Schedule II of the Companies Act, 2013 gives useful lives in years for classes of assets, not depreciation rates. Residual value is not to exceed 5% of original cost unless the difference is disclosed with technical advice, and the depreciable amount is spread over the useful life by straight-line (SLM) or written-down-value (WDV) method. Tax depreciation under the Income-tax Act is separate and uses blocks of assets.
Facts checked: 9 October 2026. The useful lives and notes below were checked against the text of Schedule II as reproduced in an ICAI guidance note (ICAI, Guidance Note on Accounting for Depreciation), not the MCA gazette copy, which could not be opened. An earlier draft of this post gave the wrong life for continuous process plant; the schedule gives 25 years, and the post is corrected. Check the MCA text before using these in audit documentation.
Useful lives in Part C (main classes)
| Asset class | Useful life |
|---|---|
| Buildings, RCC frame (other than factory buildings) | 60 years |
| Buildings, other (other than factory buildings) | 30 years |
| Factory buildings | 30 years |
| Plant and machinery, general | 15 years |
| Plant and machinery, continuous process plant for which no special rate is prescribed | 25 years |
| Furniture and fittings, general | 10 years |
| Furniture, hotels, schools, libraries etc. | 8 years |
| Office equipment | 5 years |
| Computers, end-user devices (desktops, laptops) | 3 years |
| Computers, servers and networks | 6 years |
| Motor cycles and scooters | 10 years |
| Motor cars and buses, other than hire business | 8 years |
| Electrical installations and equipment | 10 years |
These are the lives for common classes. The schedule has many more specific entries, so look up the exact class and its notes for your asset.
Residual value, components, shifts
- Residual value. The schedule says it shall not be more than five percent of the original cost; a different figure needs disclosure with the reason.
- Component accounting. Where a significant part of an asset has a different useful life, its life is determined separately and it is depreciated separately.
- Shift working. For double-shift use, depreciation for that period increases by 50%, and for triple-shift use it is calculated on the basis of 100% (read by ICAI as an increase of 100%). This does not apply to assets marked in Part C as not eligible for extra shift depreciation.
- Variation. A company can use a different life or residual value only with a justification disclosed in the financial statements, as the schedule's text provides.
SLM and WDV
SLM charges the same amount each year: (cost − residual value) / useful life. WDV applies a fixed percentage to the opening book value, so the charge falls each year. The rate is derived, not given in the schedule. For a 15-year life and 5% residual value, the WDV rate works out to about 18.10% (1 − 0.05^(1/15)).
Worked example: SLM
Illustrative figures. A machine is bought for ₹10,00,000 and falls in the 15-year plant and machinery class. Residual value is taken at 5%, ₹50,000.
Annual depreciation = (10,00,000 − 50,000) / 15 = ₹63,333 (rounded).
| Year | Opening value (₹) | Depreciation (₹) | Closing value (₹) |
|---|---|---|---|
| 1 | 10,00,000 | 63,333 | 9,36,667 |
| 2 | 9,36,667 | 63,333 | 8,73,334 |
| 3 | 8,73,334 | 63,333 | 8,10,001 |
The example uses full years for clarity. Check the schedule's text on the treatment of assets added or sold part-way through a year.
How it differs from Income-tax depreciation
| Point | Companies Act | Income-tax |
|---|---|---|
| Unit | Each asset (and significant components) | Block of assets |
| Basis | Useful life in years | Prescribed percentage rates |
| Method | SLM or WDV, by policy | WDV on the block |
| Purpose | Books and financial statements | Taxable income |
The two will differ, so deferred tax arises on the gap. The Income-tax Act, 2025 applies from 1 April 2026; sources give different section numbers for its depreciation provision, so confirm the section on the Income Tax Department site before citing it. For the dual-books idea, read Schedule II vs Income-tax depreciation: one asset, two books and WDV vs SLM computed.
Use the Schedule II depreciation calculator and the Income-tax depreciation calculator, and track each asset in a fixed asset register.
Frequently asked questions
Does the Companies Act give depreciation rates?
No. Schedule II gives useful lives in years. Rates under SLM or WDV follow from the life and residual value.
Is residual value always 5%?
The schedule says residual value shall not be more than 5% of original cost. A company can use a different figure only where the difference is disclosed with technical advice.
Can I change the depreciation method?
A change of method is a change in accounting estimate and needs disclosure under the applicable accounting standard. Confirm treatment with the standard.
Why are my book and tax depreciation different?
Books use useful life and component accounting; tax uses block rates. The difference feeds deferred tax.
Statutory facts on this page are checked against their sources, and the page says where it relied on secondary reporting. How we verify · Report an error