Assets partly used for business; How to claim fair proportionate depreciation in ITR-3? (Section 38)

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Mr. AB

Self-employed

76 Points Posted on 20 January 2022

In a sole proprietorship business scenario where some of the fixed-assets (like computers, servers/routers, smartphone, etc.) are sometimes used for personal purposes, in addition to their intended business purposes; as per Section 38(2), Income-tax Act, it allows a fair proportionate part of depreciation calculated based on estimated business-usage of the fixed-assets that are not exclusively used for business purposes.

When we look at the depreciation schedules of the ITR-3 form (Schedule DPM and Schedule DOA, to be precise), we do not see any option to mention a proportionate depreciation.

Mathematically my understanding is:

If an asset, say a new workstation computer, was put to use since April 1 of the previous year, and had a cost of ₹50,000, and the rate of depreciation allowable as per Income-tax is %40. We put this amount as additions in the Schedule DPM and the form automatically calculates the depreciation for us.
Depreciation = 40% of ₹50,000 = ₹20,000

Keeping all above parameters same, with estimated business-use of 30%, and we can calculate the fair proportionate part of depreciation as below.
Depreciation = 30% of (40% of ₹50,000) = ₹6,000

Now obviously, if we reduce the cost of asset by 30% (basis its estimated business usage), and then we put the amount in the Schedule DPM, it will result in the same amount of depreciation.
Adjusted cost of asset = 30% of ₹50,000 = ₹15,000
Depreciation = 40% of ₹15,000 = ₹6,000

I would like to know if this type of adjustment to the cost of asset, basis its estimated business usage percentage, is a generally accepted accounting practice for income-tax purposes.

PS:
I do not have a commerce background. Thanks in advance for any helpful input.

Replies (5)

Quick Summary

This discussion addresses how to claim depreciation for assets in an ITR-3 return when they are used for both business and personal purposes. While Section 38(2) of the Income-tax Act allows for proportionate depreciation based on business usage, the ITR-3 forms (Schedule DPM and DOA) initially seemed to lack a direct option for this. However, it's clarified that there is a specific column for 'Depreciation disallowed u/s 38(2)' where the personal-use portion should be entered, rather than adjusting the asset's cost.

sabyasachi mukherjee

Profession

19978 Points Posted on 20 January 2022

This type of adjustment is logical but rarely followed.

CA Raj Doshi

Practising CA

5649 Points Posted on 21 January 2022

Such an adjustment is not a generally accepted accounting practice for income tax purposes

Mr. AB

Self-employed

76 Points Posted on 31 December 2025

I forgot to mention this earlier, back when I posted the original question. I overlooked the provision to enter proportionate depreciation at that time.

For the record, Schedule DPM and Schedule DOA include a provision to enter Depreciation disallowed under Section 38(2) of the Income Tax Act. This implies that we can determine the fair proportion attributable to personal use and then claim the balance as allowable business depreciation, with the disallowed portion specifically reported under Section 38(2) in Schedule DPM and Schedule DOA.

Ryan Vaz

VR4U

138 Points Posted on 01 January 2026

Yes — the correct place to show proportionate usage is in:

Schedule DPM → Column: “Depreciation disallowed u/s 38(2)”
Schedule DOA (if intangible assets / others apply)

There is no need to manipulate or reduce the cost of the asset to ₹15,000.
The law expects the cost to remain intact, and only depreciation to be restricted.

Aashok Kumar Sharma

Finance/Compliance Consultant

77999 Points Posted on 06 November 2026

Sec 38(2) allows proportionate depreciation:

• Sec 38(2): where a building, machinery, plant or furniture is not exclusively used for business, depreciation (and repairs/insurance under Sec 30/31) is allowed only on a "fair proportionate part", determined by the AO. Self-disallowing the personal portion is the correct approach.

• Practical method: estimate business use (e.g. a smartphone at 70% business) and claim depreciation on the full block entry but add back the personal share. In ITR-3, Schedule DEP has no column for this. Add back the disallowed depreciation in Schedule BP "Any other amount not allowable" (or reduce the claim in Schedule DOA/DEP and keep a working).

• The WDV for the block continues to reduce by the full depreciation (actual cost and WDV are not split), per Sec 38(2) mechanics.

• For a sole proprietor, keep a usage log or note on file. AOs usually accept a reasonable personal-use estimate.

• Cars: the same principle applies. GST ITC on motor cars is blocked anyway; for other assets, apportion ITC under Sec 17(1).