Schedule II of the Companies Act, 2013 does not give you depreciation rates. It gives useful lives, caps residual value at 5% of original cost, and leaves the company to convert those two figures into an annual charge under the straight-line method (SLM) or the written down value method (WDV). Calculating depreciation as per Schedule II is therefore a sequence. Find the useful life in Part C, fix the residual value and work out the rate. Then charge it only for the days the asset was available for use, adding extra depreciation if the asset ran on double or triple shift.
Each step is shown below with worked numbers for FY 2025-26 and FY 2026-27. The lives, limits and notes quoted are from the current text of Schedule II. The figure produced here is book depreciation for the financial statements; tax depreciation is a separate computation.
Schedule II sets a useful life and a 5% residual cap, not a rate
The rules sit in three parts of Schedule II to the Companies Act, 2013. Part A says the useful life of an asset "shall not ordinarily be different" from the life specified in Part C, and that the residual value "shall not be more than five per cent of the original cost". Part B lets a regulator under an Act of Parliament, or the Central Government, notify useful lives or residual values for accounting purposes, and those notified figures apply to the companies they cover. Part C is the table of lives.
A company may depart from Part C. If it adopts a different useful life, or a residual value above 5%, the proviso to paragraph 3(i) of Part A requires the financial statements to disclose the difference and give a justification "duly supported by technical advice". Keep the engineer's or valuer's report on file; a board note alone does not meet those words. Separately, Note 3 to the Schedule requires every company to disclose the depreciation methods used and any useful lives that differ from the Schedule.
Residual value is a ceiling, not a fixed figure. A company can use 5%, a smaller percentage or nil. The examples below use 5% because that is the highest residual value the Schedule allows without the disclosure described above. The rate itself is left to arithmetic, which the next sections work through.
Part C useful lives for the assets most companies own
Part C runs to several pages of industry-specific plant. The lines below cover the assets found in almost every fixed asset register. NESD stands for "no extra shift depreciation", and its effect is explained in the shift section further down.
| Asset class (Part C) | Useful life | Marked NESD |
|---|---|---|
| Factory buildings | 30 years | Yes |
| Buildings other than factory buildings, RCC frame structure | 60 years | Yes |
| Buildings other than factory buildings, other than RCC frame | 30 years | Yes |
| Fences, wells and tube wells | 5 years | Yes |
| Plant and machinery, general rate (other than continuous process plant) | 15 years | No |
| Continuous process plant, general rate | 25 years | Yes |
| Furniture and fittings, general | 10 years | Yes |
| Furniture in hotels, restaurants, schools, colleges, libraries and similar places | 8 years | Yes |
| Motor cycles, scooters and other mopeds | 10 years | Yes |
| Motor buses, lorries and cars not used in a hire business | 8 years | Yes |
| Motor buses, lorries, cars and taxis used in a business of running them on hire | 6 years | Yes |
| Office equipment | 5 years | Yes |
| Servers and networks | 6 years | Yes |
| End-user devices such as desktops and laptops | 3 years | Yes |
| Electrical installations and equipment | 10 years | Yes |
| Laboratory equipment, general | 10 years | Yes |
Two definitions in the Notes decide which line some assets belong to. "Factory buildings" do not include offices, godowns or staff quarters, so an office block inside a factory compound takes the 60-year or 30-year building life, not the factory life. A "continuous process plant" is one "required and designed to operate for twenty-four hours a day". The test is the design requirement, not the hours a plant happens to run in a given year.
Turning a useful life into an SLM or WDV rate
Under SLM, the annual charge is the depreciable amount (cost minus residual value) divided by the useful life. With a 5% residual value, 95% of cost is spread evenly, so the effective SLM rate on cost is 95 divided by the life in years.
WDV needs a single rate that, applied every year to the reducing balance, brings the asset down to its residual value exactly at the end of its useful life. The arithmetic gives one formula: WDV rate = 1 − (residual value ÷ cost) raised to the power 1/n, where n is the useful life in years. With residual value at 5%, the ratio is 0.05 for every asset, so the rate depends only on the life.
The rates below are worked out with that formula and rounded to two decimals:
| Useful life | SLM rate on cost (5% residual) | WDV rate (5% residual) |
|---|---|---|
| 3 years | 31.67% | 63.16% |
| 5 years | 19.00% | 45.07% |
| 6 years | 15.83% | 39.30% |
| 8 years | 11.88% | 31.23% |
| 10 years | 9.50% | 25.89% |
| 15 years | 6.33% | 18.10% |
| 25 years | 3.80% | 11.29% |
| 30 years | 3.17% | 9.50% |
| 60 years | 1.58% | 4.87% |
If a company uses a residual value below 5%, it must recompute the WDV rate with its own ratio, and this table no longer applies. A nil residual value works only with SLM or a units-based method, because a reducing-balance rate never takes the carrying amount all the way to zero. How the two methods differ in pattern, and when each suits an asset, is covered in straight-line vs written down value depreciation.
Part-year depreciation runs from the date the asset is added
Note 2 to Part C says that when an asset is added during the year, depreciation is "calculated on a pro rata basis from the date of such addition". For an asset sold, discarded, demolished or destroyed, it runs up to that date. Paragraph 57 of AS 10, Property, Plant and Equipment fixes the start point as the date the asset "is available for use", which is not always the invoice date or the payment date. The same paragraph says depreciation does not stop merely because an asset becomes idle.
Schedule II does not say whether pro rata means days or months. A day count follows the words "from the date of such addition" most closely, and the examples here count days, including both the first and the last day. Only capitalised cost enters the calculation, so settle first whether a repair, a spare or an upgrade belongs in the asset at all; the tests are set out in capital vs revenue expenditure.
Worked example: a machine ready for use on 10 August 2025
Illustration. A manufacturing company buys a CNC lathe for ₹12,00,000, including freight and installation. It falls under general plant and machinery, with a 15-year life, and is ready for use on 10 August 2025. Residual value is taken at 5%, or ₹60,000. The financial year ends on 31 March.
- Depreciable amount: ₹12,00,000 − ₹60,000 = ₹11,40,000.
- Full-year SLM charge: ₹11,40,000 ÷ 15 = ₹76,000.
- Days in use in FY 2025-26: 10 August 2025 to 31 March 2026 is 234 days.
- SLM charge for FY 2025-26: ₹76,000 × 234 ÷ 365 = ₹48,723.
- WDV alternative for FY 2025-26: ₹12,00,000 × 18.1036% × 234 ÷ 365 = ₹1,39,274. The rate 18.1036% is the unrounded figure behind the 18.10% in the table.
In year one the WDV charge is almost three times the SLM charge. That gap is why the choice of method moves reported profit so much in the early years of a capital-heavy business, and why Note 3 makes the method a mandatory disclosure.
Extra depreciation for double and triple shift working
Note 6 states that the useful lives in the Schedule are "based on their single shift working". Where an asset is used for any time during the year on double shift, depreciation increases by 50% for that period. For triple shift, depreciation for that period is calculated at 100% extra. Assets marked NESD get no increase at all.
Continuing the illustration, in FY 2026-27 the lathe works a single shift for most of the year, a double shift for 120 days and a triple shift for 60 days. Under SLM:
- Normal single-shift charge for the full year: ₹76,000.
- Extra for double shift: ₹76,000 × 120 ÷ 365 × 50% = ₹12,493.
- Extra for triple shift: ₹76,000 × 60 ÷ 365 × 100% = ₹12,493.
- Total depreciation for FY 2026-27: ₹1,00,986.
The same proportions apply under WDV: compute the normal WDV charge for the year, then add 50% or 100% of it for the days on double or triple shift. Keep the production logs or shift rosters that prove those days, because the extra charge rests entirely on the period of multi-shift use. Extra shift depreciation also uses up the depreciable amount faster, so under SLM the asset reaches its residual value before the 15 years run out unless the useful life is reassessed.
The NESD marker takes most assets outside plant and machinery out of this calculation. Buildings, furniture, motor vehicles, office equipment, computers, electrical installations and laboratory equipment all sit under NESD headings, and so does the 25-year continuous process plant line. A laptop shared by two shifts of staff earns no extra depreciation.
Short-life assets: a laptop bought on 1 January 2026
Illustration. A laptop costing ₹90,000 is issued to an employee on 1 January 2026. End-user devices carry a 3-year life. At a 5% residual value of ₹4,500, the full-year SLM charge is (₹90,000 − ₹4,500) ÷ 3 = ₹28,500. For the 90 days from 1 January to 31 March 2026, the FY 2025-26 charge is ₹28,500 × 90 ÷ 365 = ₹7,027.
Under WDV the rate for a 3-year life is 63.16%, so the same 90 days would cost ₹14,016, and a full year would write off nearly two-thirds of the carrying amount. Servers and networks sit on a separate 6-year line, so a company that books its file server under "computers" without splitting the two categories will over-depreciate it.
Revising the useful life after the annual review
Paragraph 53 of AS 10 requires the residual value and useful life to be reviewed at least at each financial year-end. A change is accounted for as a change in accounting estimate under AS 5, which means it applies from the current period onwards and earlier years are not restated. The line between an estimate change and a prior period error is drawn in AS 5 prior period items vs changes in estimate.
Back to the lathe. Its carrying amount at 31 March 2027 is ₹12,00,000 − ₹48,723 − ₹1,00,986 = ₹10,50,291. At that date, a technical assessment concludes that heavy multi-shift use leaves 8 more years, not the roughly 13 years implied by the original plan. From FY 2027-28 the SLM charge becomes (₹10,50,291 − ₹60,000) ÷ 8 = ₹1,23,786 a year, before any shift additions.
The total life now works out to about 9.6 years against 15 in Part C. That triggers the Part A proviso: the financial statements must disclose the different useful life and the justification, supported by the technical assessment that produced the 8-year figure.
Significant parts, intangibles and companies on Ind AS
Note 4 says the Part C life is for the whole asset. Where the cost of a part is significant to the total cost and its life differs from the rest of the asset, the part's useful life is determined separately. That requirement was voluntary for financial years beginning on or after 1 April 2014 and became mandatory from 1 April 2015. Paragraph 45 of AS 10 says the same, and the method for splitting an asset is explained in component accounting under AS 10 and Schedule II.
Intangible assets are outside Part C. Paragraph 3(ii) of Part A sends them to the accounting standards that apply to the company, with a separate revenue-based amortisation option for toll roads built under BOT and similar arrangements. Because Part A refers both to Ind AS and to the other accounting standards, the Schedule applies whichever set a company follows, and it states that depreciation "includes amortisation".
For questions the Schedule does not answer, ICAI has issued the Guidance Note on Accounting for Depreciation in Companies in the context of Schedule II, which replaced its earlier Application Guide on Schedule II.
Why the Schedule II charge never matches the tax figure
Income-tax depreciation is computed on blocks of assets at rates prescribed under the income-tax law, not on Schedule II useful lives. A company therefore runs two depreciation schedules for the same machine: the Schedule II charge in its books and the tax charge in its return. The difference reverses over the asset's life and is a timing difference for deferred tax, worked through in AS 22 vs Ind AS 12 deferred tax.
Year-end checks on the fixed asset register
- Map every asset to a Part C line, and record the line description in the register rather than a generic label such as "equipment".
- Confirm the available-for-use date for each addition and the exact date of every sale, discard or write-off, then recompute the pro rata days.
- Check residual values: anything above 5% of original cost needs the disclosure and technical support required by the Part A proviso.
- Pull the shift records for plant and machinery not marked NESD, and add the 50% or 100% extra only for the documented days.
- Review useful lives against actual use, and apply any revision prospectively from the current year.
- Make sure the notes to accounts state the depreciation method for each class and list every useful life that differs from Part C, as Note 3 requires.
Finally, look at assets already written down to their residual value. Paragraph 56 of AS 10 makes the depreciation charge zero once residual value equals or exceeds the carrying amount, even if the asset is still in use. When such an asset is sold or scrapped, paragraph 75 sends the gain or loss on derecognition to the statement of profit and loss in that year.
