The Companies Act, 2013 does not publish a depreciation rate anywhere. Schedule II gives the useful life of each asset in years, and you work the rate out from that life.
So a laptop has a useful life of three years, not a rate of 63.16%. The 63.16% is what falls out once you apply the written down value formula to a three-year life with 5% left at the end.
In the sets of books we see, a wrong depreciation figure almost always traces back to a rate copied off a chart that never said which method it assumed. The old Schedule XIV under the Companies Act, 1956 did give rates directly, which is where the habit started. The chart below shows the useful life the Act actually specifies, with both rates already derived.
Key Takeaways
- Schedule II prescribes useful life in years, never a rate
- Residual value cannot be more than 5% of original cost
- The rate depends on which method you pick, straight line or written down value
- A shorter or longer life is allowed only with disclosure and technical justification
- Income tax depreciation runs on a different schedule entirely
Why Schedule II Gives a Useful Life, Not a Rate
The shift happened when the 2013 Act replaced the 1956 one.
Schedule XIV of the old Act listed percentages you applied directly. Schedule II of the Companies Act, 2013 replaced that with a table of useful lives, sitting in Part C. Depreciation is then the cost of the asset spread over that life.
ICAI reads it the same way. Its application guide on Schedule II states that the schedule specifies useful life instead of rates. The guide also goes further, into harder cases such as component accounting, revaluation and low value items.
The practical effect is that two companies can hold the same machine and book different amounts against it. One uses the straight line method, the other written down value. Both are compliant, and only the shape of the charge differs.
The Two Rules Behind Every Schedule II Rate
Before the chart, the two constraints that govern every line in it.
The first is residual value. Schedule II puts both limits in a single line. The useful life “shall not ordinarily be different from the useful life specified in Part C”, and the residual value “shall not be more than five per cent of the original cost of the asset”. That 5% floor is why no asset depreciates to nil here.
The second is the escape route. A company may adopt a different useful life or residual value, but the financial statements then have to disclose the difference and justify it with technical advice. It is allowed, not free.
Full Depreciation Rate Chart as per Companies Act 2013
Useful lives below are from Part C of Schedule II, covering the classes most businesses actually hold. The two rate columns are derived from those lives with a 5% residual value, so they are arithmetic rather than statute.
| Asset Class in Schedule II Part C | Useful Life | SLM Rate | WDV Rate |
|---|---|---|---|
| Buildings, RCC frame, other than factory | 60 years | 1.58% | 4.87% |
| Buildings, non-RCC, and factory buildings | 30 years | 3.17% | 9.50% |
| Fences, wells and tube wells | 5 years | 19.00% | 45.07% |
| Plant and machinery, general | 15 years | 6.33% | 18.10% |
| Continuous process plant | 25 years | 3.80% | 11.29% |
| Furniture and fittings, general | 10 years | 9.50% | 25.89% |
| Furniture in hotels, restaurants and schools | 8 years | 11.88% | 31.23% |
| Motor cars not used for hire | 8 years | 11.88% | 31.23% |
| Motor buses, lorries and cars used for hire | 6 years | 15.83% | 39.30% |
| Motor cycles, scooters and mopeds | 10 years | 9.50% | 25.89% |
| Office equipment | 5 years | 19.00% | 45.07% |
| Servers and networks | 6 years | 15.83% | 39.30% |
| End user devices, desktops and laptops | 3 years | 31.67% | 63.16% |
| Electrical installations and equipment | 10 years | 9.50% | 25.89% |
| General laboratory equipment | 10 years | 9.50% | 25.89% |
Two notes worth carrying. Schedule II states that “factory buildings” does not include offices, godowns or staff quarters. An office block on a factory site therefore follows the 60-year line, not the 30-year one.
The second is the NESD tag, which several classes carry. It stands for no extra shift depreciation, and it matters because Schedule II otherwise raises the charge by 50% for any period an asset runs a double shift, and by 100% on a triple shift. An NESD asset stays on its base rate whatever the shift pattern.
Part C runs longer than the table above. It also covers aircraft, ships and railway sidings, along with plant specific to certain industries. Narrower entries include carpeted roads at 10 years for RCC and 5 years otherwise, speed boats at 13 years, and temporary structures at 3 years.
So check the schedule itself for anything not listed here. If an asset genuinely fits none of the classes, set a life on technical grounds and disclose it rather than borrowing the nearest rate.
How to Work Out a Schedule II Rate Yourself
The chart covers the common classes. For anything else, the two formulas take a minute.
Take a packing machine bought by a Surat textile unit for ₹8,40,000 in April 2026 (an example). It is general plant and machinery, so the useful life is 15 years.
Residual value at 5% is ₹42,000, leaving ₹7,98,000 to depreciate. Under the straight line method that is ₹53,200 a year, every year, which works out to the 6.33% in the chart. Under written down value the first year takes 18.10% of ₹8,40,000, or ₹1,52,040, and each later year charges the same percentage on a smaller base.
SLM or WDV: Which Method Your Company Should Use
Schedule II lets you choose. The choice changes when the cost hits your profit, not how much of it does.
Straight line spreads the charge evenly. That suits assets which wear out steadily, such as a building or office furniture. Written down value front-loads it instead, which suits anything losing most of its value early.
Take a Nashik electronics retailer replacing twelve counter laptops (an example). At a three-year life the written down value rate is 63.16%, so nearly two-thirds of the cost clears in year one. That is roughly when a working laptop stops being worth anything on resale, which is the point of the method.
The same packing machine shows the gap clearly over its first three years, using the chart rates.
| Year | SLM Charge | WDV Charge | WDV Closing Value |
|---|---|---|---|
| 1 | ₹53,200 | ₹1,52,040 | ₹6,87,960 |
| 2 | ₹53,200 | ₹1,24,521 | ₹5,63,439 |
| 3 | ₹53,200 | ₹1,01,982 | ₹4,61,457 |
Written down value takes ₹3,78,543 out in three years against straight line’s ₹1,59,600. Both end at the same ₹42,000 residual after 15 years. Only the timing moves.
Whichever you pick, apply it consistently and show the charge as its own line in the profit and loss account. The accumulated figure then sits against the asset on the balance sheet, which is why the two statements move together.
Why the Companies Act Rate Differs From the Income Tax Rate
This is the part that causes the most confusion at year end, and the short answer is that you will run two sets of numbers.
Depreciation under the Income-tax Act works on a block of assets rather than asset by asset. It uses written down value, and the rates come from Appendix I to the Income-tax Rules, 1962, not from Schedule II. Computers sit at 40% there, plant and machinery at 15%, furniture at 10%.
So the same laptop carries 63.16% in your books under the Companies Act and 40% in your tax computation. Neither figure is wrong. The gap is a timing difference, which is why a fixed asset register usually carries both columns side by side.
What Your Fixed Asset Register Must Hold
Schedule II only produces a correct number if the record underneath it is correct.
For every asset the register needs:
- Description and asset class under Part C
- Purchase date, and separately the date it was put to use
- Original cost, including freight and installation
- Method chosen and the useful life applied
- Depreciation charged in each year
- Closing carrying value
Two of those fields cause most of the errors. The date of addition drives the pro rata charge in year one, so record it rather than inferring it later from an invoice. The original cost should carry everything spent to bring the asset into working condition, so freight and installation belong in it, not just the invoice value.
A purchase order and the supplier invoice between them supply most of those fields. Petpooja Invoice keeps both against the purchase record, so the register is built from documents rather than from memory in March.
Conclusion
Schedule II never hands you a rate. It hands you a useful life, caps residual value at 5%, and leaves the method to you.
Work from the chart above for the common classes, and use the two formulas for anything outside it. Keep the method consistent, disclose any life you vary from Part C, and keep the tax figures in a separate column.
The reconciliation at year end is only as good as the purchase records behind it. Log every asset with its invoice, date and cost on the day you buy it, and keep that trail in one place rather than across three files. That is the difference between an afternoon in March and a fortnight of it.
Our annual financial summary template gives you somewhere to pull the totals together, and Petpooja Invoice keeps the purchase side of the trail intact.
Frequently Asked Questions
No. Schedule II sits in the Companies Act, so it binds companies. A sole proprietorship or a partnership firm is not governed by it and normally depreciates assets under the Income-tax Act instead. Many still follow Schedule II lives in their books for consistency.
It stays on the books at its residual value, up to 5% of original cost, until you actually sell or scrap it. Depreciation stops but the asset does not disappear. On disposal, the difference between sale proceeds and that carrying value becomes a profit or loss in the general ledger.
Yes, but not quietly. Schedule II permits a different life where circumstances justify it, provided the financial statements disclose the difference and back it with technical advice. Auditors do check for that disclosure.
Pro rata from the date of addition. Schedule II says depreciation on an asset added during the year is calculated pro rata from that date, and in reverse up to the date an asset is sold, discarded or destroyed. An asset added on 1 October therefore carries about half a year, not a full one.
Yes, in two places. It is added back to net profit in the EBITDA calculation, and again as a non-cash item in the operating section of the cash flow statement.
