Depreciation as per Companies Act 2013: A Complete Schedule II Guide
A plain-English walkthrough of Schedule II useful-life depreciation under the Companies Act 2013, with worked SLM and WDV examples in rupees.
Schedule II of the Companies Act 2013 replaced the old rate-based depreciation of Schedule XIV with a useful-life approach. Instead of applying a prescribed rate, you depreciate an asset over the useful life specified for its class — and if you depart from that life, you disclose and justify it. Getting this right matters: depreciation flows straight into your P&L, your net block, and ultimately your deferred tax.
The three inputs Schedule II needs
- Useful life: the years an asset is expected to be used, taken from Schedule II Part C (e.g. 15 years for general plant & machinery, 30 or 60 years for buildings, 3 years for computers).
- Residual value: capped at 5% of the original cost unless justified otherwise.
- Method: straight-line (SLM) or written-down value (WDV) — a policy choice you apply consistently by asset class.
Worked example: SLM
Take plant costing ₹10,00,000 with a 15-year life and 5% residual value. Depreciable amount = ₹10,00,000 − ₹50,000 = ₹9,50,000. Annual SLM depreciation = ₹9,50,000 ÷ 15 = ₹63,333. If the asset is capitalised mid-year, you charge it pro-rata for the days actually held in that financial year.
Worked example: WDV
For the same asset under WDV, the rate is derived so the asset writes down to its residual value over its life: rate = 1 − (residual ÷ cost)^(1/life). That works out to roughly 18.1% per year, applied to the opening written-down value — so depreciation is front-loaded and tapers over time.
Mid-life changes and disposals
When you revise a useful life or residual estimate (AS 5 / Ind AS 8), you depreciate the remaining carrying amount over the remaining revised life — prospectively, not by restating the past. On disposal or reclassification to held-for-sale (Ind AS 105), depreciation stops at that date. Each of these needs the sub-period charged under its own basis.
AssetOS computes all of this from your register — SLM or WDV, days-based pro-rata, the 5% residual cap, and mid-year basis changes — and posts it monthly with close controls, so the Fixed Asset Register always reconciles.