Under the Companies Act, 2013, depreciation is governed by Schedule II.
Unlike the Income Tax Act (which uses fixed percentages), the Companies Act focuses on the useful life of an asset. While the Act doesn’t strictly mandate “rates,” the industry uses the specified useful lives to derive standard Straight Line Method (SLM) and Written Down Value (WDV) rates, assuming a 5% residual value.
Depreciation Chart (Key Assets)
| Nature of Asset | Useful Life | SLM Rate | WDV Rate |
| I. Buildings | |||
| (a) RCC Frame Structure (Non-factory) | 60 Years | 1.58% | 4.87% |
| (b) Non-RCC Frame (Non-factory) | 30 Years | 3.17% | 9.50% |
| (c) Factory Buildings | 30 Years | 3.17% | 9.50% |
| II. Furniture & Fittings | |||
| (a) General Furniture & Fittings | 10 Years | 9.50% | 25.89% |
| (b) Used in Hotels/Schools/Hospitals | 8 Years | 11.88% | 31.23% |
| III. Plant & Machinery | |||
| (a) General Plant & Machinery | 15 Years | 6.33% | 18.10% |
| (b) Continuous Process Plant | 25 Years | 3.80% | 11.29% |
| IV. Office Equipment | 5 Years | 19.00% | 45.07% |
| V. Computers & Data Processing | |||
| (a) Servers and Networks | 6 Years | 15.83% | 39.30% |
| (b) Laptops, Desktops, End-user devices | 3 Years | 31.67% | 63.16% |
| VI. Vehicles | |||
| (a) Motor Cycles / Scooters | 10 Years | 9.50% | 25.89% |
| (b) Motor Cars (Non-commercial) | 8 Years | 11.88% | 31.23% |
| (c) Taxis, Lorries, Buses (Commercial) | 6 Years | 15.83% | 39.30% |
Important Rules to Remember
-
Residual Value: By default, the residual value is capped at 5% of the original cost of the asset.
-
Pro-rata Basis: If an asset is purchased or sold during the year, depreciation is calculated only for the period it was actually used.
-
Double/Triple Shift: For Plant & Machinery used in double shifts, depreciation increases by 50%. For triple shifts, it increases by 100% (Note: Assets marked “NESD”—No Extra Shift Depreciation—do not get this benefit).
-
Component Accounting: If different parts of one large machine have significantly different useful lives, you must depreciate those components separately.