Form 3CD Clause 18 Depreciation Working Paper Format 2026
FORM 3CD CLAUSE 18 — DEPRECIATION WORKING PAPER
Assessee: {{client_name}} · PAN: {{client_pan}} · Previous year ended: {{period_end}} · Assessment Year: 2026-27
What the clause asks: particulars of depreciation allowable under the Income-tax Act, 1961 for each asset or block of assets — (a) description of the asset or block, (b) rate of depreciation, (c) actual cost or written down value (WDV), (ca) and (cb) one-time adjustments to WDV, (cc) adjusted WDV, (d) additions and deductions during the year with dates and, for additions, the date put to use, including adjustments for indirect-tax credit, exchange-rate changes and subsidy or grant, (e) depreciation allowable, and (f) WDV at the end of the year. The clause asks for the depreciation ALLOWABLE under the Act, not the figure charged in the books.
1. Block-wise depreciation statement
| Block of assets (a) | Rate % (b) | Opening WDV (c) ₹ | Adjustments (ca)/(cb) ₹ | Adjusted WDV (cc) ₹ | Additions used 180 days or more ₹ | Additions used less than 180 days ₹ | Deductions — moneys payable ₹ | Depreciation allowable (e) ₹ | Closing WDV (f) ₹ |
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| Buildings — residential | 5 | | | | | | | | |
| Buildings — other than residential | 10 | | | | | | | | |
| Furniture and fittings, including electrical fittings | 10 | | | | | | | | |
| Plant and machinery — general | 15 | | | | | | | | |
| Motor cars (not used in a hire business) | 15 | | | | | | | | |
| Motor buses, lorries and taxis used in a hire business | 30 | | | | | | | | |
| Computers, including computer software | 40 | | | | | | | | |
| Intangible assets (know-how, patents, licences, franchises — not goodwill) | 25 | | | | | | | | |
| ____________ [any other block — state the Appendix I entry relied on] | | | | | | | | | |
| Total | | | | | | | | | |
- Rates shown are the common Appendix I (Income-tax Rules, 1962) rates. Check every block against the current Appendix I entry before filing; no block carries a rate above 40%.
- Depreciation allowable = (adjusted WDV + additions used 180 days or more − deductions) × rate, plus additions used less than 180 days × half the rate. If deductions exceed the block value, or the block is empty at year-end, there is no depreciation and section 50 applies instead (see Part 3).
- Columns (ca) and (cb) are one-time adjustments: (ca) for WDV restated on moving into a concessional tax regime, and (cb) for goodwill removed from the intangible block. The utility labels (ca) with a specific assessment year — it is normally nil for AY 2026-27. Do not leave an old adjustment in the column.
2. Additions during the year — put-to-use test
| Asset | Block | Invoice / acquisition date | Date put to use | Invoice value ₹ | Less: GST credit availed ₹ | Add / less: exchange difference, subsidy or grant ₹ | Less: paid in cash above ₹10,000 a day ₹ | Actual cost ₹ | 180 days or more? (Y/N) | Evidence ref. |
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- 180-day rule (second proviso to section 32(1)): where an asset is acquired during the year and put to use for less than 180 days in that year, depreciation is restricted to 50% of the normal rate. The test runs from the date PUT TO USE, not the invoice or capitalisation date.
- Cut-off for the previous year ended 31 March 2026: an asset put to use on or before 3 October 2025 is used for 180 days or more (full rate); an asset put to use on or after 4 October 2025 gets half the rate. Recount for any year that includes 29 February.
- Actual cost excludes GST for which input tax credit is claimed, and excludes any payment (or aggregate of payments to one person in a day) above ₹10,000 made otherwise than by account payee cheque or draft or a prescribed electronic mode (second proviso to section 43(1)). A subsidy or grant that directly or indirectly meets the cost reduces actual cost (Explanation 10 to section 43(1)).
- Capital work-in-progress and assets received but not installed or ready for use are not additions for this clause, whatever the books show.
3. Deductions during the year
| Asset sold / discarded / destroyed | Block | Date | Moneys payable (sale value, scrap, insurance) ₹ | Block still has assets and positive value? (Y/N) | Section 50 gain or loss, if any ₹ | Evidence ref. |
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The deduction is the moneys payable for the asset, not its book WDV and not the book profit or loss on sale. Where the moneys payable exceed the block value, or every asset in the block has been transferred, the result is a deemed short-term capital gain or loss under section 50 — carry it to the capital-gains working and report no depreciation for that block.
4. Additional depreciation — section 32(1)(iia)
| New plant or machinery | Date put to use | Actual cost ₹ | Rate (20% / 10%) | Additional depreciation this year ₹ | Balance 10% to claim next year ₹ | Eligibility checked (Y/N) |
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| Brought forward: balance 10% on prior-year additions used less than 180 days | | | 10 | | | |
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- Who can claim: an assessee engaged in the manufacture or production of any article or thing, or in the generation, transmission or distribution of power. Rate: 20% of actual cost of NEW plant or machinery (not ships or aircraft) acquired and installed.
- Not eligible: second-hand machinery; machinery installed in office premises or residential accommodation, including a guest house; office appliances; road transport vehicles; and assets whose whole cost is allowed as a deduction in one year.
- Used less than 180 days in the year of installation: 10% this year, and the balance 10% in the immediately following year (third proviso to section 32(1)). Check last year’s working for a balance to bring forward.
- Regime check: additional depreciation is not available to an assessee taxed under section 115BAA, 115BAB, 115BAC (the default regime for individuals, HUFs, AOPs and BOIs, unless they opt out), 115BAD or 115BAE. Confirm the regime in the return before including it.
5. Evidence to obtain
- Last year’s Form 3CD clause 18 and the depreciation schedule in the return as filed — opening WDV must agree to last year’s closing WDV, adjusted for any assessment or appellate order.
- Fixed-asset register and ledger of additions, with purchase invoices, bills of entry and GST credit workings.
- Put-to-use evidence for each significant addition: installation or commissioning report, trial-run record, first production or usage log, vehicle registration date, software go-live sign-off.
- Sale invoices, scrap notes and insurance settlement letters for deductions.
- Bank statements for mode of payment on asset purchases; subsidy or grant sanction letters; forward-contract and loan statements where section 43A applies.
- For additional depreciation: evidence that the business is manufacture, production or power, and that the machinery is new.
6. Common errors
- Copying book depreciation (Schedule II useful lives) into clause 18 instead of computing block-wise depreciation at Appendix I rates.
- Using the invoice date for the 180-day test, or treating all March capitalisations as put to use.
- Reducing the block by book WDV or by profit on sale instead of the sale consideration.
- Claiming depreciation on goodwill, on land included in a composite property cost, or on GST for which credit was taken.
- Missing the balance 10% additional depreciation from the prior year — or claiming additional depreciation under a concessional regime that bars it.
- Treating depreciation as optional: Explanation 5 to section 32(1) applies it whether or not the assessee claims it, so an unclaimed year still reduces WDV.
7. Flow to the return of income
The block figures feed the depreciation schedules of the return (plant and machinery, other assets, the depreciation summary, and the deemed capital gains schedule for section 50) in ITR-3, ITR-5 and ITR-6. Book depreciation is added back and the clause 18 figure is allowed in the business-income computation. Agree the return schedules to this working paper block by block before the report is uploaded; a mismatch between Form 3CD and the return is a common trigger for an adjustment under section 143(1).
Conclusion: depreciation allowable under the Income-tax Act for the year is ₹ ____________, against book depreciation of ₹ ____________. Exceptions and matters for the partner: ____________ [state any block where classification, rate or put-to-use date is judgemental].
Prepared by: {{prepared_by}} Reviewed by: Date: 1 October 2026
