Form 3CD Clause 18 for AY 2026-27: Depreciation, WDV & Put-to-Use Reconciliation
Updated: Sep 28
Direct answer: Clause 18 of Form 3CD requires asset/block-wise reporting of depreciation allowable under the Income-tax Act, 1961. For AY 2026-27, tax teams should reconcile opening written-down value, additions and deductions with dates, the date each addition was put to use, statutory adjustments to actual cost/WDV, the applicable depreciation rate, depreciation allowable and closing WDV. The tax-audit report for FY 2025-26 continues in Forms 3CA/3CB with Form 3CD and is generally due on 21 October 2026.
Update — 28 September 2026: CBDT changed the specified ordinary AY 2026–27 tax-audit report deadline from 30 September to 21 October 2026 and the related audited return deadline from 31 October to 21 November 2026. Transfer-pricing Form 3CEB cases follow a separate timeline. Official Income Tax Department announcement.
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Why Clause 18 deserves a separate reconciliation
Depreciation is often treated as a routine fixed-asset calculation, but Clause 18 combines tax classification, timing and documentary evidence. A mismatch can flow directly into taxable business income and can also create inconsistencies between the tax audit report, depreciation schedule and return of income. The safest approach is to build Clause 18 from a tax fixed-asset register rather than copy book depreciation.
What Clause 18 requires you to report
For each asset or block of assets, the reporting framework covers: description of the asset/block; rate of depreciation; actual cost or opening WDV; prescribed WDV adjustments where applicable; additions and deductions during the year with dates; the date an addition was put to use; specified adjustments including foreign-exchange changes and subsidy, grant or reimbursement; depreciation allowable; and closing WDV.
Section 32 vs book depreciation: do not confuse the two
Clause 18 is about depreciation allowable under the Income-tax Act. Book depreciation under the Companies Act or accounting standards may use different useful lives, residual values and methods. The tax audit working paper should therefore begin with the tax block of assets and separately reconcile the accounting fixed-asset register. A book depreciation number is not a substitute for the Section 32 computation.
The put-to-use date is a control point, not a clerical field
For additions during FY 2025-26, preserve the invoice, installation/commissioning evidence and the date the asset became capable of business use. The put-to-use date affects the depreciation computation and should be tested asset by asset for material additions. Year-end capitalisation entries deserve special review because an invoice date, accounting capitalisation date and actual put-to-use date may differ.
A practical Clause 18 reconciliation workflow
1. Freeze the opening tax WDV block-wise and tie it to the preceding year. 2. Map every material addition to invoice, ownership and put-to-use evidence. 3. Map disposals and other deductions to the correct tax block. 4. Review actual-cost/WDV adjustments, including exchange-rate movements and subsidies or grants where relevant. 5. Apply the correct tax depreciation rate and any timing restriction. 6. Recompute depreciation independently. 7. Tie closing WDV to the tax computation and return schedules. 8. Document differences from the book fixed-asset register.
Worked example
Assume a plant-and-machinery block opens with tax WDV of ₹40 lakh and eligible additions of ₹10 lakh are put to use during the year. The Clause 18 file should not merely show ₹50 lakh as a base. It should identify the addition date and put-to-use date, test the applicable depreciation treatment, account for any disposal or cost adjustment, calculate allowable depreciation and carry the resulting closing WDV into the next year. If the books use a different useful life, that difference belongs in the book-to-tax reconciliation, not in the tax depreciation rate.
Common Clause 18 mistakes
Common failures include using the Companies Act depreciation schedule as the tax schedule; missing the put-to-use date; carrying forward an incorrect opening WDV; classifying an asset in the wrong tax block; omitting foreign-exchange or subsidy adjustments; failing to reconcile disposals; and allowing the Form 3CD figure to diverge from the tax computation or ITR depreciation schedule.
AY 2026-27 transition point
FY 2025-26 / AY 2026-27 remains governed by the Income-tax Act, 1961 for tax-audit reporting. The Income Tax Department confirms that Forms 3CA/3CB with Form 3CD continue for AY 2026-27, with the ordinary tax-audit report due on 21 October 2026. The unified Form 26 belongs to Tax Year 2026-27 under the Income Tax Act, 2025 and should not be used for AY 2026-27.
Pre-filing checklist
Before signing the report, confirm that opening WDV agrees with last year; additions and disposals are complete; material additions have put-to-use evidence; block classification and rates are reviewed; Section 43A/actual-cost adjustments are considered where relevant; grants/subsidies are reviewed for tax cost impact; depreciation is independently recomputed; and closing WDV agrees with the return and tax computation.
FAQs
Is Clause 18 the same as book depreciation?
No. Clause 18 reports depreciation allowable under the Income-tax Act. Book depreciation may follow the Companies Act or applicable accounting standards and therefore requires a separate reconciliation.
Which date matters for an asset addition?
The acquisition documentation matters, but Clause 18 specifically requires the date the addition is put to use. That date should be supported by evidence, particularly for material or year-end additions.
What tax-audit forms apply for AY 2026-27?
The Income Tax Department confirms continued use of Form 3CA or 3CB together with Form 3CD for FY 2025-26 / AY 2026-27.
Related PGT & Associates guides
For the wider tax-audit framework, also see our guides on Tax Audit Due Date for AY 2026-27, Form 3CD Common Mistakes, Clause 22 (MSME/Section 43B(h)) and Clause 26 (Section 43B reconciliation). These supporting pages should be read together when finalising the audit file.
Primary references
Income Tax Department — Income Tax Forms / AY 2026-27 guidance (Forms 3CA/3CB/3CD and due date); Income Tax Department — AY 2026-27 taxpayer guidance; ICAI — Guidance Note on Tax Audit under Section 44AB, Revised 2026 (July 2026).
Professional assistance
PGT & Associates assists businesses and professional teams with tax-audit readiness, Form 3CD reconciliations, fixed-asset tax reviews and documentation of high-risk reporting positions. For a review before filing, use the enquiry/contact page on pgtandassociates.com.
Disclaimer: This article is for general professional information and does not constitute legal or tax advice. Applicability depends on the taxpayer’s facts, asset classification and the law in force on the relevant date.
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