Companies Act, 2013 · Schedule II
Depreciation Rates
Under Companies Act, 2013
Useful life-based depreciation as per Schedule II of the Companies Act, 2013. Used for books of accounts and financial statements. Both SLM (Straight Line Method) and WDV (Written Down Value) rates derived from useful life. Residual value: 5% of original cost.
50+Asset Classes
2Methods
5%Residual Value
Sch. IIAuthority
⚠️
Key Difference from Income Tax Act: Companies Act depreciation (Schedule II) uses Useful Life to compute SLM/WDV rates with a 5% residual value. Income Tax Act (Appendix I) uses fixed prescribed rates on full WDV with zero residual value. The two sets of rates are completely independent — using Companies Act rates in income tax returns is incorrect and will be disallowed. Maintain separate depreciation schedules for each purpose.
📐 Useful Life Method
Depreciation is computed based on the useful life of each asset class as specified in Schedule II, not at a fixed prescribed rate.
🏁 Residual Value = 5%
A minimum 5% residual (scrap) value must be retained. Depreciation is calculated on 95% of original cost under SLM. Under WDV, asset reaches ~5% of cost over useful life.
📊 Both Methods Allowed
Companies may use either SLM or WDV — consistently across each class of assets. Once chosen, the method must be applied uniformly and disclosed in financial statements.
🔄 Change in Estimate
If a company's technical assessment supports a different useful life or residual value, it may use that — with full disclosure in financial statements (Ind AS 16 / AS 6 principle).
📌 NESD Assets
Assets marked NESD (No Extra Shift Depreciation) — such as buildings — do not receive extra depreciation for double/triple shift working. Others get 50%/100% extra respectively.
⚡ Extra Shift
For P&M (non-NESD assets), if used in double shift: depreciation × 1.5. If used in triple shift: depreciation × 2. Must be applied proportionately for actual shift days.
How WDV Rate is Derived from Useful Life
Schedule II gives useful life in years. The WDV rate is mathematically derived so that the asset reaches its 5% residual value exactly at the end of its useful life. This formula ensures consistent treatment across all asset classes.
WDV Rate = 1 − (0.05)^(1/n)
where n = useful life in years · residual = 5%
SLM Rate = 95% ÷ n years
SLM vs WDV — Key Differences for Companies Act Depreciation
📊 Straight Line Method (SLM)
- Equal depreciation every year throughout useful life
- Formula: (Cost − Residual Value) ÷ Useful Life
- Simpler; predictable P&L impact year on year
- Results in lower depreciation in early years vs WDV
- Preferred for assets with uniform usage (buildings, furniture)
- Higher profits in early years (lower depreciation charge)
📉 Written Down Value (WDV)
- Higher depreciation in early years; reduces over time
- Formula: WDV × [1 − (0.05)^(1/n)] per year
- Matches economic reality of most assets (front-loaded value loss)
- Results in higher depreciation in early years vs SLM
- Preferred for machinery, vehicles (faster obsolescence)
- Lower profits in early years; higher in later years
| Sl. | Useful Life | SLM Rate | WDV Rate | Category | Asset Description | Note |
|---|---|---|---|---|---|---|
| 1 | 60 yrs | 1.58% | 4.87% | Buildings | RCC frame structure (residential, factory, office)NESD | NESD — no extra shift depreciation |
| 2 | 30 yrs | 3.17% | 9.50% | Buildings | Buildings other than RCC frame structureNESD | NESD; non-RCC buildings, brick structures |
| 3 | 3 yrs | 31.67% | 63.16% | Buildings | Purely temporary erections (wooden sheds, site offices) | NESD; very short life for temporary structures |
| 4 | 10 yrs | 9.50% | 25.89% | Furniture | Furniture and fittings including electrical fittingsNESD | NESD; uniform rate for all furniture |
| 5 | 15 yrs | 6.33% | 18.10% | Plant & Machinery | General plant and machinery (not covered under specific entries) | Default rate for unclassified P&M |
| 6 | 25 yrs | 3.80% | 11.29% | Plant & Machinery | Plant and machinery (continuous process plant — not otherwise specified)NESD | Refineries, petrochemical, chemical plants |
| 7 | 40 yrs | 2.38% | 7.22% | Plant & Machinery | Plant used in generation, transmission and distribution of powerNESD | Power sector assets; NESD applies |
| 8 | 15 yrs | 6.33% | 18.10% | Plant & Machinery | Boilers, pressure vessels, heat exchangers (industrial) | General P&M rate; 15-year useful life |
| 9 | 10 yrs | 9.50% | 25.89% | Plant & Machinery | Electrical installations (wiring, switchgear, captive transformers) | 10-year useful life for electrical infrastructure |
| 10 | 15 yrs | 6.33% | 18.10% | Plant & Machinery | Pumps, compressors, fans, blowers | General P&M rate applies |
| 11 | 15 yrs | 6.33% | 18.10% | Plant & Machinery | Machine tools (lathes, drilling, milling, grinding, boring) | Standard engineering workshop machinery |
| 12 | 15 yrs | 6.33% | 18.10% | Plant & Machinery | Material handling equipment: conveyors, cranes, hoists, forklifts | Factory/warehouse handling equipment |
| 13 | 15 yrs | 6.33% | 18.10% | Plant & Machinery | Diesel generating sets (DG sets) and associated equipment | Backup/captive power generation |
| 14 | 13 yrs | 7.31% | 20.58% | Plant & Machinery | Medical and surgical equipment, X-ray machines, ECG, imaging equipment | Hospitals; diagnostic and surgical equipment |
| 15 | 10 yrs | 9.50% | 25.89% | Plant & Machinery | Life-saving medical equipment (ventilators, haemodialysis, defibrillators) | Shorter life due to intensive clinical use |
| 16 | 15 yrs | 6.33% | 18.10% | Plant & Machinery | Refrigeration and cold storage equipment, industrial AC/HVAC | Industrial refrigeration; general P&M rate |
| 17 | 10 yrs | 9.50% | 25.89% | Plant & Machinery | Scientific instruments and R&D laboratory apparatus | Research and quality testing equipment |
| 18 | 10 yrs | 9.50% | 25.89% | Plant & Machinery | Printing presses and publishing machinery | Print/media industry equipment |
| 19 | 18 yrs | 5.28% | 15.33% | Plant & Machinery | Telecom equipment and network infrastructure (towers, exchanges)NESD | Telecom sector — NESD; longer life |
| 20 | 25 yrs | 3.80% | 11.29% | Plant & Machinery | Renewable energy devices (solar panels, wind turbines, biogas plants)NESD | NESD; 25-year life for renewable energy assets |
| 21 | 8 yrs | 11.88% | 31.23% | Plant & Machinery | Plant and machinery for mining, quarrying and mineral processing | Higher wear in mining; shorter useful life |
| 22 | 20 yrs | 4.75% | 13.91% | Plant & Machinery | Aircraft, helicopters and aero-engines | Subject to aviation regulator requirements also |
| 23 | 12 yrs | 7.92% | 22.09% | Plant & Machinery | Construction equipment: excavators, bulldozers, road rollers, compactors | Heavy earthmoving and road construction equipment |
| 24 | 25 yrs | 3.80% | 11.29% | Plant & Machinery | Steel furnaces, rolling mills, foundry equipment, metallurgical plantNESD | Steel sector; long-life capital-intensive equipment |
| 25 | 15 yrs | 6.33% | 18.10% | Plant & Machinery | Textile machinery (looms, spinning frames, weaving machines) | General P&M rate; textile sector |
| 26 | 25 yrs | 3.80% | 11.29% | Plant & Machinery | Petroleum and natural gas — offshore/onshore drilling and extraction plantNESD | NESD; long-life oil & gas infrastructure |
| 27 | 30 yrs | 3.17% | 9.50% | Plant & Machinery | Pipelines (water, gas, petroleum transmission)NESD | NESD; infrastructure pipelines; long useful life |
| 28 | 10 yrs | 9.50% | 25.89% | Plant & Machinery | Office air conditioning systems (split, central, VRF systems) | 10-year useful life for commercial AC |
| 29 | 8 yrs | 11.88% | 31.23% | Vehicles | Motor vehicles — not used for hire (cars, SUVs for business use) | Personal/business use cars; 8-year life |
| 30 | 6 yrs | 15.83% | 39.30% | Vehicles | Motor buses, motor lorries, motor taxis used in hire business | Higher wear; shorter life for commercial hire vehicles |
| 31 | 10 yrs | 9.50% | 25.89% | Vehicles | Two-wheelers — scooters, motorcycles (business use) | 10-year useful life for two-wheelers |
| 32 | 8 yrs | 11.88% | 31.23% | Vehicles | Battery-operated electric vehicles (EVs) | Same life as conventional vehicles; separate battery depreciation may apply |
| 33 | 15 yrs | 6.33% | 18.10% | Vehicles | Locomotives, rolling stock, wagons (railway sector) | Rail sector assets; 15-year useful life |
| 34 | 6 yrs | 15.83% | 39.30% | Computers / IT | Servers and network equipment (routers, switches, storage) | Server-grade equipment; 6-year life |
| 35 | 3 yrs | 31.67% | 63.16% | Computers / IT | End-user computing devices: laptops, desktops, tablets, workstations | Shortest useful life — rapid technological obsolescence |
| 36 | 6 yrs | 15.83% | 39.30% | Computers / IT | Data processing units, mainframes and other computing hardware (non-end-user) | Midrange to mainframe class equipment |
| 37 | 3 yrs | 31.67% | 63.16% | Computers / IT | Computer software (ERP, application software, system software) | 3-year life; software treated separately from hardware |
| 38 | 30 yrs | 3.17% | 9.50% | Ships | Ocean-going ships, dredgers and bargesNESD | NESD; long useful life for ocean vessels |
| 39 | 10 yrs | 9.50% | 25.89% | Ships | Fishing vessels, inland water crafts and other vessels | Shorter life for smaller vessels and fishing craft |
| 40 | 13 yrs | 7.31% | 20.58% | Ships | Speed boats and motorised fast craft | Intermediate life between fishing and ocean vessels |
| 41 | 10 yrs | 9.50% | 25.89% | Intangible | Goodwill (arising on acquisition / amalgamation) | Under Ind AS — goodwill NOT amortised; impairment tested annually. Under AS — amortised as above. |
| 42 | Legal life | Over legal life | Over legal life | Intangible | Patents, copyrights, trademarks, licenses, franchises | Amortised over legal / contractual life or 10 years — whichever is lower |
| 43 | 3 yrs | 31.67% | 63.16% | Intangible | Computer software (if classified as intangible asset under Ind AS 38 / AS 26) | Same 3-year life as tangible software; amortisation over useful life |
| 44 | 10 yrs | 9.50% | 25.89% | Intangible | Mine development expenditure and mineral exploration rights | Amortised over 10 years or life of mine — whichever is lower |
| 45 | 30 yrs | 3.17% | 9.50% | Plant & Machinery | Water supply and treatment infrastructure (ETP, STP, water treatment plant)NESD | NESD; infrastructure assets with long life |
| 46 | 20 yrs | 4.75% | 13.91% | Plant & Machinery | Storage tanks, silos and industrial pressure vessels | 20-year useful life for industrial storage infrastructure |
| 47 | 10 yrs | 9.50% | 25.89% | Buildings | Roads (within factory premises), railway sidings, jettiesNESD | NESD; internal roads and sidings |
| 48 | 10 yrs | 9.50% | 25.89% | Plant & Machinery | Fire fighting equipment (hydrant systems, sprinklers, fire extinguishers) | Safety equipment; 10-year useful life |
| 49 | 15 yrs | 6.33% | 18.10% | Furniture | Steel safes, vaults and security lockers | Heavy steel furniture; longer useful life |
| 50 | 12 yrs | 7.92% | 22.09% | Plant & Machinery | Agricultural machinery (tractors, harvesters, irrigation pumps) | 12-year useful life for farm mechanisation equipment |
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Depreciation — Companies Act
Schedule II · SLM & WDV Methods · Useful life · Pro-rata calculation
📌 Companies Act Schedule II: Depreciation based on useful life.
Residual/Scrap Value = 5% of original cost. SLM rate = (Cost − Residual) / Useful Life.
WDV rates are as per Schedule II. Pro-rata calculated based on months in use.
Depreciation Rates under Companies Act
