Asset Depreciation Calculator
Calculate asset depreciation as per Schedule II of the Companies Act 2013. Supports SLM and WDV methods based on useful life.
| FY | Opening | Depreciation | Closing |
|---|
Understanding Depreciation (Companies Act 2013)
Key Concepts
Unlike the Income Tax Act, which prescribes fixed percentage rates, the Companies Act 2013 (Schedule II) focuses on the useful life of the asset. This approach ensures that financial statements present a "true and fair" view by matching the cost of the asset with the revenue it helps generate over its life.
- Cost: Acquisition price + incidentals.
- Residual Value: Value at the end of life (Default 5%).
- Useful Life: Estimate of how long the asset will be used.
Calculation Methods
Straight Line Method (SLM)
Formula: (Cost - Residual) / Useful Life
Ideal for assets that provide uniform utility over time, like furniture or buildings.
Written Down Value (WDV)
Formula: Rate = [1 - (s/c)^(1/n)]
Ideal for assets that lose value quickly in early years, like computers or vehicles.
Note: In the first year of purchase, depreciation must be calculated on a pro-rata basis from the date the asset is put to use until the end of the financial year (March 31).
Companies Act vs. Income Tax Act
| Feature | Companies Act 2013 | Income Tax Act 1961 |
|---|---|---|
| Basis | Useful Life of Asset | Blocks of Assets (Percentage) |
| Objective | True & Fair Financial Reporting | Tax Computation / Liability |
| Residual Value | Generally 5% of cost | Nil (Asset can be depreciated to ₹0) |
| Methods | SLM, WDV, or Unit of Production | Mainly WDV (SLM for Power Sector) |
Frequently Asked Questions
What is the basis of depreciation under Companies Act 2013?
Depreciation under the Companies Act 2013 is based on the useful life of the asset as specified in Schedule II, rather than fixed rates prescribed by law.
What is the standard residual value for assets?
The standard residual value is generally capped at 5% of the original cost of the asset, unless a different value can be justified.
How is pro-rata depreciation calculated?
Pro-rata depreciation is calculated from the date the asset is available for use. In the first year, it's calculated based on the number of days from the date of purchase until the end of the financial year (March 31st).
What are the common useful lives for assets?
Common useful lives include: Computers (3 years), Servers (6 years), Plant & Machinery (15 years), Furniture (10 years), and RCC Buildings (60 years).
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