Calculate the annual straight-line depreciation expense and book value of an asset over its useful life.
A depreciation calculator computes the annual depreciation expense on an asset and its book value (written-down value) over its useful life. Depreciation is the systematic allocation of an asset\'s cost over the periods it is used — a fundamental concept in business accounting, income tax computation, and financial reporting for Indian businesses, professionals, and companies. This calculator uses the straight-line depreciation method (SLM), where an equal amount is written off each year. Understanding depreciation is essential for computing taxable business income under the Income Tax Act and for accurate financial statements under Indian Accounting Standards (Ind AS).
Two methods of depreciation are most common in India: Straight-Line Method (SLM) and Written-Down Value (WDV) method. This calculator uses SLM.
Straight-Line Method (SLM): Annual Depreciation = (Asset Cost − Salvage Value) ÷ Useful Life in Years. The same amount is depreciated each year.
Example: Asset cost ₹5,00,000, salvage value ₹50,000, useful life 10 years: Annual SLM depreciation = (₹5,00,000 − ₹50,000) ÷ 10 = ₹45,000 per year. After 5 years: Accumulated depreciation = ₹2,25,000. Book value = ₹5,00,000 − ₹2,25,000 = ₹2,75,000. After 10 years: Book value = ₹50,000 (salvage value).
For income tax purposes, the WDV method is mandatory for most assets under the Income Tax Act. WDV applies a fixed percentage each year to the declining book value. Common IT Act block rates: Plant and Machinery — 15%; Buildings — 10%; Furniture — 10%; Vehicles — 15%; Computers and peripherals — 40%; Intangibles — 25%. (Note: for ITR filing, use IT Act depreciation rates, not SLM unless specifically permitted.)
Indian businesses must navigate two depreciation frameworks: (1) Accounting depreciation — as per Companies Act 2013 (Schedule II specifies useful lives for different asset categories) and Indian Accounting Standards (Ind AS). Schedule II requires companies to use the useful life specified (or justify a different life), and the SLM and WDV methods are both allowed. For example, Schedule II specifies a useful life of 15 years for general plant and machinery. (2) Tax depreciation — as per Income Tax Act, 1961 (Section 32), which specifies WDV rates for different asset "blocks." The IT Act depreciation amount is a deductible expense when computing taxable business income. If accounting depreciation differs from IT Act depreciation (which it often does), a deferred tax asset or liability arises — handled per Ind AS 12 (Income Taxes). For small businesses and professionals using the presumptive taxation scheme (Section 44AD or 44ADA), there is no separate depreciation deduction — the presumptive income already accounts for it. For larger businesses, optimising depreciation under the IT Act is a legitimate tax planning tool: assets acquired in the second half of the year are eligible for only 50% of the applicable depreciation rate in the year of acquisition. Additional depreciation (20% of cost in the year of installation) is available for certain manufacturing plant and machinery under Section 32(1)(iia).
Straight-Line Method (SLM): equal depreciation amount each year (Cost − Salvage Value) ÷ Useful Life. Used in Companies Act Schedule II for accounting. Written-Down Value (WDV) method: a fixed percentage is applied each year to the net book value (declining balance), resulting in higher depreciation in early years and lower in later years. Mandatory for income tax under Section 32 of the IT Act. For tax planning, WDV is usually more beneficial: it front-loads depreciation deductions, reducing taxable profit in earlier years. The specific WDV rates for each asset block are in Appendix I of the Income Tax Rules (Rule 5).
Key IT Act (WDV) depreciation rates: Residential buildings — 5%; Non-residential commercial buildings — 10%; Plant and machinery (general) — 15%; Motor vehicles — 15%; Ships — 20%; Computers and peripherals — 40%; Books for business use — 100%; Furniture and fittings — 10%; Know-how, patents, copyrights, licences — 25%. Additional rates apply for energy-saving devices and certain manufacturing machinery. The rates apply to the "block" (pool of assets) at the beginning of the year plus acquisitions minus disposals during the year. A 50% restriction applies for assets acquired in the second half of the financial year.
Companies Act 2013, Schedule II prescribes the useful lives of various asset categories for the purpose of computing depreciation in the financial statements of Indian companies. For example: Buildings (commercial) — 60 years; Computers (desktops/laptops) — 3 years; General plant and machinery — 15 years; Motor vehicles — 8 years; Furniture and fittings — 10 years. Companies must use these useful lives (or justify a different life and residual value to auditors). The depreciation method (SLM or WDV) is the company's accounting choice. Non-compliance with Schedule II can lead to auditor qualifications.
If a portion of your home is exclusively used for business (for self-employed professionals, freelancers, or proprietors), you can claim depreciation on that portion under the Income Tax Act. The depreciation rate depends on the type of structure (5% for residential buildings under WDV). However, if the property is rented or used for both personal and business purposes, only the proportionate business use portion qualifies. Salaried employees cannot claim depreciation on their residence. The asset must be "used for business or profession" as stated in Section 32 to qualify.
Additional depreciation under Section 32(1)(iia) of the Income Tax Act allows manufacturing companies (and certain other businesses as specified) to claim an extra 20% depreciation on the actual cost of new plant and machinery in the year of installation (in addition to the normal WDV depreciation). This is available only for new machinery acquired and installed (not second-hand). For manufacturing units in notified backward areas (certain states like Andhra Pradesh, Bihar, Telangana, West Bengal), the rate is 35%. If assets are acquired in the second half of the year, the 20% additional depreciation is restricted to 10% in the first year, with the remaining 10% claimed in the next year.
Under the IT Act (WDV block method): when an asset from a block is sold, the sale proceeds are deducted from the block's WDV. If the block still has other assets, depreciation continues on the reduced block balance. If all assets in a block are sold and the sale proceeds exceed the block's WDV, it is a "short-term capital gain" (taxable). If the sale proceeds are less than the block's WDV, it is a "terminal allowance" (additional depreciation deductible). Under Companies Act (for accounting): the gain or loss on disposal (Sale Proceeds − Net Book Value) is recognised in the Profit and Loss statement as "Profit or Loss on Disposal of Fixed Asset."
Disclaimer: This calculator uses the Straight-Line Method (SLM) for depreciation estimates. For income tax purposes in India, use the WDV method and rates prescribed under the Income Tax Act, 1961. Depreciation rules and rates may change — consult a Chartered Accountant (CA) for tax depreciation planning and Companies Act compliance. This tool is for educational and financial planning purposes only.