Companies Act: Schedule II
Schedule II to the Companies Act 2013 prescribes useful lives, not rates, and a residual value of normally up to 5% of cost. A company may use a different life or residual value if it discloses the justification. From the life, the straight-line rate is (1 − residual %) ÷ life, and the written-down-value rate is 1 − (residual ÷ cost)1/life; for a 5% residual and 15-year life these give 6.33% and 18.10%. Depreciation in the year of addition is pro rata to the days the asset was available for use.
Income-tax: s.33 [32] and the block of assets
Under the Income-tax Act 2025, depreciation is allowed by s.33 [32 of the 1961 Act] on the written-down value of each block of assets at the prescribed rates: 15% for general plant and machinery and motor cars, 40% for computers and software, 30% for vehicles used in a hiring business, 10% for furniture, fittings and non-residential buildings, 5% for residential buildings and 25% for specified intangibles (goodwill is not depreciable). The rates are in the Income-tax Rules verify — check the final 2026 Rules table for the rule number. If an asset is acquired and put to use for less than 180 days in the tax year, only half the rate is allowed that year (s.33(4)).
Additional depreciation
A business engaged in manufacture or production, or in generating or distributing power, can claim additional depreciation of 20% of the actual cost of new plant and machinery in the year it is acquired and put to use; if used for under 180 days, 10% is allowed that year and the remaining 10% in the next year (s.33(8)–(9)). Office equipment, vehicles, second-hand machinery and machinery installed in office or residential premises are excluded. Companies taxed under s.200 [115BAA] at 22%, and new manufacturing companies under the 15% regime [115BAB], cannot claim it.
Deferred tax
The gap between book and tax depreciation is a timing difference. Faster tax depreciation creates a deferred tax liability that reverses in later years when book depreciation overtakes tax depreciation. The table shows the cumulative difference multiplied by the tax rate you enter.
Sources: Companies Act 2013 Schedule II (mca.gov.in); Income-tax Act 2025 s.33 and s.200 (incometaxindia.gov.in); depreciation rate table as published for the Income-tax Rules 2026. Checked 6 October 2026.
Common questions
Can a company charge depreciation faster than Schedule II?
Yes, if it uses a shorter life or a different residual value based on technical assessment and discloses the justification in the notes. A longer life also needs justification.
Does the 180-day rule apply in the books?
No. The 180-day half-rate rule is only for income-tax. In the books, depreciation in the year of addition is pro rata to the days the asset was in use.
What happens to tax depreciation when an asset is sold?
The sale price reduces the written-down value of the block. There is no separate gain or loss unless the sale price exceeds the block's value (a short-term capital gain) or the whole block ceases to exist.