Depreciation As Per Companies Act 2013| Everything You Need to Know!

Depreciation as per companies act 2013 is applicable for assets purchased on or after 1st April 2014. It only prescribes the useful life of different assets and does not provide any specific depreciation rates.

You can use the depreciation formula and the useful life given in Schedule II of Companies Act, 2013 to calculate the rate of depreciation as per companies act. Besides, we have calculated and given the mca depreciation rates under Depreciation Rates as per companies act 2013 for AY 2020-21.

Depreciation Meaning

Depreciation measures the wearing out or loss of value of a depreciable asset from use or obsolescence.

Key Points

-Depreciation as per Companies Act 2013 applies to assets purchased on or after 1st April 2014
-Depreciation formula considers the cost of the asset, the useful life of the asset and residual value.
– A company calculates the depreciation amount annually until the end of the useful life of an asset.
-Residual value is considered at a maximum of 5% of the cost of the asset.
-Use either SLM or WDV method of finding depreciation as per companies act.
-Schedule 2 of the Companies Act 2013 provides useful life of assets tangible in nature.
-Refer to the Chart for Depreciation Rate as per Companies Act For AY 2020-21 to calculate depreciation.
-To calculate depreciation on intangible assets, the provisions of AS 26 shall apply.
-A company charges depreciation to the Profit and Loss account.

Depreciation Rate as per Companies Act For AY 2020-21

Schedule 2 of the Companies Act 2013 only provides useful life of assets tangible in nature. Therefore, we calculated the depreciation rates under the WDV and the SLM methods using the depreciation formula.

Below is the rate of depreciation as per Companies act 2013 / Depreciation Chart as per Companies Act:

I. Buildings [NESD]

Nature of assetsUseful life as per companies actDepreciation rate 
 (in years)WDV
rate
SLM rate
Buildings (other than factory buildings) RCC Frame Structure60 years4.87 %1.67 %
Buildings (other than factory buildings) other than RCC Frame Structure30 years9.50 %3.17 %
Factory buildings30 years9.50 %3.17 %
Fences, wells, tube wells5 years45.07 %19.00 %
Others (including temporary structure, etc.)3 years63.16 %31.67 %

II. Bridges, culverts, bunders, etc. [NESD]  

Nature of assetsUseful life as per companies actDepreciation rate 
  WDVSLM
Bridges, culverts, bunders, etc. [NESD]30 years9.50 %3.17 %

III. Roads [NESD]

Nature of assetsUseful LifeDepreciation rate 
  WDVSLM
Carpeted Roads-RCC10 years25.88 %9.50 %
Carpeted Roads-other than RCC5 years45.07 %19.00 %
Non-carpeted roads3 years63.16 %31.67 %

IV. Plant and Machinery

(i) General rate applicable to plant and machinery not covered under special plant and machinery

Nature of assetsUseful life as per companies actDepreciation rate 
  WDVSLM
Plant and machinery other than continuous process plant not covered under specific industries15 years18.10 %6.33 %
continuous process plant for which no special rate has been prescribed under (ii) below [NESD]8 years31.23 %11.88 %
Non-carpeted roads3 years63.16 %31.67 %

(ii) Special Plant and Machinery

(a) Plant and Machinery related to production and exhibition of Motion Picture Films

Nature of assetsUseful life as per companies actDepreciation rate 
  WDVSLM
Cinematograph films—Machinery used in the production and
exhibition of cinematograph films, recording and reproducing equipments, developing machines, printing machines, editing machines, synchronisers and studio lights except bulbs
13 years20.58 %7.31 %
Projecting equipment for exhibition of films13 years20.58 %7.31 %

(b) Plant and Machinery used in glass manufacturing

Nature of assetsUseful life as per companies actDepreciation rate 
  WDVSLM
Plant and machinery except for direct fire glass melting furnaces
Recuperative and regenerative glass melting furnaces
13 years
20.58 %
7.31 %
Plant and machinery except for direct fire glass melting furnaces
Moulds [NESD]
8 years31.23 %11.88 %
Float Glass Melting Furnaces [NESD]10 years25.88 %9.50 %

(c) Plant and Machinery used in mines and quarries

Nature of assetsUseful life as per companies actDepreciation rate 
  WDVSLM
Portable underground machinery and earth moving machinery used in open cast mining [NESD]8 years31.23 %11.88 %

(d) Plant and Machinery used in Telecommunications [NESD]

Nature of assetsUseful life as per companies actDepreciation rate 
  WDVSLM
Towers18 years15.33 %5.28 %
Telecom transceivers, switching centres, transmission and other network equipment13 years20.58 %7.31 %
Telecom—Ducts, Cables and optical fibre18 years15.33 %5.28 %
Satellites
18 years
15.33 %5.28 %

(e) Plant and Machinery used in exploration, production and refining oil and gas [NESD]

Nature of assetsUseful life as per companies actDepreciation rate 
  WDVSLM
Refineries25 years11.29 %3.80 %
Oil and gas assets (including wells), processing plant and facilities25 years11.29 %3.80 %
Petrochemical Plant25 years11.29 %3.80 %
Storage tanks and related equipment25 years11.29 %3.80 %
Pipelines30 years9.50 %3.17 %
Drilling Rig30 years9.50 %3.17 %
Field operations (above ground) Portable boilers, drilling tools, well-head tanks, etc.8 years31.23 %11.88 %
Loggers8 years31.23 %11.88 %

(f ) Plant and Machinery used in generation, transmission and distribution of power [NESD]

Nature of assetsUseful life as per companies actDepreciation rate 
  WDVSLM
Thermal/ Gas/ Combined Cycle Power Generation Plant40 years7.22 %2.38 %
Hydro Power Generation Plant40 years7.22 %2.38 %
Nuclear Power Generation Plant40 years7.22 %2.38 %
Transmission lines, cables and other network assets40 years7.22 %2.38 %
Wind Power Generation Plant22 years12.73 %4.32 %
Electric Distribution Plant35 years
8.20 %
2.71 %
Gas Storage and Distribution Plant30 years9.50 %3.17 %
Water Distribution Plant including pipelines30 years9.50 %3.17 %

(g) Plant and Machinery used in manufacture of steel

Nature of assetsUseful life
as per companies act
Depreciation rate 
  WDVSLM
Sinter Plant20 years13.91 %4.75 %
Blast Furnace20 years13.91 %4.75 %
Coke ovens20 years13.91 %4.75 %
Rolling mill in steel plant20 years13.91 %4.75 %
Basic oxygen Furnace Converter25 years11.29 %3.80 %

(h) Plant and Machinery used in manufacture of non-ferrous metals

Nature of assetsUseful life
as per
companies act
Depreciation rate 
  WDVSLM
Metal pot line [NESD]40 years7.22 %2.38 %
Bauxite crushing and grinding section [NESD]40 years7.22 %2.38 %
Digester Section [NESD]40 years7.22 %2.38 %
Turbine [NESD]40 years7.22 %2.38 %
Equipments for Calcination [NESD]40 years7.22 %2.38 %
Copper Smelter [NESD]40 years7.22 %2.38 %
Roll Grinder40 years7.22 %2.38 %
Soaking Pit30 years9.50 %3.17 %
Annealing Furnace30 years9.50 %3.17 %
Rolling Mills30 years9.50 %3.17 %
Equipments for Scalping, Slitting , etc. [NESD]30 years9.50 %3.17 %
Surface Miner, Ripper Dozer, etc., used in mines25 years11.29 %3.80 %
Copper refining plant [NESD]25 years11.29 %3.80 %

(i) Plant and Machinery used in medical and surgical operations [NESD]

Nature of AssetsUseful LifeDepreciation rate 
  WDVSLM
Electrical Machinery, X-ray and electrotherapeutic apparatus and accessories thereto, medical, diagnostic equipments, namely,
Cat-scan, Ultrasound Machines, ECG Monitors, etc.
13 years20.58 %7.31 %
Other Equipments15 years20.58 %7.31 %

(j) Plant and Machinery used in manufacture of pharmaceuticals and chemicals [NESD]

Nature of AssetsUseful life
as per
companies act
Depreciation rate 
  
WDV
SLM
Reactors20 years13.91 %4.75 %
Distillation Columns20 years13.91 %4.75 %
Drying equipments / Centrifuges and Decanters20 years13.91 %4.75 %
Vessel/storage tanks20 years13.91 %4.75 %

(k) Plant and Machinery used in civil construction

Nature of AssetsUseful LifeDepreciation rate 
  WDVSLM
Concreting, Crushing, Piling Equipments and Road Making Equipments12 years22.09 %7.92 %
Heavy Lift Equipments— Cranes with capacity of more than 100 tons20 years13.91 %4.75 %
Heavy Lift Equipments— Cranes with capacity of less than 100 tons15 years18.10 %6.33 %
Transmission line, Tunneling Equipments [NESD]10 years25.88 %9.50 %
Earth-moving equipments9 years28.31 %10.56 %
Others including Material Handling /Pipeline/Welding Equipments [NESD]12 years22.09 %7.92 %

(l) Plant and Machinery used in salt works [NESD]

Nature of AssetsUseful LifeDepreciation rate 
  WDVSLM
Plant and machinery used in salt works [NESD]15 years18.10 %6.33 %

V. Furniture and fittings [NESD]

Nature of AssetsUseful LifeDepreciation rate 
  WDVSLM
General furniture and fittings10 years25.88 %9.50 %
Furniture and fittings used in hotels, restaurants and boarding houses,
schools, colleges and other educational institutions, libraries; welfare centres; meeting halls, cinema houses; theatres and circuses; and furniture and fittings let out on hire for use on the occasion of marriages
and similar functions.
8 years31.23 %11.88 %

VI. Motor Vehicles [NESD]

Nature of AssetsUseful LifeDepreciation rate 
  WDVSLM
Motor cycles, scooters and other mopeds10 years25.88 %9.50 %
Furniture and fittings used in hotels, restaurants and boarding houses,
schools, colleges and other educational institutions, libraries; welfare centres; meeting halls, cinema houses; theatres and circuses; and furniture and fittings let out on hire for use on the occasion of marriages and similar functions.
6 years39.30 %15.83 %
Motor buses, motor lorries, motor cars and motor taxies used in
a business of running them on hire
8 years31.23 %11.88 %
Motor buses, motor lorries and motor cars other than those used
in a business of running them on hire
8 years31.23 %11.88 %
Motor tractors, harvesting combines and heavy vehicles8 years31.23 %11.88 %
Electrically operated vehicles including battery powered or fuel cell powered vehicles8 years31.23 %11.88 %

VII. Ships [NESD]

1. Ocean-going ships

Nature of AssetsUseful LifeDepreciation rate 
  WDVSLM
Bulk Carriers and liner vessels25 years11.29 %3.80 %
Crude tankers, product carriers and easy chemical carriers with or without conventional tank coatings.20 years13.91 %4.75 %
Chemicals and Acid Carriers: With Stainless steel tanks25 years11.29 %3.80 %
Chemicals and Acid Carriers: With other tanks20 years13.91 %4.75 %
Liquified gas carriers30 years9.50 %3.17 %
Conventional large passenger vessels which are used for cruise purpose also30 years9.50 %3.17 %
Coastal service ships of all categories30 years9.50 %3.17 %
Offshore supply and support vessels20 years13.91 %4.75 %
Catamarans and other high speed passenger for ships or boats20 years13.91 %4.75 %
Drill ships25 years11.29 %3.80 %
Hovercrafts15 years18.10 %6.33 %
Fishing vessels with wooden hull10 years25.88 %9.50 %
Dredgers, tugs, barges, survey launches and other similar ships used mainly for dredging purposes14 years19.26 %6.79 %

2. Vessels ordinarily operating on inland waters—

Nature of AssetsUseful LifeDepreciation rate 
  WDVSLM
Speed boats13 years20.58 %7.31 %
Other vessels28 years10.15 %
3.39 %

VIII. Aircrafts or Helicopters [NESD]

Nature of AssetsUseful LifeDepreciation rate 
  WDVSLM
Aircrafts or Helicopters [NESD]20 years13.91 %4.75 %

IX. Railways sidings, locomotives, rolling stocks, tramways and railways used by concerns, excluding railway concerns [NESD]

Nature of AssetsUseful LifeDepreciation rate 
  WDVSLM
Railways sidings, locomotives, rolling stocks, tramways and
railways used by concerns, excluding railway concerns [NESD]
15 years18.10 %6.33 %

X. Ropeway structures [NESD]

Nature of AssetsUseful LifeDepreciation rate 
  WDVSLM
Ropeway structures [NESD]15 years18.10 %6.33 %

XI. Office equipment [NESD]

Nature of AssetsUseful LifeDepreciation rate 
  WDVSLM
Office equipment [NESD]5 years45.07 %19.00 %

XII. Computers and data processing units [NESD]

Nature of AssetsUseful LifeDepreciation rate 
  WDVSLM
Servers and networks6 years39.30 %
15.83 %
End user devices, such as, desktops, laptops, etc.3 years63.16 %31.67 %

XIII. Laboratory equipment [NESD]

Nature of AssetsUseful LifeDepreciation rate 
  WDVSLM
General laboratory equipment10 years25.88 %9.50 %
Laboratory equipments used in educational institutions5 years45.07 %19.00 %

XIV. Electrical Installations and Equipment [NESD]

Nature of AssetsUseful LifeDepreciation rate 
  WDVSLM
Electrical Installations and Equipment [NESD]10 years25.88 %9.50 %

XV. Hydraulic works, pipelines and sluices [NESD]

Nature of AssetsUseful LifeDepreciation rate 
  WDVSLM
Hydraulic works, pipelines and sluices [NESD]15 years18.10 %6.33 %

 

Download Depreciation as per Companies Act 2013 pdf

Important points to remember while calculating depreciation as per companies act, 2013 on tangible assets

1.Depreciation on a pro-rata basis is calculated from the date of such addition or sale or destruction in the following scenarios

(i) Any addition is made to any asset.

(ii) Any asset is sold

(iii) Any asset is discarded, demolished or destroyed.

2.The calculations of the extra depreciation for double shift working and for triple shift working must be made separately in the proportion which the number of days for which the concern worked a double shift or triple shift bears to the normal number of working days during the year.

For this purpose, the typical number of working days during the year shall be deemed to be –
(a) A seasonal factory or concern- The number of days on which the factory or concern actually worked during the year or 180 days, whichever is greater ;
(b) Others- The number of days on which the factory or concern actually worked during the year or 240 days, whichever is greater.

3.Double Shift depreciation- Depreciation increases by 50% for the period in which the asset is in use for double shift.

4.Triple Shift depreciation- Depreciation increases by 100% for the period in which the asset is in use for triple shift.

5.NESD means No extra shift depreciation. Schedule II has certain assets with NESD. A business cannot charge extra shift depreciation in respect of such assets.

6. Residual value of an asset must not be more than 5% of the asset’s original cost.

7. Depreciation rate as per Schedule II of Companies Act, 2013 applies to assets purchased on or after 1st April 2014.

Also read depreciation as per Companies Act, 1956.

 

Business can opt any of the below methods of depreciation calculation as per companies act.

(1)Straight Line Method (SLM)

It is one of the simplest methods of calculating depreciation as per companies act. Under this method, the total depreciable amount is allocated evenly every year over the asset’s useful life.

(2) Written Down Value Method (WDV)

It is also known as the reducing balance method or declining balance method of calculating depreciation as per companies act. Under this method, we charge the depreciation rate on the reducing balance of the asset.

For example, in the 1st year, the depreciation rate is calculated on the asset’s book value at the end of the financial year. Then, in the 2nd year, the depreciation amount of the 1st year is reduced from the initial book value of the asset to arrive at a new reduced or written down book value on which we calculate the depreciation. We will continue this process until the asset is reduced to its residual value at the end of the asset’s life.

How to calculate depreciation as per Companies Act 2013 using WDV method

You can use the below Depreciation formula to calculate the depreciation rate.

Depreciation WDV Formula

Annual Depreciation Rate= {1-(Scrap value of asset/Cost of asset)^(1/remaining useful life of asset)} x 100

Pro-rata depreciation Rate= {1-(Scrap value of asset/Cost of asset)^(1/remaining useful life of asset)} x [Number of days from date of asset purchased till financial year-end/365] x 100

The symbol ^ known as Caret represents an exponent. For instance, 2^3 is same as 23

Likewise, in the above formula ^ is used as an exponent.

Use a standard keyboard, scientific calculator or calculator on your mobile to calculate easily using this formula. The feature ^ is not available in a simple calculator so it becomes tedious to calculate using a simple calculator.

Cost of Asset: To calculate depreciation on a capital asset, you must consider the asset’s cost, excluding the GST amount if you are claiming input tax credit (ITC) on that asset.

If you want to consider the total asset amount including GST for calculating depreciation as per companies act, then you should not claim ITC on that asset.

As per Sec 2(19) of CGST Act, Where the registered person has claimed depreciation on the tax component of the cost of capital goods and plant and machinery under the provisions of the Income-tax
Act, 1961, the input tax credit on the said tax component shall not be allowed.

 

We shall understand how to calculate depreciation as per companies act with example as below

Examples to calculate Depreciation as per companies act using WDV method

Example 1: Asset Purchased after 1st April 2014.

Suppose ABC Ltd purchased a laptop on 1st April 2019 for R s 10,000.

We shall calculate the rate of depreciation using the above depreciation formula

Step 1: Finding the Scrap value of asset

As per companies act, the residual value of an asset should not be more than 5% of the asset’s original cost.

So, the Scrap value of asset= Cost of Asset x 5%

=10000 X 5%

Scrap value= Rs 500

Step 2: Finding Remaining useful life of an asset

Asset purchased is laptop. The useful life of laptop given under schedule II of Companies Act 2013 is 3 years.

Useful life of asset= 3 years

Step 3: Finding Depreciation rate

Substituting the values in the depreciation formula we get

Depreciation rate= {1-(500/10000)^(1/3)} X 100

=0.63159 x 100
=63.16%

Depreciation rate for laptop is 63.16%

Now, that we know the depreciation rate we can calculate the depreciation amount during the useful life of the asset (laptop)

Step 4: Depreciation schedule as per Companies Act during the useful life of asset (laptop)

YearOpening WDVDepreciationClosing WDV
11000010000 X 63.16%
= 6316
10000-6316
=3684
236843684 X 63.16% =2326.813684-2326.81
=1357.19
31357.191357.19 X 63.16%
=857.20
1357.19-857.20
=500

Example 2: Asset Purchased before 1st April 2014.

Suppose XYZ Ltd purchased a building on 1st April 2000 for Rs 100,000. The company was charging depreciation on the Straight-line method @ 1.63% as per the rate of depreciation prescribed in the Companies Act, 1956.

Step 1:Transition effect of depreciation

Calculate the amount of depreciation charged till FY 2013-14

Depreciation amount= Asset Value X Depreciation Rate X Number of years

Substituting the values, we get

=100000 X 1.63% X 4

Depreciation amount=Rs  6520

Step 2: Find Carrying value of the asset as of 1st April 2014 

Carrying value of Asset = Original cost of asset – Accumulated Depreciation

Substituting the values, we get

Carrying value of asset on 1st April 2014= 100000 – 6520

Carrying value of asset =Rs 93480

Step 3: Find Depreciation rate as per Companies Act, 2013

From 1st April 2014, depreciation as per schedule II of Companies Act, 2013 is applicable

We use the below depreciation formula to arrive at the depreciation rate

Depreciation Rate= {1-(Scrap value of asset/Carrying value of asset)^(1/remaining useful life of asset)} x 100

Scrap value of asset= Carrying value of asset on 1st April 2014 X 5%

=93480 X 5%

Scrap value= Rs 4674

Remaining useful life of asset= 30-4 years (as per schedule II)

=26 years

Depreciation rate= {1-(4674/93480)^(1/26)} X 100

=0.10883X 100

Depreciation rate=10.88%

How to calculate depreciation as per Companies Act 2013 using SLM method

Depreciation SLM Formula

Annual Depreciation = {Cost of asset- Salvage Value of asset} / Useful life of asset

Cost of asset= Cost of asset on the date of purchase

Salvage value of asset= cost of asset x Residual value of asset. (max residual value is 5%)

The useful life of asset= Useful life of the asset as given under Schedule II of Companies Act 2013 for different asset classes.

Depreciation rate= Annual Depreciation/ 100

You can also calculate depreciation under Straight line method using Excel formula.

SLM Formula in Excel

=SLN(Cost,Salvage value, life of asset)

Depreciation using excel formula

Examples to calculate Depreciation as per companies act using SLM Method

Example 1: Asset Purchased after 1st April 2014.

Suppose ABC Ltd purchased a laptop on 1st April 2019 for Rs 10,000.

We shall calculate the rate of depreciation using the above depreciation formula

Step 1: Finding the Salvage value of asset

As per the companies act, the residual value of an asset should not be more than 5% of the asset’s original cost.

So, Salvage value of asset= Cost of Asset x 5%

=10000 X 5%

Salvage value= Rs 500

Step 2: Finding Remaining useful life of asset

The asset purchased is a laptop. The useful life of a laptop given under schedule II of Companies Act 2013 is three years.

Useful life of asset= 3 years

Step 3: Finding Depreciable amount

Depreciable amount= cost of the asset – Salvage value of asset

Depreciable amount=  10000-500

=9500

Step 4: Finding Annual Depreciation amount

Substituting the values in the depreciation formula we get

Annual Depreciation = 9500/ 3

= 3166.67

Step 4: Finding Depreciation rate

Substituting the values in the SLM depreciation formula.

Depreciation rate= 3166.67/100

=3166.67/ 100

Depreciation rate as per SLM =31.67 %

Step 4: Depreciation schedule as per Companies Act during the useful life of asset (laptop)

YearOpening Book valueDepreciationClosing Book Value
11000010000 X 31.67 %
= 3166.67
10000-3166.67
=6833.33
26833.3310000 X 31.67 %
= 3166.67
6833.33-3166.67
=3167.30
33666.6610000 X 31.67 %
= 3166.67
3666.66-3166.67
=499.99~ 500

Recording Journal entry for Depreciation in Tally

Now that you know the concept let us see how to record a Depreciation Journal entry in Tally

Step1: Firstly, you must create a group named “Depreciation” under the head Indirect Expenses. By doing this, when you record a journal entry for depreciation, it is automatically charged as depreciation expense in Profit and Loss A/c.

depreciation group creation in tally

Step 2: Now, create depreciation on a specific asset ledger selecting the group as depreciation.

Depreciation ledger creation in tally

Step 3. Record journal entry in Tally using voucher type “Journal Voucher” by pressing key F7

Depreciation journal entry example

Suppose, ZYZ company purchases office equipment on 1-04-2020 @ Rs 1,00,000. Then, we must charge a WDV depreciation rate of 45.07% as per the companies act, 2013.

Depreciation amount for 1st year is 100,000 x 45.07%= Rs 45,070.

Below is the journal entry to record depreciation on office equipment.

Depreciation on computers        Dr                                    45,070

To Office equipment                                                                 45,070

Depreciation entry in Tally

Depreciation Journal entry in Tally

 

Depreciation on Intangible Assets as per Companies act 2013

The Companies Act identifies the below assets as Intangible assets

a) Brand names
(b) Mastheads and publishing titles
(c) Computer software
(d) Licences and franchises
(e) Copyrights, and patents and other industrial property rights, service and operating rights
(f) Recipes, formulae, models, designs and prototypes
(g) Intangible assets under development

For calculation of depreciation on intangible assets, the provisions of accounting standard 26 (AS 26) shall apply. Furthermore, Schedule II of Companies Act, 2013 is not applicable in the case of intangible assets.

Amortisation in case of intangible assets may be done as follows

Depreciation formula for Intangible assets

Amortisation rate= (Amoritsation amount/ Cost of Intangible assets) x 100

Amortisation amount= Cost of Intangible assets x Actual Revenue for the year/ Projected revenue from Intangible asset

where,

Cost of Intangible asset (A)= cost incurred by the company under the AS 26
Actual revenue for the year= Actual revenue (Toll charges) received during the accounting year.
Projected Revenue from Intangible Asset = Total projected revenue from the Intangible Assets as provided to the project lender at the time of financial closure/agreement.

Also read about the Intangible assets depreciation on official MCA website

 

Difference between Depreciation as per Companies Act and Income Tax Act

Depreciation as per Companies Act, 2013Depreciation as per Income Tax Act, 1961
Depreciation is calculated on a pro-rata basis.Depreciation calculation is done either full rate or half rate based on 180 days criteria.
Pro-rata basis-It is calculated from the date of purchase of the asset to the end of the financial year.If the asset is in use for more than 180 days, one can claim the full depreciation rate. And if the assets are in use for less than 180 days, one can claim half the depreciation rate.

 

Depreciation as per Companies Act FAQs

(1)What is a Depreciable amount?

It is the cost of an asset less its residual value.

(2)What is useful life as per companies act?

Useful life of an asset is either
(a) the period of time over which an asset is expected to be used by the enterprise or
(b)the number of production or similar units expected to be obtained from the asset by the enterprise.

(3)What is Residual Value?

It is the amount an organisation expects to obtain for an asset at the end of its useful life after deducting the expected costs of disposal. As per the Companies Act, a maximum of 5% of the asset is allowable as residual value.

(4)What is carrying amount?

It is the amount at which we recognise an asset in the balance sheet, net of any accumulated depreciation and accumulated impairment losses thereon.

(5) Is it mandatory to charge depreciation as per Companies Act?

As per accounting standard 6 (AS 6), it is mandatory to claim depreciation as per companies act because it has a significant effect in determining and presenting a company’s financial position and results. In addition to this, charging depreciation becomes mandatory if the company desires to declare a dividend or pay managerial remuneration.

(6)What is depreciation on plant and machinery as per companies act?

Depreciation on plant and machinery as per companies act 2013 is 18.10% under WDV & 6.33% under SLM. For depreciation rates on Special plant and machinery, refer the Schedule II given above.

(7)What is depreciation on mobile as per companies act 2013?

The treatment of mobile is the same as plant and machinery. Therefore, depreciation on mobile is 18.10% under WDV & 6.33% under SLM. Also, the useful life of mobile as per companies act is 15 years.

(8)What is Depreciation on software as per companies act?

The treatment of software is the same as computers. Therefore, the software depreciation rate as per Companies act is 63.16% under WDV & 31.67% under SLM.

(9) How much depreciation can I claim on my car?

The treatment of car is the same as Motor cars under Motor vehicles. Therefore, depreciation on the car as per companies act 2013 is 31.23% under WDV & 11.88% under SLM.

(10)Can we claim ITC on capital goods under GST?

If you claim depreciation on assets purchased, including the GST amount, you cannot claim ITC. If you claim Input Tax Credit (ITC), then you cannot claim depreciation on the tax amount. You can either claim depreciation or ITC on the tax portion of the asset.

(11)What is the Deferred Asset or Deferred Liability?

The difference in the amount of depreciation as per companies act and income tax act results in Deferred Asset or Deferred Liability. Deferred Asset or Deferred Liability is shown in the balance sheet of the company.

(12)What is Depreciation on laptop as per Companies act?

Depreciation on laptop as per companies act 2013 is 63.16% under WDV & 31.67% under SLM.

(13) What is the depreciation rate on tally software ?

The treatment of tally Software is the same as computers. Therefore, the Depreciation rate on tally software as per companies act 2013 is 63.16% under WDV & 31.67% under SLM.

(14)What is Depreciation on Computers as per companies act?

Depreciation on computers as per companies act 2013 is 63.16% under WDV & 31.67% under SLM.

(15)What is Depreciation on Office Equipment?

Office Equipment depreciation rate is 45.07% under WDV and 19% under SLM.

(16)What is Depreciation on Furniture?

Depreciation on furniture as per companies act 2013 is 25.88% under WDV & 9.50% under SLM. And Life of Furniture, as per the companies act 2013, is ten years.

(17)What is Depreciation on Building?

The depreciation rate for building as per companies act 2013 is 4.87% under WDV & 1.67% under SLM. For depreciation for a specific type of building, see the above depreciation chart as per companies act.

(18)What is Depreciation on Motor car?

Motor car depreciation rate as per companies act is 31.23% under WDV & 11.88% under SLM.

(19)What is the useful life of software as per Companies Act 2013?

The useful life of software as per Companies Act 2013 is 3 years. You may refer to the depreciation rate chart for useful life of other assets.