Depreciation Calculator as Per Income Tax Act

Our free depreciation calculator helps businesses accurately determine the declining value of their assets over time. Calculate depreciation using either the Straight Line Method (SLM) or Written Down Value (WDV) as per the Income Tax Act and Companies Act in India.

Asset depreciation is essential for tax planning, financial reporting, and understanding the true value of your business assets. This calculator provides instant results with detailed year-by-year breakdowns and visual charts.

Depreciation Results

Initial Value

₹0.00

Total Depreciation

₹0.00

Final Value

₹0.00

Value Reduction

Year	Opening Value	Depreciation	Closing Value
Total	-	0.00	-

Note: In the last year, we have considered the difference amount as depreciation after keeping a closing balance of ₹1 in the asset account. We keep a balance of ₹1 to maintain the asset in books, as suggested by the Income Tax Act.
50% depreciation will be applied if the asset is put to use for less than 180 days in the first year.

Understanding Depreciation in India

Depreciation represents the reduction in an asset's value due to usage, wear and tear, obsolescence, or market changes. In India, companies must calculate depreciation for both accounting purposes (Companies Act) and tax purposes (Income Tax Act).

Straight Line Method (SLM) vs Written Down Value (WDV)

There are two primary methods of calculating depreciation in India:

Straight Line Method (SLM)

In the SLM method, depreciation is calculated as a fixed percentage of the original cost of the asset each year. This results in equal depreciation expenses throughout the asset's useful life.

Formula: Depreciation = (Original Cost × Rate of Depreciation) / 100

Best for: Assets that decline in value evenly over time

Written Down Value Method (WDV)

In the WDV method, depreciation is calculated on the reducing balance (book value) of the asset. This results in higher depreciation in earlier years and lower in later years.

Formula: Depreciation = (Opening WDV × Rate of Depreciation) / 100

Best for: Assets that lose value more rapidly in early years

Depreciation Under Income Tax Act

The Income Tax Act mandates specific depreciation rates for different classes of assets. Key features include:

Depreciation is calculated using the WDV method for tax purposes
Half-year depreciation rule applies if the asset is used for less than 180 days in the first year
Additional depreciation benefits are available for new plant and machinery
Assets are grouped into blocks for easier calculation

Depreciation Under Companies Act

The Companies Act allows businesses to choose between SLM and WDV methods for financial reporting. The useful life of assets is prescribed in Schedule II of the Companies Act, 2013.

Common Depreciation Rates Under Income Tax Act

Asset Type	Depreciation Rate (WDV)
Residential Buildings	5%
Commercial Buildings	10%
Furniture and Fittings	10%
Plant and Machinery	15%
Computers and Software	40%
Motor Vehicles	15% (Commercial), 20% (Personal)
Intangible Assets	25%

Additional Depreciation Benefits

The Income Tax Act provides additional depreciation benefits to encourage investment in new plant and machinery:

20% additional depreciation for new plant and machinery (except for office equipment and vehicles)
35% additional depreciation for manufacturers in notified backward areas of specified states

Benefits of Using a Depreciation Calculator

Accurately track asset values over time
Plan for future asset replacements
Optimize tax deductions
Make informed financial decisions

Compare different depreciation methods
Create detailed depreciation schedules
Simplify tax filing preparation
Improve financial reporting accuracy

How to Use Our Depreciation Calculator

Enter the asset's purchase amount in rupees
Select the purchase date (year, month, day)
Enter the applicable depreciation rate (or choose from common presets)
Choose between Straight Line Method (SLM) or Written Down Value (WDV)
Adjust the duration slider to set the number of years to calculate
Indicate if the asset is eligible for additional depreciation
Click "Calculate Depreciation" to get your results

The calculator will display a summary of the initial value, total depreciation, final value, and percentage value reduction. You'll also see a detailed year-by-year breakdown table and a visual chart showing the depreciation pattern over time.

Frequently Asked Questions (FAQs)

What is the difference between SLM and WDV methods?

The Straight Line Method (SLM) applies depreciation equally over the asset's useful life based on the original cost. The Written Down Value (WDV) method calculates depreciation on the reducing balance, resulting in higher depreciation in earlier years and lower in later years.

When is additional depreciation applicable?

Additional depreciation is applicable only for new plant and machinery acquired and installed by a manufacturing business or a power generation/distribution business. It does not apply to office equipment, vehicles, or second-hand assets.

What is the half-year rule for depreciation?

The half-year rule stipulates that if an asset is purchased and put to use for less than 180 days in a financial year, only 50% of the regular depreciation can be claimed for that year. The full rate applies in subsequent years.

Why is there a ₹1 residual value in the depreciation table?

According to accounting principles and the Income Tax Act, it's common practice to maintain a nominal value (typically ₹1) in the books for fully depreciated assets that are still in use. This helps maintain record of the asset while acknowledging it has been fully depreciated for tax purposes.

Which depreciation method is better for tax savings?

The WDV method typically provides higher tax savings in the initial years because it allows for larger depreciation deductions early in the asset's life. However, for income tax purposes in India, you must follow the prescribed method (generally WDV) and rates specified in the Income Tax Act, regardless of which method might provide more savings.