Yes, under Section 32 of the Income Tax Act, 1961, you can claim income tax depreciation on a used car in India for FY 2025-26. This benefit is fully available if the vehicle is owned and primarily used for business or professional purposes, allowing you to significantly reduce your taxable income.
Most business owners understand that purchasing a car for business allows depreciation claims. However, a large number still assume that this benefit applies only to new vehicles.
This assumption is not just incorrect - it is financially damaging.
Under Indian tax law, a used car qualifies for depreciation in exactly the same way as a new car. If you have purchased a second-hand vehicle in FY 2025–26, or are planning to do so before March 31, this provision can significantly reduce your taxable income.
The Misconception That Leads to Lost Tax Savings
A common belief among entrepreneurs and freelancers is that depreciation benefits are restricted to new assets. This belief has no basis in law.
Section 32 of the Income Tax Act, 1961 clearly allows depreciation on assets based on ownership, business usage, and actual use during the financial year. The condition of the asset, whether new or used, is irrelevant.
As a result, many taxpayers unknowingly forgo legitimate deductions, leading to avoidable tax outflows year after year.
Legal Position Under Section 32
The law permits depreciation on motor vehicles when three fundamental conditions are satisfied. The taxpayer must establish ownership of the asset, ensure that it is used for business or professional purposes, and confirm that it was put to use during the relevant financial year.
Importantly, registration in the taxpayer’s name is not always decisive if ownership can otherwise be demonstrated. Even minimal usage within the financial year is sufficient to trigger eligibility.
There is no statutory restriction limiting depreciation to newly purchased vehicles. Judicial precedents and tribunal rulings have consistently reinforced this interpretation.
That Used Car You Bought? You Can Still Claim Tax Depreciation on It - Here's How Most business owners know you can claim depreciation on a new car.
question_answerFrequently Asked Questions
Can I claim depreciation on a used car for my business in India?
Yes, under Section 32 of the Income Tax Act, 1961, you can claim income tax depreciation on a used car if it's owned and used for business or professional purposes in India.
What is the depreciation rate for a used business car in India for FY 2025-26?
For motor cars used for business purposes, the depreciation rate is 15% per annum under the Written Down Value (WDV) method for FY 2025-26.
Who is eligible to claim depreciation on a second-hand car?
Taxpayers reporting income under 'Profits and Gains of Business or Profession,' such as business owners, self-employed professionals, and companies, are eligible to claim this depreciation.
Does the half-year rule apply to used car depreciation claims?
Yes, if a used car is put to use for less than 180 days in the financial year, only 50% of the normal depreciation rate is allowed in that first year.
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