Home > Companies Act 2013 > Depreciation Rates and Provisions as per Companies Act 2013

Depreciation Rates and Provisions as per Companies Act 2013

Depreciation Calculator for Companies Act 2013

Depreciation as per companies act 2013 for  Financial year 2014-15 and thereafter. These provisions are applicable from 01.04.2014 vide notification dated 27.03.2014.

  • Depreciation is calculated by considering useful life of asset, cost and residual value.
  • Any method WDV or SLM can be used.
  • Schedule – II contains a list of useful life according to class of assets and the residual value shall not be more than five percent of the original cost of asset.
    However companies are free to adopt a useful life different from what specified in Schedule II and residual value more than 5%. The financial statements shall disclose such difference and provide justification in this behalf duly supported by technical advice.
  • If there is any addition to the asset or asset is sold, discarded, demolished or destroyed then the calculation is made according to the date of such event. In other words, if any asset is purchased or sold then the calculation will be made according to the date of purchase or sold i.e datewise calculation is made.
  • Depreciation method used is to be shown in accounts
  • Useful life of assets is to be disclosed only when it is taken different from Schedule – II
  • For assets in which NESD (No Exta Shift Depreciation) is mentioned in Schedule – II, the depreciation remains same irrespective of the no. of work shifts.
  • For other assets, if the asset is used for double shifts during any time of the year then the depreciation shall be increased by 50% for that period. Similarly if asset is used for triple shifts then depreciation shall be increased by 100% for that period.
  • Each Part of an item of an asset with a cost significant in relation to the total cost of the item shall be depreciated separately. Where cost of the part of the asset and useful life of that part is different from the useful life of the remaining asset, useful life of that significant part should be determined separately.
    As per the amendment dated August 29, 2014 notified by the MCA, the said requirement shall be voluntary in respect for the financial year commencing on or after the April 1, 2104 and mandatory for financial statements in respect of financial years commencing on or after April 1, 2015.
    Component accounting is required to be done for the entire block of assets as at 1 April 2014 if a company opts to follow it voluntarily and as at 1 April, 2015 mandatorily. It cannot be restricted to only new assets acquired after 1 April 2014 or 1 April, 2015 as the case may be.

If residual value is taken as 5% of cost of asset and life as per schedule – II then the depreciation rates on SLM and WDV basis are given in following link.

Depreciation Calculator for Companies Act 2013


Transitional Provision

For assets existing on 01.04.2014 date of purchase is considered and the balance sheet value has to be depreciated over remaining useful life of assets.
If the remaining useful life of asset is NIL then the amount over and above residual value may be recognized in the opening balance of retained earnings or may be charged off to Profit and Loss account.

if a company uses Written Down Value (WDV) method of depreciation, it will need to calculate a new rate for depreciation to depreciate the asset over their remaining useful life using the formula for calculation of rate for depreciation as per WDV method which is reproduced below –

R= {1 – (s/c)^1/n } x 100

Where  R = Rate of Depreciation (in %)
n = Remaining useful life of the asset (in years)
s = Scrap value at the end of useful life of the asset
c= Cost of the asset/Written down value of the asset

It may be noted that upon transition to Schedule II, the company may have different rates of depreciation for individual assets within the same class in case of existing assets as there will be a different remaining useful life for each asset.

Depreciation as per Companies Act

Depreciation as per new companies act is allowed on the basis of useful life of assets and residual value. Depreciation rates are not given under the new companies act.
A table is given below of depreciation rates applicable if the asset is purchased on or after 01st April, 2014 and useful life is considered as given in companies act,2013 and residual value as 5%. For all other cases calculate depreciation rate using our depreciation calculator.

NESD stands for No Extra Shift Depreciation.


Nature of Assets Useful
Life
Rate
[SLM]
Rate
[WDV]
(I) Buildings [NESD]
(a) Building (other than factory buildings) RCC Frame Structure 60 1.58% 4.87%
(b) Building (other than factory buildings) other than RCC
Frame Structure
30 3.17% 9.50%
(c) Factory buildings 30 3.17% 9.50%
(d) Fences, wells, tube wells 5 19.00% 45.07%
(e) Other (including temporary structure, etc.) 3 31.67% 63.16%
(II) Bridges, culverts, bunkers, etc. [NESD] 30 3.17% 9.50%
(III) Roads [NESD]
(a) Carpeted Roads
(i) Carpeted Roads – RCC 10 9.50% 25.89%
(ii) Carpeted Roads – other than RCC 5 19.00% 45.07%
(b) Non-carpeted roads 3 31.67% 63.16%
(IV) Plant and Machinery
(a) General rate applicable to Plant and Machinery not
covered 
under Special Plant and Machinery
(i) Plant and Machinery other than continuous process plant not
covered under specific
15 6.33% 18.10%
(ii) Continuous process plant for which no special rate has been
prescribed under (ii) below
8 11.88% 31.23%
(b) Special Plant and Machinery
(i) Plant and Machinery related to production and exhibition
of Motion Picture Films
1 Cinematograph films – Machinery used in the production and
exhibition of cinematograph films, recording and reproducing
equipments, developing machines, printing machines, editing
machines, synchronizers and studio lights
13 7.31% 20.58%
2 Projecting equipment for exhibition of films 13 7.31% 20.58%
(ii) Plant and Machinery used in glass
1 Plant and Machinery except direct fire glass melting furnaces
– Recuperative and regenerative glass melting furnaces
13 7.31% 20.58%
2 Plant and Machinery except direct fire glass melting furnaces
– Moulds [NESD]
8 11.88% 31.23%
3 Float Glass Melting Furnaces [NESD] 10 9.50% 25.89%
(iii) Plant and Machinery used in mines and quarries Portable
underground machinery and earth moving machinery used in
open cast mining
8 11.88% 31.23%
(iv) Plant and Machinery used in Telecommunications [NESD]
1 Towers 18 5.28% 15.33%
2 Telecom transceivers, switching centres, transmission and
other network equipment
13 7.31% 20.58%
3 Telecom – Ducts, Cables and optical fibre 18 5.28% 15.33%
4 Satellites 18 5.28% 15.33%
(v) Plant and Machinery used in exploration, production and
refining oil and gas [NESD]
1 Refineries 25 3.80% 11.29%
2 Oil and gas assets (including wells), processing plant and
facilities
25 3.80% 11.29%
3 Petrochemical Plant 25 3.80% 11.29%
4 Storage tanks and related equipment 25 3.80% 11.29%
5 Pipelines 30 3.17% 9.50%
6 Drilling Rig 30 3.17% 9.50%
7 Field operations (above ground) Portable boilers, drilling tools,
well-head tanks, etc.
8 11.88% 31.23%
8 Loggers 8 11.88% 31.23%
(vi) Plant and Machinery used in generation, transmission and
distribution of power [NESD]
1 Thermal / Gas / Combined Cycle Power Generation Plant 40 2.38% 7.22%
2 Hydro Power Generation Plant 40 2.38% 7.22%
3 Nuclear Power Generation Plant 40 2.38% 7.22%
4 Transmission lines, cables and other network assets 40 2.38% 7.22%
5 Wind Power Generation Plant 22 4.32% 12.73%
6 Electric Distribution Plant 35 2.71% 8.20%
7 Gas Storage and Distribution Plant 30 3.17% 9.50%
8 Water Distribution Plant including pipelines 30 3.17% 9.50%
(vii) Plant and Machinery used in manufacture of
1 Sinter Plant 20 4.75% 13.91%
2 Blast Furnace 20 4.75% 13.91%
3 Coke Ovens 20 4.75% 13.91%
4 Rolling mill in steel plant 20 4.75% 13.91%
5 Basic Oxygen Furnace Converter 25 3.80% 11.29%
(viii) Plant and Machinery used in manufacture of non ferrous metals
1 Metal pot line [NESD] 40 2.38% 7.22%
2 Bauxite crushing and grinding section 40 2.38% 7.22%
3 Digester Section [NESD] 40 2.38% 7.22%
4 Turbine [NESD] 40 2.38% 7.22%
5 Equipments for Calcinations [NESD] 40 2.38% 7.22%
6 Copper Smelter [NESD] 40 2.38% 7.22%
7 Roll Grinder 40 2.38% 7.22%
8 Soaking Pit 30 3.17% 9.50%
9 Annealing Furnace 30 3.17% 9.50%
10 Rolling Mills 30 3.17% 9.50%
11 Equipments for Scalping, Slitting, etc. [NSED] 30 3.17% 9.50%
12 Surface Miner, Ripper Dozer, etc. used in mines 25 3.80% 11.29%
13 Copper refining plant [NSED] 25 3.80% 11.29%
(ix) Plant and Machinery used in medical and surgical operations
[NESD]
1 Electrical Machinery, X-ray and electrotherapeutic apparatus
and accessories thereto, medical, diagnostic equipments, namely,
Cat-scan, Ultrasound Machines, ECG Monitors, etc.
13 7.31% 20.58%
2 Other Equipments 15 6.33% 18.10%
(x) Plant and Machinery used in manufacture of pharmaceuticals
and chemicals [NESD]
1 Reactors 20 4.75% 13.91%
2 Distillation Columns 20 4.75% 13.91%
3 Drying equipments / Centrifuges and Decanters 20 4.75% 13.91%
4 Vessel / Storage tanks 20 4.75% 13.91%
(xi) Plant and Machinery used in civil construction
1 Concreting, Crushing, Piling Equipments and Road Making
Equipments
12 7.92% 22.09%
2 Heavy Lift Equipments –
– Cranes with capacity more than 100 tons 20 4.75% 13.91%
– Cranes with capacity less than 100 tons 15 6.33% 18.10%
3 Transmission line, Tunnelling Equipments [NESD] 10 9.50% 25.89%
4 Earth-moving equipments 9 10.56% 28.31%
5 Others including Material Handling / Pipeline / Welding
Equipments [NESD]
12 7.92% 22.09%
(xii) Plant and Machinery used in salt works [NESD] 15 6.33% 18.10%
(V) Furniture and fittings [NESD]
(a) General furniture and fittings 10 9.50% 25.89%
(b) Furniture and fittings used in hotels, restaurants and boarding
houses, schools, colleges and other education institutions, libraries,
welfare centres, meeting halls, cinema houses, theatres and
circuses and furniture and fittings let out on hire for used on
occasion of marriages and similar functions
8 11.88% 31.23%
(VI) Motor Vehicles [NESD]
(a) Motor cycles, scooters and other mopeds 10 9.50% 25.89%
(b) Motor buses, motor lorries, motor cars and motor taxies
used in a business of running them on hire
6 15.83% 39.30%
(c) Motor buses, motor lorries, motor cars and motor taxies
other than those used in a business of running them on
8 11.88% 31.23%
(d) Motor tractors, harvesting combines and heavy vehicles 8 11.88% 31.23%
(e) Electrically operated vehicles 8 11.88% 31.23%
(VII) Ships [NESD]
(a) Ocean-going ships
(i) Bulk Carriers and liner vessels 25 3.80% 11.29%
(ii) Crude tankers, product carriers and easy chemical carriers
with or without conventional
20 4.75% 13.91%
(iii) Chemicals and Acid Carriers
1 With Stainless steel tanks 25 3.80% 11.29%
2 With other tanks 20 4.75% 13.91%
(iv) Liquefied gas carriers 30 3.17% 9.50%
(v) Conventional large passenger vessels which are used for
cruise purpose also
30 3.17% 9.50%
(vi) Coastal service ships of all categories 30 3.17% 9.50%
(vii) Offshore supply and support vessels 20 4.75% 13.91%
(viii) Catamarans and other high speed passenger
for ships or boats
20 4.75% 13.91%
(ix) Drill ships 25 3.80% 11.29%
(x) Hovercrafts 15 6.33% 18.10%
(xi) Fishing vessels with wooden hull 10 9.50% 25.89%
(xii) Dredgers, tugs, barges, survey launches and other
similar ships used mainly for dredging
14 6.79% 19.26%
(b) Vessels ordinarily operating on inland waters
(i) Speed boats 13 7.31% 20.58%
(ii) Other vessels 28 3.39% 10.15%
(VIII) Aircrafts or Helicopters [NESD] 20 4.75% 13.91%
(IX) Railway siding, locomotives, rolling stocks,
tramways and railway used by concerns, excluding railway
15 6.33% 18.10%
(X) Ropeway structures [NESD] 15 6.33% 18.10%
(XI) Office equipments [NESD] 5 19.00% 45.07%
(XII) Computers and data processing units [NESD]
(a) Servers and networks 6 15.83% 39.30%
(b) End user devices, such as, desktops, laptops, etc. 3 31.67% 63.16%
(XIII) Laboratory equipment [NESD]
(a) General laboratory equipment 10 9.50% 25.89%
(b) Laboratory equipments used in education institutions 5 19.00% 45.07%
(XIV) Electrical Installations and Equipment [NESD] 10 9.50% 25.89%
(XV) Hydraulic woks, pipelines and sluices [NESD] 15 6.33% 18.10%

Also Read:

Depreciation rates as per Income Tax For F.y 2016-17 & 2017-18
Input Tax Credit under GST

14 comments

  1. Is this mandatory to charge depreciation on fixed assets as per companies act 2013?

    • Rohit Pithisaria

      You are required to charge depreciation according to the rates specified in Schedule II or to adopt a useful life different from what specified in Schedule II and residual value more than 5%. The financial statements shall disclose such difference and provide justification in this behalf duly supported by technical advice. If you do not want to charge a depreciation on an asset then you should also state the justification for this in the Notes.

  2. rajanish pratap singh

    there is any specific performa for this

  3. when asset value is write of on which low value

  4. Hello Sir,What about the depreciation of assets existing as on !.4.2014?How to calculate ?

  5. Samsung mobile @8000/- purchased on 20. 09. 15. how much depreciation is applicable?

  6. Hi,

    As per the guideline, this formula should be used R= {1 – (s/c)^1/n } x 100 for calculating depreciation on WDV basis. Now i realise that if this formula works only if asset is purchased in the beginning of the financial year. How to apply this formula if addition is made during the year?
    For example,
    Date of Purchase:- 01/10/2014
    Year Ended:-31/03/2015
    Cost:-500000/-
    Residual Value:-25000
    Useful Life:- 6 years.

    As per above formula Rate is 39.30%, but over period of time of 6 years, asset value is coming down exactly at Rs.25000/-. References say 1st year Depreciation is 105980/- in this case and subsequent rates are 42.39%, please help me out..

  7. Sir,

    There is a block of assets under plant & machinery & other assets b/f from PY at wdv. It is difficult to trace detail of individual asset and their date of purchase etc. In this case how Depreciation is to be calculated.

    • Prateek Agarwal

      Block of Assets concept is not applicable in depreciation as per companies act.
      For calculating depreciation as per companies act you need details of individual assets.

  8. Respected Sir/Ma’am,
    As Sch-II prescribed the Rate of Dep. & Life of Asstes, Here Let me know that After expiry of the life of the Assets, some Amount come in balancecalled WDV, So what accounting treatment should given for this.
    E.g
    Nature of Assets Buildings RCC Frame Structure
    Useful Life – 60 Years
    Rate [WDV] – 4.87%
    Cost of Purchased – 70L
    Remaining Balance after Charging Dep for 60 years@4.87% on WDV Method – Rs. 3,50,064.32/-
    Total Dep – Rs. 66,49,935.80/-, Here how account for the WDV At the Year end 60th Year. & In Very Next Years.

    • Prateek Agarwal

      Hi

      After expiry of life of assets, the WDV of assets continue to be shown in books of accounts and because no depreciation is charged for further years, it continue to be shown at the same WDV for the subsequent years till the year of sale out or disposal.

Leave a Reply

Your email address will not be published. Required fields are marked *

close-link
Remain Updated with GST & Income Tax
Join 20K subscribers
Remain Updated with GST & Income Tax
Join 20K subscribers