Aalekh
All calculators
For Chartered AccountantsRates reviewed September 2026

Depreciation Calculator: Companies Act and Income Tax

A depreciation calculator has to answer two separate questions for the same asset, because India runs two depreciation regimes side by side. For the financial statements, Schedule II to the Companies Act, 2013 prescribes useful lives and the company chooses straight line or written down value. For the tax computation, section 33 of the Income-tax Act, 2025 (section 32 of the 1961 Act) prescribes written down value depreciation on blocks of assets at rates set out in the prescribed rate table, historically Appendix I. The two almost never agree, and the gap is what generates deferred tax.

Under Schedule II you depreciate cost less residual value over the prescribed useful life. Residual value cannot exceed 5 per cent of original cost unless the company discloses and technically justifies a different figure. The lives given are for single shift working: for assets not marked NESD, double shift working increases depreciation by 50 per cent and triple shift by 100 per cent for that period. Componentisation is mandatory for financial years beginning on or after 1 April 2015, so where a part of an asset is significant in cost and has a different useful life, that part is depreciated separately.

Under the Income-tax Act you do not track individual assets at all. Assets of the same class and rate are pooled into a block, additions are added to the block, sale proceeds are deducted, and the rate is applied to the closing written down value. An asset acquired and put to use for less than 180 days in the tax year gets half the normal rate that year. Manufacturing and power generation businesses can claim a further 20 per cent additional depreciation under section 33(8) (section 32(1)(iia)) on new plant and machinery, again halved to 10 per cent if put to use for under 180 days, with the balance 10 per cent in the following year. Companies that have opted for the concessional regimes in section 200 or section 201 (sections 115BAA and 115BAB) forgo additional depreciation.

Depreciation Calculator

Drives the Schedule II useful life and the income-tax block rate.

₹

Schedule II caps this at 5% of original cost unless a different figure is disclosed and technically justified.

%

Leave at 0 to use the Schedule II life for the selected class.

years

Depreciation for the year

₹12,667

Schedule II SLM, 15-year life

Useful life appliedPlant and machinery, general
15 years
Residual value5% of ₹6 lakh
₹30,000
Depreciable amountcost less residual value
₹5,70,000
Rate appliedstraight line
6.667%
Period chargedput to use on 1 Dec 2026
4 months
Depreciation for a full year
₹38,000
Depreciation for this year
₹12,667
Closing carrying amount
₹5,87,333
  • Schedule II depreciation runs from the date the asset is ready for use and is charged pro rata, so this is the first-year figure for the asset.
  • Add 50% for double shift working or 100% for triple shift working on assets not marked NESD, and componentise any significant part with a different life.

The formula

Tax depreciation = (Opening WDV + Additions − Sale proceeds) × Prescribed rate | Book depreciation (SLM) = (Cost − Residual value) ÷ Useful life

Opening WDV
Written down value of the block of assets at the start of the tax year, determined under section 41 of the Income-tax Act, 2025.
Prescribed rate
The written down value rate for that block, for example 15 per cent for general plant and machinery and 40 per cent for computers, halved for assets put to use for under 180 days.
Residual value
Scrap value at the end of useful life under Schedule II, capped at 5 per cent of original cost unless a different figure is disclosed and justified.
Useful life
The life prescribed in Part C of Schedule II to the Companies Act, 2013, adjusted for shift working where the asset is not marked NESD.

Depreciation for the books runs from the date the asset is ready for use and is charged pro rata for the part of the year, whereas the tax half-rate rule is a flat 50 per cent cut, not a day count.

How to calculate it

  1. 1

    Fix the date the asset was put to use

    This single date drives both computations. For the books it starts the pro rata charge; for tax it decides whether the asset crosses 180 days in the tax year and therefore whether the full rate or half rate applies.

  2. 2

    Build the book charge under Schedule II

    Take cost, deduct residual value of up to 5 per cent, and spread the balance over the prescribed useful life using SLM or WDV as the company has elected. Apply componentisation where a significant part has a different life, and add 50 per cent for double shift or 100 per cent for triple shift working on assets not marked NESD.

  3. 3

    Group tax assets into blocks

    Pool every asset carrying the same rate into one block. Add the actual cost of additions, deduct money received on assets sold or discarded, and work on the net figure. Individual assets lose their identity once inside a block, so there is no asset-wise gain or loss until the whole block is extinguished.

  4. 4

    Apply the rate and the 180-day rule

    Apply the prescribed rate to the opening WDV and to additions used for 180 days or more. Apply half the rate to additions put to use for less than 180 days. The half rate applies only in the year of acquisition; from the next year the asset is inside the block at full rate.

  5. 5

    Add additional depreciation if eligible

    A business engaged in manufacture or production, or in generation, transmission or distribution of power, can claim 20 per cent of the actual cost of new plant and machinery under section 33(8). Second-hand assets, office appliances, road transport vehicles and plant installed in office or residential premises are excluded, and the deduction is not available under the concessional regimes.

  6. 6

    Reconcile the two figures

    Carry the difference between book depreciation and tax depreciation into the deferred tax working. Where tax depreciation exceeds the book charge the difference is taxable and creates a deferred tax liability.

Depreciation benchmarks for FY 2026-27: income-tax block rates and Schedule II useful lives

Depreciation benchmarks for FY 2026-27: income-tax block rates and Schedule II useful lives
Asset classIncome-tax rate (WDV)Schedule II useful life
Residential buildings5%60 years (RCC frame structure)
Non-residential and factory buildings10%30 years (factory building)
Furniture and fittings10%8 to 10 years
Plant and machinery, general15%15 years
Continuous process plant15%25 years
Motor cars, not used in a hire business15%6 to 10 years by vehicle type
Computers, laptops and software40%3 years for end-user devices, 6 years for servers
Intangible assets such as patents and trademarks25%Amortised per AS 26 or Ind AS 38

Worked example

Opening WDV, plant and machinery block
₹10,00,000
New machine acquired and put to use
₹6,00,000 on 1 December 2026
Business
Manufacturing, default tax regime
Schedule II useful life, SLM, residual 5%
15 years
  • Days of use for the new machine in FY 2026-27 is under 180, so the half-rate rule applies to it
  • Tax depreciation on opening WDV = ₹10,00,000 × 15% = ₹1,50,000
  • Tax depreciation on the new machine = ₹6,00,000 × 7.5% = ₹45,000
  • Additional depreciation under section 33(8) = ₹6,00,000 × 10% = ₹60,000, balance 10% allowed in FY 2027-28
  • Total tax depreciation = ₹1,50,000 + ₹45,000 + ₹60,000 = ₹2,55,000
  • Closing tax WDV = ₹10,00,000 + ₹6,00,000 − ₹2,55,000 = ₹13,45,000
  • Book depreciation on the new machine = (₹6,00,000 − ₹30,000) ÷ 15 = ₹38,000 per year, charged for 4 months = ₹12,667

Tax depreciation ₹2,55,000 against a book charge of ₹12,667 on the new machine, a taxable difference that feeds the deferred tax liability

Frequently asked questions

Computers, laptops and computer software fall in a 40 per cent written down value block. If the machine is acquired and put to use for less than 180 days in the tax year, only half that rate, 20 per cent, is allowed in the first year. From the following year the asset sits inside the block and attracts the full 40 per cent on the block written down value.
Where an asset is acquired and put to use for less than 180 days in the tax year of acquisition, depreciation on that asset is restricted to 50 per cent of the normal rate for that year. It is a flat halving, not a day-count apportionment. The restriction applies only in the year of acquisition and also applies to additional depreciation, where the unclaimed 10 per cent is allowed in the immediately following year.
Depreciation is now section 33 of the Income-tax Act, 2025, which replaced section 32 of the Income-tax Act, 1961 from 1 April 2026. Additional depreciation is section 33(8), corresponding to section 32(1)(iia), and unabsorbed depreciation carry-forward is section 33(11), corresponding to section 32(2). The written down value and actual cost definitions sit in section 41.
Schedule II provides that residual value ordinarily shall not be more than 5 per cent of the original cost of the asset. A company may adopt a lower residual value, or a different useful life, but it must disclose the deviation in the financial statements and support it with technical advice. The 5 per cent is a cap, not a mandatory figure.
Yes. Section 33(8) of the Income-tax Act, 2025 continues the 20 per cent additional depreciation on new plant and machinery acquired and installed by a business engaged in manufacture or production, or in generation, transmission or distribution of power. It is not available on second-hand plant, office appliances, road transport vehicles, or to companies that have opted for the concessional regimes in section 200 or section 201.
Yes. Unabsorbed depreciation under section 33(11) of the Income-tax Act, 2025, formerly section 32(2), has no time limit and can be carried forward indefinitely. It can be set off against income under any head other than salary, which is wider than a business loss carried forward under section 112, formerly section 72, where the carry-forward is limited to eight years and set-off is confined to business income.
The Companies Act is trying to spread cost over the period the asset genuinely serves the business, so Schedule II works from useful lives and residual value and allows both SLM and WDV. The Income-tax Act is applying a statutory allowance, so it uses fixed rates on pooled blocks with no regard to actual useful life. The difference between the two charges is a timing or temporary difference and is accounted for as deferred tax.

Sources

Rates and rules on this page come from the following. This is a working aid, not professional advice: confirm anything material with your Chartered Accountant before you act on it.

Stop re-keying these figures

Aalekh runs this calculation on your actual client data, pulls the underlying ledgers straight from Tally, and carries the result through to the financial statements and the return.

Get StartedBook a demo

Related calculators