Schedule II vs Income Tax Depreciation: One Asset, Two Completely Different Numbers
Ask most finance teams whether Schedule II depreciation and Income Tax depreciation are "basically the same, just different rates," and the honest answer is no — they're computed by entirely different mechanisms, on entirely different units of account, with entirely different rules for a part-used first year. The gap between them isn't rounding error; it's the temporary difference that AS 22 / Ind AS 12 deferred tax exists to reconcile.
Two Different Units of Account
Schedule II to the Companies Act 2013 prescribes a useful life per asset class — 60 years for an RCC-frame building, 10 years for general furniture, 3 years for end-user computer devices, and so on — with a residual value capped at 5% of original cost. From that life, a company derives either an SLM rate (straight-line: (cost − 5%) ÷ life) or a WDV rate (declining balance: 1 − (5%)^(1/life)), choosing either method per asset class.
The Income Tax Act doesn't track individual assets at all. It groups similar assets into blocks, each block carrying one prescribed WDV rate under Appendix I — 5% to 40% depending on the block. Depreciation is charged on the block's aggregate written-down value. There's no SLM option under the general block-of-assets regime, and no concept of an individual asset's own useful life.
The 180-Day Cliff Is Tax-Only
The Income Tax Act adds a rule Schedule II simply doesn't have: an asset put to use for less than 180 days in its year of acquisition gets only half the block's prescribed rate for that year. The undepreciated balance rolls into the block's opening WDV the following year, depreciating at the full rate from then on.
Schedule II has no equivalent cliff. Its depreciation is pro-rated by actual days used — smooth day-counting, not a binary step at a threshold.
A Worked Example: Three Numbers, One Asset
General plant & machinery, ₹10,00,000, put to use 15 October 2025, financial year ending 31 March 2026 — 168 days of use, just under the 180-day line.
| Method | Rate | First-year depreciation |
|---|---|---|
| Schedule II SLM (95% ÷ 15 years, pro-rated 168/365) | 6.33% p.a. | ≈ ₹29,151 |
| Schedule II WDV (1 − 5%^(1/15), pro-rated 168/365) | 18.1% p.a. | ≈ ₹83,326 |
| Income Tax block WDV (15% halved for <180 days) | 7.5% | ₹75,000 |
Three different figures from one asset, one cost, one year. The tax figure happens to land between the two Schedule II options here — but that's coincidental to this particular life/rate pairing, not a general rule. The mechanisms for handling partial-year use are just different: day-proration on both Schedule II methods, a binary half-rate step on tax.
Where Intangibles Break the Pattern
Schedule II Part C covers tangible fixed assets only — it does not prescribe a useful life for intangible assets. Those are amortised under AS 26 or Ind AS 38 based on the asset's actual economic useful life, assessed case by case, not looked up in a statutory table. The Income Tax Act, by contrast, does have a block rate for intangibles (patents, licences, etc.) — 25% — so the two systems diverge even in whether a number exists to compare in the first place.
Frequently Asked Questions
What is the 180-day rule in income tax depreciation?
If an asset is put to use for less than 180 days in its year of acquisition, that year's depreciation is restricted to half the block's prescribed rate. The remainder carries into the following year's opening WDV, depreciating at the full rate from then — the restriction applies only to the year of acquisition.
Does Schedule II have an equivalent to the 180-day rule?
No. Schedule II depreciation is pro-rated by actual days of use in the year — there's no half-rate step at any fixed day-count threshold. Applying the tax 180-day cliff to a Schedule II computation is a common but real error.
Why does the Income Tax Act use blocks instead of individual assets?
It's a structural simplification: assets of a similar type and rate are pooled, and depreciation is computed on the pooled WDV rather than tracked per asset. One consequence is that gains or losses on selling an individual asset within a block are usually absorbed into the block's WDV rather than computed asset-by-asset, until the block itself is emptied or extinguished.
Can a company choose SLM depreciation for tax purposes the way it can under Schedule II?
Generally no. The Income Tax Act's general block-of-assets regime (Appendix I) is WDV-only. SLM under Appendix II is restricted to power generation and distribution undertakings, not available as a general election the way Schedule II offers a per-class SLM/WDV choice.
CORAA's Depreciation Comparator runs both books off the same asset inputs — Schedule II SLM and WDV alongside the Income Tax block WDV rate, complete with the 180-day rule — so the deferred-tax temporary difference for fixed assets starts from two correctly-computed figures instead of one book's number applied twice.