakhs X 30%= 15lakhs

Case 2 – 20th September 2019

Depreciation for the year = 50lakhs X 45%= 22.5lakhs

Read Also: Depreciation Rates for AY 2020-21 : Section 32 of Income Tax Act, 1961

Method of depreciation

Under the income tax act, depreciation is allowed only on written down value basis for motor vehicles.

Example- A motor car was bought on 1-4-2019 for Rs. 10,00,000, so depreciation for FY 2019-20 = 10,00,000 X 15% =  1,50,000

Value of the motor car on 31-3-2020= 10,00,000 – 1,50,000 = 8,50,000

Depreciation for FY 2020-21 = 8,50,000 X 15% = 1,27,500

Read Also: Difference between Section 44AD, 44ADA and 44AE of Income Tax Act

Time Limit for claiming Depreciation

S. No.ParticularAmount
(a)The asset has been put to use for 180 days or more in the FY.Full Rate (100%)
(b)The asset has been put to use for less than 180 days in the FYHalf Rate (50%)


Type of Motor VehicleBought onPut to use onRate of depreciation to be charged
Motor Car05-08-201920-08-201915%
Motor Car05-08-201920-09-201915%
Motor Car05-08-201920-11-20197.5%(15% X 0.5)
Motor Car05-09-201920-09-201930%
Motor Car05-09-201920-11-201915%(30% X 0.5)
Truck05-08-201920-11-201915%(30% X 0.5)
Truck05-09-201920-11-201922.5%(45% X 0.5)

Read Also: Depreciation – How to calculate depreciation under Income Tax?

Important Points for depreciation on Motor Vehicle

 1. Higher rate of depreciation is also applicable for second-hand or previously used motor cars or motor vehicles purchased in the specified period since there is no condition that eligible vehicle should be new.

2. It’s a one-time benefit of higher depreciation. In other words, if the asset is acquired and put to use within the specified period (from 23.08.2019 to 31.03.2020) then only the higher rate of depreciation shall be available for AY 2020-21 and all the subsequent assessment years. This benefit shall expire from 01.04.2020. Normal rates of depreciation shall apply in those cases.

3. Only acquisition is not sufficient, it must be ‘put to use’ on or before 31.03.2020. Therefore, care is required by buyer to avoid point of dispute as to the date on which vehicle was put to use. If full depreciation is desired then the vehicle must be put to use on or before 01/10/2019.

4. Registration and other procedure must be ensured, documented and proofs must be kept, to satisfy the Assessing Officer and to avoid dispute about date of put to use.

5. Higher rate have been prescribed only for motor cars, motor buses, motor lorries and motor taxis. Higher rates are not prescribed for tractors, trailers, Mopeds, Bikes, Bi-cycle etc.(this subject to Interpretation)

Read Also: FAQs on Income Tax Audit under section 44AB of Income Tax Act, 1961


The author of the above article is Aditya Kishore.

Disclaimer:The article or blog or post (by whatever name) in this website is based on the writer’s personal views and interpretation of Act. The writer does not accept any liabilities for any loss or damage of any kind arising out of information and for any actions taken in reliance thereon. 
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