Calculate asset depreciation using Straight-Line Method (SLM) or Written Down Value (WDV)
Enter asset details to calculate depreciation
Formula: (Asset Cost - Salvage Value) ÷ Useful Life
Formula: Book Value × Depreciation Rate
Depreciation is a non-cash expense that reduces taxable income. Indian Income Tax Act specifies different rates for different asset classes. Proper depreciation calculation is crucial for accurate tax filing.
Depreciation is the systematic allocation of an asset's cost over its useful life. It represents the reduction in value of an asset due to wear and tear, obsolescence, or passage of time.
The two main methods are Straight Line Method (SLM) where depreciation is uniform each year, and Written Down Value (WDV) method where depreciation is calculated on the reducing balance each year.
Use SLM for assets that provide uniform benefits over their life (buildings, furniture). Use WDV for assets that lose value faster initially (machinery, vehicles, computers).
Depreciation reduces taxable income. In India, Income Tax Act specifies WDV rates for different asset classes. Depreciation is allowed as a business expense under Section 32.
Book depreciation is calculated as per company's accounting policies for financial statements. Tax depreciation follows Income Tax Act rules and may use different rates and methods.
Useful life is estimated based on expected usage, physical wear, technological obsolescence, and legal/contractual limits. Companies Act and Income Tax Act provide standard useful lives for various asset categories.
Salvage value (or residual value) is the estimated amount an asset can be sold for at the end of its useful life. It's deducted from the asset cost before calculating depreciation in SLM method.
No, land is not a depreciable asset as it doesn't wear out or become obsolete. However, buildings and improvements on land are depreciable. Land can appreciate in value over time.