Depreciation is where accounting and tax go their separate ways in India. The Income-tax Act uses written-down value on a block of assets at prescribed rates; the Companies Act 2013 uses useful lives from Schedule II and lets you choose straight-line or WDV. Small businesses need both — one for the tax return, one for the books — and get them wrong in predictable ways (full-year depreciation on a March purchase, or 60% on a laptop bought after 2017). This calculator produces both schedules year by year, with the half-year rule, additional depreciation for manufacturers, and residual value handling.
Income-tax depreciation: block of assets
Under Section 32, assets are grouped into blocks with the same rate; depreciation is charged on the block's opening WDV plus additions minus sale proceeds. Key rates as of FY 2026-27:
| Block | Rate |
|---|---|
| Residential buildings | 5% |
| Non-residential buildings; furniture and fittings | 10% |
| Plant and machinery (general); motor cars | 15% |
| Commercial vehicles used for hire (taxis, buses, lorries) | 30% |
| Computers, software, books, pollution-control equipment | 40% |
| Intangibles — patents, know-how, licences, franchises | 25% |
| Purely temporary structures | 40% |
Two rules bite: the half-rate rule — an asset put to use for fewer than 180 days in the year gets half the rate for that year — and additional depreciation of 20% for manufacturers buying new plant and machinery (10% if used under 180 days, with the balance next year). Businesses opting for the concessional 22%/15% corporate tax regimes forgo additional depreciation. The Income Tax Act 2025, effective from 1 April 2026, keeps these rates and blocks intact; what did change is summarised in Income Tax Act 2025: what actually changes.
Companies Act depreciation: useful lives
Schedule II prescribes useful lives — 3 years for laptops and desktops, 6 for servers, 8 for motor cars, 10 for furniture, 15 for general plant, 30 or 60 for buildings — and a residual value of up to 5%. Under SLM the annual charge is (cost − residual) ÷ life. Under WDV the rate is 1 − (residual ÷ cost)^(1 ÷ life), which front-loads the charge. Companies may justify different lives with technical evidence but must disclose it. LLPs and proprietorships are not bound by Schedule II but often follow it for consistency.
How to use the calculator
- Enter the asset cost (including installation, freight and non-creditable GST) and the date it was put to use.
- Choose Income-tax and the block, or Companies Act and the asset class; for Companies Act pick SLM or WDV and set the residual percentage.
- Tick "manufacturer, new plant" for additional depreciation where eligible.
- Read the year-wise schedule — opening value, depreciation, closing WDV — and export it as CSV for your fixed-asset register.
- For a block with several assets, run each and add, or enter the block's opening WDV as the cost.
GST and the asset cost
If you claim input tax credit on the asset, the cost for depreciation is the price excluding GST — Section 16(3) bars depreciation on the tax component you have credited. If ITC is blocked (motor cars for most businesses, works-contract on buildings), include the GST in cost. Check the invoice with the GST calculator before capitalising.
Practical notes
- Buy before 1 October to get the full-year rate; a 2 October purchase gets half.
- When you sell an asset from a block, reduce the block by the sale price — no gain arises unless the block goes negative or empty.
- Keep a fixed-asset register with invoice numbers; assessors ask for it when depreciation is large. The purchase order and GST invoice tools keep the paper trail tidy.
- For EBITDA and profitability reviews, add depreciation back — see the EBITDA calculator.
Related tools
- Income tax calculator — where the depreciation deduction lands.
- EBITDA calculator — operating profit before depreciation.
- EMI calculator — if the asset is loan-financed, interest is a separate deduction.
- Employee cost calculator — the other big fixed cost.
- Percentage calculator — quick rate arithmetic.