How is depreciation calculated under the Income Tax Act?

The Income Tax Act uses the written-down value (WDV) method on blocks of assets. Depreciation each year is the block rate applied to the opening WDV. If an asset is put to use for less than 180 days in the year of acquisition, only 50 percent of the normal rate is allowed that year.

What is the difference between SLM and WDV depreciation?

Straight-line method (SLM) charges an equal amount every year over the asset's useful life. Written-down value (WDV) charges a fixed percentage on the reducing book value, so depreciation is higher in early years and lower later.

What residual value does Companies Act 2013 prescribe?

Under Schedule II of the Companies Act 2013, the residual value of an asset shall not normally exceed 5 percent of its original cost, and depreciation is spread over the useful life prescribed for each asset class.

Free depreciation calculator

Depreciation Calculator

Compute depreciation as per the Income Tax Act (WDV) or Companies Act 2013 (SLM & WDV), with a year-wise schedule.

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Choose a regime, asset, and cost to build the schedule.

Depreciation regime

Asset class

Asset cost

Rs.

Put to use for less than 180 days in year of purchase (50% depreciation in year 1)Additional depreciation u/s 32(1)(iia) — new plant & machinery in manufacturing, old regime only (20%)

Years to project (1–20)

Depreciation summary

Income Tax Act · WDV

Basis

15% WDV

Asset costRs. 1,00,000.00

First-year depreciationRs. 15,000.00

Depreciation over 5 yrRs. 55,629.47

Closing value (yr 5)Rs. 44,370.53

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This is a working estimate. The Companies Act allows pro-rata depreciation by days in the year of purchase; confirm final figures against the Act and your accounting policy.

Year-wise depreciation schedule

Written-down value on the block at the chosen rate.

Year	Opening value	Depreciation	Closing value
Year 1	Rs. 1,00,000.00	Rs. 15,000.00	Rs. 85,000.00
Year 2	Rs. 85,000.00	Rs. 12,750.00	Rs. 72,250.00
Year 3	Rs. 72,250.00	Rs. 10,837.50	Rs. 61,412.50
Year 4	Rs. 61,412.50	Rs. 9,211.88	Rs. 52,200.63
Year 5	Rs. 52,200.63	Rs. 7,830.09	Rs. 44,370.53

Income Tax Act rates (% WDV)

Asset block	Rate
Plant & machinery — general	15%
Computers, including computer software	40%
Furniture & fittings (incl. electrical fittings)	10%
Building — residential	5%
Building — non-residential / commercial	10%
Building — purely temporary structures	40%
Motor car — non-commercial use	15%
Motor buses / lorries / taxis used on hire	30%
Intangibles — patents, trademarks, licences	25%
Books (professionals)	40%
Ships — ocean-going	20%

Max block rate is capped at 40%. Assets used under 180 days in year 1 get 50% of the rate.

Companies Act 2013 useful lives

Asset class	Useful life
Plant & machinery — general	15 yrs
Continuous process plant	8 yrs
Computers — end-user devices (desktop/laptop)	3 yrs
Computers — servers and networks	6 yrs
Furniture & fittings — general	10 yrs
Furniture & fittings — hotels / restaurants / education	8 yrs
Office equipment	5 yrs
Electrical installations & equipment	10 yrs
Building (non-factory) — RCC frame structure	60 yrs
Building (non-factory) — other than RCC	30 yrs
Factory building	30 yrs
Fences, wells, tube-wells	5 yrs
Temporary structures	3 yrs
Motor car — non-hire use	8 yrs
Motor vehicles used on hire	6 yrs
Motorcycles, scooters, mopeds	10 yrs
Ships — bulk carriers and liners	25 yrs
Ships — crude / product tankers	20 yrs
Ships — liquefied gas carriers	30 yrs

Residual value is capped at 5% of original cost under Schedule II.

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