Accounting

Schedule II Depreciation: Useful Lives to SLM and WDV Rates

Schedule II of the Companies Act, 2013 does not give you a depreciation rate. It gives you a useful life. The rate is something you derive, and the method you pick decides how much of the cost lands in this year’s profit and loss account rather than a later one.

That single distinction causes most of the confusion. A tax rate chart hands you a percentage. Schedule II hands you a number of years and a residual value cap, and expects you to do the arithmetic.

The two rules Schedule II actually imposes

Part C of Schedule II prescribes the useful life of each class of asset. Part A, paragraph 3, caps the residual value: “the residual value of an asset shall not be more than five per cent of the original cost of the asset”.

Those two inputs are all you need. Everything else follows.

Straight line

Under the straight line method you write off the depreciable amount evenly:

SLM rate = (100 − residual %) ÷ useful life

With the 5% cap applied, that is 95 divided by the useful life. A 15 year asset gives 95 ÷ 15 = 6.33% of original cost every year.

Written down value

Under WDV you apply a constant percentage to a shrinking balance, so the rate has to be the one that erodes the cost to exactly 5% over the life:

WDV rate = 1 − (residual value ÷ original cost)^{1/useful life}

For the same 15 year asset: 1 − 0.05^1/15 = 18.10%.

The WDV rate is always much higher than the SLM rate for the same asset. That is not an inconsistency. WDV front-loads the charge, so it needs a bigger percentage to reach the same endpoint.

The rates, derived

These are computed from the Schedule II useful lives using the two formulas above, with residual value at the 5% cap. If your company uses a lower residual value, recompute rather than copying this table.

The laptop line is the one that surprises people. A three year life with a 5% floor means 63.16% comes off in year one under WDV. That is correct, and it is roughly what a laptop is actually worth after a year.

Worked example

A manufacturing company buys a machine for ₹10,00,000 on 1 April. General plant and machinery, so a 15 year life. Residual value taken at the 5% cap, which is ₹50,000.

Straight line

Depreciable amount is ₹10,00,000 − ₹50,000 = ₹9,50,000. Spread over 15 years that is ₹63,333 every year, unchanged, until the carrying amount reaches ₹50,000.

Written down value at 18.10%

After 15 years the closing balance is ₹50,000, which is the residual value. That is the check on whether your rate is right: if the asset does not land on the residual value at the end of its life, the rate was wrong.

The difference in year one is the whole point. WDV charges ₹1,81,036 against profit; SLM charges ₹63,333. Same asset, same law, ₹1,17,703 of difference in reported profit, purely from a method choice.

You can run your own figures in the depreciation calculator, which handles both methods.

Choosing a method, and changing one

Schedule II prescribes lives, not methods. A company selects the method that reflects the pattern in which it expects to consume the asset’s economic benefits, and discloses that choice in its accounting policies.

In practice the pattern argument is straightforward. A machine that works hardest when new, or an asset facing rapid technological obsolescence, fits WDV. An asset that delivers steady output across its life, such as a building, fits SLM.

A change of method is treated as a change in accounting estimate, not a correction of an error, and is applied going forward. It is not a free lever for managing reported profit, and auditors read it that way.

Using a life other than Schedule II’s

A company may use a useful life or residual value different from Schedule II, but it must disclose the difference and justify it with technical advice. This matters more than it sounds. If your plant genuinely runs 20 years, using 20 is defensible with support. Quietly extending lives to flatter profit is not, and it is visible in the notes.

Pro rata from the date of use

Depreciation runs from the date the asset is available for use, not the date on the invoice. A machine bought in January and commissioned in March gives you roughly one month of depreciation in that financial year, not three, and not twelve.

This is where Schedule II and the tax computation part company. The Companies Act works on days; the income tax computation has historically worked on a half year convention tied to 180 days of use. Two different rules, two different numbers, both correct in their own place.

Book depreciation is not tax depreciation

Schedule II governs the depreciation in your financial statements. Your tax computation follows the income tax law, which uses a block of assets and its own rates.

They will not agree, and they are not meant to. The gap between them is a timing difference that flows into deferred tax. If your company shows identical depreciation in the accounts and the tax computation, something has usually gone wrong in one of them.

A note on currency: for tax year 2026-27, tax depreciation is governed by section 33 of the Income-tax Act, 2025, which replaced the Income-tax Act, 1961 from 1 April 2026. The block rates are in Appendix I to the Income-tax Rules, 2026, and the half-rate rule for an asset used for fewer than 180 days in its first year is in section 33(4). Schedule II of the Companies Act is unaffected by that change, so everything above stands.

Where this fits

• Run both methods on your own asset in the depreciation calculator
• The fundamentals, from first principles: depreciation in the accounting course
• Where the charge and the accumulated balance appear in the statements: how to read a balance sheet
• Fixed asset work in the monthly cycle: the month-end close checklist
• Terms used here: accounting glossary

Source

Companies Act, 2013, Schedule II. Useful lives from Part C; the residual value cap from Part A, paragraph 3. The SLM and WDV rates in the table are derived from those lives using the formulas shown, not copied from a third party chart, so you can reproduce every one of them.