New Delhi: The finance ministry has cut depreciation rates on certain tangible assets - including energy-saving devices, air pollution equipment, water pollution control equipment and solid waste control equipment - from 100 per cent to 80 per cent.

The depreciation rates on intangible assets covering know-how, patents, copyrights, trademarks, licences and franchises have, however, been retained at 25 per cent. The cut in depreciation rates will impact the liquidity position of companies, which channelise funds to replace these assets. It would, however, shore up revenues for the exchequer.

The revised depreciation rate of 80 per cent notified by the Central Board of Direct Taxes for several tangible assets is lower than the originally proposed rate of 60 per cent. Energy-saving devices (with a depreciation rate of 80 per cent) include specialised boilers and furnaces, instrumentation and monitoring system for monitoring energy flows, waste heat recovery equipment, co-generation systems, electrical equipment, burners and renewable energy devices.

The depreciation rate for hotels has been pruned from 20 per cent to 10 per cent. A new category has been added to building (buildings acquired on or after 1 September 2002) for installing machinery and plant forming part of water supply project or water treatment systems and which is put to use for providing infrastructure facilities under Section 80 IA of the Income Tax Act, 1961. The depreciation rate for this category has been fixed at 100 per cent.

The depreciation rate on furniture and fittings will now be a flat rate of 15 per cent as against the two rates of 10 per cent and 15 per cent earlier. The depreciation rate on commercial vehicles acquired on or after 1 October 1998 and before 1 April 1999 for business purposes, however, remains unchanged at 40 per cent. Similarly, the rate for new commercial vehicles acquired after 1 April 2001 but before 1 April 2002 stands at the existing 50 per cent.

Computers will now include computer software with a depreciation rate of 60 per cent. The depreciation rate for books (annual publications) owned by professionals has been retained at 100 per cent. Similarly, the rate for books owned by those running lending libraries has been retained at 100 per cent. The depreciation rate has, however, been cut to 60 per cent for non-annual publications.