What is the difference between Companies Act and Income-tax depreciation?

The Companies Act (Schedule II) uses useful lives for the P&L; the Income-tax Act uses block rates for the tax return. Both are computed every year and the gap creates deferred tax.

What is the residual value under Schedule II?

Normally 5% of the original cost. A company may use a different residual value if it justifies and discloses it in the financial statements.

How is the WDV rate derived from useful life?

Rate = 1 − (residual ÷ cost)^(1 ÷ life). For a 15-year asset with 5% residual that is about 18.1% a year.

Is depreciation pro-rated in the year of purchase?

Yes. Schedule II requires depreciation from the date the asset is available for use, computed on a daily or monthly basis, unlike the income-tax 180-day rule.

What happens when the useful life is over?

The asset is carried at residual value until disposed. If it continues in use, no further depreciation is charged.

Companies Act Depreciation Calculator

Schedule II useful lives, SLM and WDV rates, the pro-rated first year and a five-year schedule for the books.

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Asset class (Schedule II Part C)

Method

Cost of asset (₹)

₹

Residual value (% of cost, max 5)

Date put to use

Financial year end

Book depreciation

Useful life

15 years

SLM rate

6.67% p.a.

Residual value

₹ 0

Full-year depreciation

₹ 0

First-year charge365 of 365 days

₹ 0

Indicative only. Schedule II, Companies Act 2013, Part C lives for the common classes; a company may use a different life or residual value with disclosure and justification. Double/triple-shift additions for plant are not applied. Income-tax depreciation is different: use the depreciation calculator for block rates.

How it works

Pick the class

Schedule II prescribes a useful life for each asset class. Residual value is capped at 5% of cost unless justified.

Rate from life

SLM spreads cost less residual evenly. WDV uses the rate that reduces cost to residual over the life, so early years carry more.

Pro-rate year one

Depreciation runs from the date the asset is put to use, by days, for the first financial year.

Books vs tax: two depreciations every company keeps

Under the Companies Act the charge in the P&L follows Schedule II useful lives, chosen to reflect how long the asset actually serves. Under the Income-tax Act the deduction follows block rates with the 180-day rule, chosen by Parliament. The two rarely agree, and the gap is the deferred tax asset or liability under Ind AS 12 / AS 22. Auditors expect a fixed-asset register that carries both.

Component accounting

Where a significant part of an asset has a different life, depreciate the part separately.

Continuous process plant

Plant running 24×7 gets a 25-year life; general plant 15 years, with extra depreciation for double or triple shifts.

Asset below ₹5,000

The old 100% write-off is gone; small assets follow their class life unless the company's policy expenses them.

Change of method

Switching SLM to WDV is a change in accounting estimate under Ind AS 8, applied prospectively.