Accounting

WDV or SLM: Choosing a Depreciation Method in India

Most explanations of written down value versus straight line present it as a choice. For an Indian business it usually is not, and which of the two you are allowed to use depends entirely on which set of books you are preparing.

Three separate regimes are in play, and conflating them is where the confusion starts.

So: if you are an ordinary business, you do not get to choose WDV or SLM for income tax. You are on written down value over blocks, and the only real question is which block your asset belongs to. The straight line route under the Act is not a preference an ordinary taxpayer can exercise; it is a separate regime confined to undertakings engaged in the generation, or generation and distribution, of power.

The choice you do have is on the book side, and that is what the rest of this covers first.

What each method does

Straight line spreads the depreciable amount evenly. The charge is the same rupee figure every year until the asset reaches its residual value.

Written down value applies a constant percentage to a shrinking balance. The charge is large in year one and falls every year after, approaching but never quite reaching zero.

Both write off the same total cost. They disagree only about which year bears the charge.

The same asset, both ways

A machine costing ₹10,00,000, general plant and machinery. Under Schedule II that is a 15 year useful life with residual value capped at 5%, giving a straight line charge of ₹63,333 a year and a WDV rate of 18.10%.

By the end of year five, WDV has written off ₹6,31,597 against SLM’s ₹3,16,667. The asset is identical and so is the law. The method alone has moved ₹3,14,930 of expense between periods, and therefore the same amount of reported profit.

The crossover arrives later. WDV’s charge falls below SLM’s around year seven, and by the end of the fifteenth year both land on the ₹50,000 residual value. Nothing has been gained or lost in total.

Run your own asset through the depreciation calculator to see where your crossover falls.

Where you genuinely have a choice: the financial statements

Schedule II of the Companies Act, 2013 prescribes useful 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 not complicated:

WDV suits assets that give most of their value early or decline quickly. Machinery that works hardest when new, vehicles, and anything facing rapid obsolescence. It also matches the repairs profile, since repair costs typically rise as depreciation falls, giving a steadier total cost of ownership across the years.

SLM suits assets that deliver steady service across their life. Buildings, long-life infrastructure, and most intangibles with a defined term.

A change of method is a change in accounting estimate, applied prospectively, not a correction of an error. It is not a free lever for managing reported profit, and it is visible in the notes, so auditors read a change in method as something requiring a reason.

Where you do not have a choice: the tax computation

Rule 25(1) of the Income-tax Rules, 2026 sets the default. The allowance under section 33(3) is computed on the written down value of the block of assets, at the percentages in Appendix I. There is no method election in that sub-rule.

The straight line alternative exists but is narrow. Rule 25(3) provides that the allowance under section 33(2), for assets specified in Appendix II, is computed on the actual cost rather than written down value. Appendix II is a schedule of power sector assets, with rates such as 3.4% for hydro-electric plant, 7.84% for steam electric plant and cooling towers, and 1.95% for dams and spillways.

Two further sub-rules complete the picture. Rule 25(4) provides that aggregate depreciation under section 33(2) cannot exceed the asset’s actual cost. Rule 25(5) allows an undertaking specified in section 33(2) to opt instead for the Appendix I written down value system, if the option is exercised on or before the due date for the return under section 263(1)(c) for the tax year in which it begins to generate power. Rule 25(6) makes that option final and binding for all subsequent tax years.

So the honest answer for most readers: on the tax side there is nothing to choose. If you are not an undertaking generating power, or generating and distributing it, you are on WDV over blocks, and the only question is which block your asset falls into.

Which block, and at what rate

From Appendix I to the Income-tax Rules, 2026, on written down value:

A building is treated as mainly residential if at least two-thirds of its built-up floor area is used for residential purposes. “Buildings” includes roads, bridges, culverts, wells and tubewells. “Electrical fittings” includes wiring, switches, sockets and fans.

Two rules that change the first year

The 180-day convention. An asset put to use for fewer than 180 days in the tax year of acquisition attracts half the normal rate that year. The notified depreciation schedule separates additions held for 180 days or more from additions held for less, and computes half-rate depreciation on the latter.

The 40% cap. Rule 25(2) limits depreciation to 40% of written down value for a domestic company that has exercised an option under section 199(3), 200(5) or 201(2), a resident co-operative society that has opted under section 203(5) or 204(2), and an individual, HUF, AOP, BOI or artificial juridical person whose income is taxed under section 202(1), the default regime. If you are on a concessional regime, the 40% blocks are effectively capped at 40% and nothing higher applies.

So which should you pick

For the financial statements, pick the method that describes how the asset actually gets used up, and be able to say why. That is the whole test, and a defensible answer is more valuable than a favourable one.

For the tax computation, the question rarely arises. Get the block classification right instead, because that is where the real money is: a laptop classified as general plant at 15% rather than computers at 40% costs you materially more in year one than any method debate would.

And do not expect the two to agree. They will not, and the difference between them is the deferred tax working.

Where this fits

• Deriving the book rates from useful lives: Schedule II depreciation
• Reconciling the two systems: income tax vs Companies Act depreciation
• Your own figures: depreciation calculator
• First principles: the depreciation lesson
• Terms used here: accounting glossary

Sources

• Income-tax Rules, 2026, rule 25(1) to (7) and Appendices I and II, as notified in the Gazette of India, Extraordinary, Part II section 3(i), 20 March 2026. Rates and the Appendix II examples are taken from that notification.
• Income-tax Act, 2025, sections 33(2) and 33(3). In force 1 April 2026.
• Companies Act, 2013, Schedule II, Part A paragraph 3 and Part C.