Depreciation Calculator — SLM & WDV Method India

Depreciation Method

Equal depreciation each year — simple and commonly used.

Asset Cost

₹

Salvage Value (Scrap Value)

₹

Useful Life

years

Year 1 Depreciation

₹0

0.00% per year · Straight Line

Total Depreciation

₹0

Book Value at End

₹0

Asset Cost

₹5,00,000

Useful Life

5 years

What is a Depreciation?

A depreciation calculator computes the annual reduction in an asset's value over its useful life, using either the Straight Line Method (SLM) or the Written Down Value (WDV) method — and generates a year-by-year schedule of depreciation charges and book values. It eliminates the manual calculation of WDV rates (which require logarithms) and the tedious construction of multi-year depreciation tables.

Depreciation is a fundamental concept in both accounting and tax calculation in India. When a business purchases a fixed asset — machinery, vehicles, computers, furniture, or commercial property — the asset's cost cannot be deducted entirely in the year of purchase. Instead, the cost is spread over the asset's useful life through annual depreciation charges, which reduce the taxable profit and therefore the income tax payable each year. Under Section 32 of the Income Tax Act, 1961, businesses can claim depreciation on all tangible and intangible assets used for the purposes of their business or profession.

India uses two distinct depreciation frameworks depending on purpose:

For income tax purposes, the Income Tax Act mandates the WDV method with prescribed rates — 15% for plant and machinery, 40% for computers, 10% for furniture and commercial buildings, and so on. These statutory rates apply regardless of what an asset's actual wear and tear pattern is.

For financial reporting under the Companies Act 2013, Schedule II specifies useful lives for different asset classes. Companies then compute depreciation using SLM or WDV based on the useful life, as long as the method is applied consistently within each asset class.

The Depreciation Calculator is useful for both frameworks: enter the statutory WDV rate as the asset cost divided back to derive useful life, or use the actual cost, salvage value, and life to compute the SLM or custom WDV rate. The year-by-year schedule is particularly valuable for balance sheet preparation and asset management.

For analysing the return on a depreciating asset, the ROI Calculator can be used alongside depreciation data to model net asset profitability. For assessing the profit or loss on the sale of a depreciated asset, use the Profit & Loss Calculator.

How to use this Depreciation calculator

Enter the Asset Cost — the original purchase price of the asset including freight, installation, and any costs required to bring the asset to its intended location and working condition. Do not include subsequent capital improvements (those should be treated as additions to asset cost separately). For income tax purposes in India, the WDV method uses the actual cost as the starting base.
Enter the Salvage Value (Scrap Value) — your best estimate of the amount you will recover when the asset is disposed of at the end of its useful life. For vehicles, the scrap metal value is typically 5–10% of original cost; for computers, it is often zero; for commercial property, it may equal the land value. Under the Income Tax Act, the WDV method in practice often runs book value to nearly zero because the statutory rates are prescribed and salvage value is not an input — but for accounting purposes, salvage value is a required estimate.
Set the Useful Life — in years, as per the Companies Act 2013 Schedule II for financial reporting (buildings: 60 years; computers: 3 years; furniture: 10 years; general plant: 15 years), or as you estimate for management accounting. For income tax, the useful life is implicit in the WDV rate — a 15% WDV rate implies approximately 14-year life to reach near-zero.
Select the Depreciation Method — choose Straight Line (SLM) if you want equal annual charges (simpler for reporting, common for buildings and furniture), or Written Down Value (WDV) if you want front-loaded depreciation (mandatory for income tax, better matching for vehicles and tech equipment). Switching the method toggle instantly recalculates all outputs.
Review the schedule and plan — note the Year 1 Depreciation for your current financial year's tax planning. Scroll down to the year-by-year table to find the book value at any specific year — useful for insurance renewal, loan applications, or asset disposal planning.

Formula & Methodology

Straight Line Method (SLM):

Annual Depreciation = (Asset Cost − Salvage Value) ÷ Useful Life

SLM Rate = 100 ÷ Useful Life (%)

Book Value after year k = Asset Cost − (k × Annual Depreciation)

Written Down Value (WDV):

WDV Rate = (1 − (Salvage Value ÷ Asset Cost)^(1÷Useful Life)) × 100 (%)

Year 1 Depreciation = Asset Cost × WDV Rate

Year k Depreciation = Book Value_(k−1) × WDV Rate

Book Value after year k = Book Value_(k−1) − Year k Depreciation

Where:
- Asset Cost = original purchase price (₹)
- Salvage Value = estimated residual value at end of life (₹)
- Useful Life = number of years the asset will be in service

Worked example (SLM) — ₹5 lakh machine with ₹50,000 salvage value, 5-year life:

Annual Depreciation = (₹5,00,000 − ₹50,000) ÷ 5 = ₹90,000/yearSLM Rate = 100 ÷ 5 = 20% p.a.Total Depreciation = ₹90,000 × 5 = ₹4,50,000Book Value at End = ₹5,00,000 − ₹4,50,000 = ₹50,000 (= Salvage Value ✓)

Worked example (WDV) — same asset:

WDV Rate = (1 − (₹50,000 ÷ ₹5,00,000)^(1÷5)) × 100= (1 − (0.1)^0.2) × 100 = (1 − 0.6310) × 100 = 36.90% p.a.

| Year | Opening Balance | Depreciation | Closing Balance |
|---|---|---|---|
| 1 | ₹5,00,000 | ₹1,84,500 | ₹3,15,500 |
| 2 | ₹3,15,500 | ₹1,16,419 | ₹1,99,081 |
| 3 | ₹1,99,081 | ₹73,461 | ₹1,25,620 |
| 4 | ₹1,25,620 | ₹46,354 | ₹79,266 |
| 5 | ₹79,266 | ₹29,266 | ₹50,000 ✓ |

Assumptions:
- Depreciation is calculated for full financial years. The Income Tax Act applies half the depreciation for assets acquired in the second half of the financial year (October–March); this pro-ration is not applied in the calculator — adjust manually if purchasing mid-year.
- The WDV rate formula mathematically ensures the book value converges to the salvage value at the end of the useful life; rounding in intermediate years may cause minor differences.
- For zero salvage value under WDV, the formula produces an infinite rate; in practice, use a nominal salvage value (e.g., ₹1) or the statutory Income Tax rate directly.
- Statutory depreciation rates under the Income Tax Act are fixed percentages that do not depend on salvage value — use the Income Tax Act rates for actual ITR filings, and this calculator for accounting/management purposes.

Frequently Asked Questions

What is depreciation and why does it matter for business?

Depreciation is the systematic allocation of an asset's cost over its useful life, recognising that physical assets — machinery, vehicles, computers, furniture — lose value through use, wear and tear, and obsolescence. It matters for two key reasons: for accounting purposes, it matches the cost of an asset against the revenues it helps generate (the matching principle); for tax purposes, depreciation is a deductible expense that reduces taxable income and therefore the tax payable in each financial year.

What is the Straight Line Method (SLM) of depreciation?

In the Straight Line Method (SLM), the same amount is charged as depreciation every year throughout the asset's useful life. Annual depreciation = (Asset Cost − Salvage Value) ÷ Useful Life in years. For a ₹5 lakh asset with ₹50,000 salvage value and 5-year life, SLM depreciation is ₹90,000 per year. SLM is preferred when asset usage is expected to be consistent year over year — such as buildings, furniture, and long-life plant. The Companies Act 2013 (Schedule II) specifies useful lives for various asset classes under SLM.

What is the Written Down Value (WDV) method of depreciation?

In the Written Down Value (WDV) method, depreciation is charged as a fixed percentage on the book value (outstanding balance) at the start of each year — meaning depreciation is higher in early years and gradually declines. This more accurately represents how many assets actually lose value: a vehicle loses more value in its first year than its fifth. The WDV method is mandated by the Income Tax Act, 1961 for computing depreciation for tax purposes in India, and the prescribed rates vary by asset class.

What is the difference between SLM and WDV depreciation methods?

SLM produces equal depreciation every year, resulting in a straight downward slope of book value to the salvage value. WDV produces higher depreciation in early years and lower in later years, creating a curved decline. Both methods result in the same total depreciation (Asset Cost minus Salvage Value) over the asset's life — only the timing differs. SLM is simpler to apply and is common in financial reporting under the Companies Act; WDV is mandated for income tax computation under the Income Tax Act in India.

Which depreciation method is used for income tax in India?

The Income Tax Act, 1961 mandates the Written Down Value (WDV) method for all tangible and intangible assets under Section 32. The prescribed WDV rates are: buildings (residential) 5%, buildings (commercial) 10%, furniture and fittings 10%, plant and machinery (general) 15%, computers and peripherals 40%, motor vehicles (other than public transport) 15%. These statutory rates override what you would compute using the Depreciation Calculator for tax filing purposes — use the calculated rate here for understanding but refer to the Act for actual tax compliance.

What is salvage value in depreciation calculations?

Salvage value (also called residual value or scrap value) is the estimated amount an asset can be sold for at the end of its useful life. It is subtracted from the asset cost before calculating depreciation, representing the portion of cost that will be recovered at disposal. A ₹5 lakh machine with ₹50,000 salvage value has a depreciable base of ₹4.5 lakh. Setting salvage value to zero means the asset will be depreciated to nil — appropriate for assets with no resale value, such as custom software or tooling.

What is book value of an asset and how is it calculated?

Book value is the recorded value of an asset on the balance sheet after deducting accumulated depreciation from its original cost. After year 1, book value = Asset Cost − Year 1 Depreciation. After year n, it equals Asset Cost minus all depreciation charged through year n. At the end of its useful life, the book value should equal the salvage value — if the WDV rate is calculated correctly, it mathematically converges to the salvage value. Book value is used in loan applications (as collateral value), insurance claims, and asset sale negotiations.

How to calculate depreciation manually using SLM?

For Straight Line Method: Annual Depreciation = (Asset Cost − Salvage Value) ÷ Useful Life in years. Depreciation Rate = 100 ÷ Useful Life. For a ₹3 lakh computer with zero salvage value and 3-year life: Annual Depreciation = ₹3,00,000 ÷ 3 = ₹1,00,000 per year; Rate = 33.33% p.a. The book value after year 1 is ₹2,00,000, after year 2 is ₹1,00,000, and after year 3 is ₹0. The Depreciation Calculator automates this and also generates the full year-by-year schedule.

How to use the Depreciation Calculator?

Enter the Asset Cost — the original purchase price of the asset including installation and transportation. Enter the Salvage Value — the estimated resale or scrap value at the end of useful life (set to 0 if the asset will have no residual value). Set the Useful Life in years. Select the Depreciation Method — choose Straight Line (SLM) for equal annual charges, or Written Down Value (WDV) for front-loaded depreciation. The calculator shows Year 1 Depreciation, the depreciation rate, total depreciation over the useful life, and the book value at end.

What are the depreciation rates under the Income Tax Act for common assets in India?

Under Section 32 of the Income Tax Act and Appendix I of the Income Tax Rules, the WDV depreciation rates for common assets are: buildings used for business (other than residential) 10%, furniture and fittings 10%, plant and machinery 15%, computers and computer software 40%, motor vehicles 15%, ships 20%, and intangible assets (goodwill, patents, licences) 25%. For new plant and machinery installed after 31 March 2005 and before certain dates, enhanced depreciation of 20% additional was available. Always confirm current rates with a tax professional as these are subject to amendment.

Can I switch between SLM and WDV depreciation methods for the same asset?

Under the Income Tax Act in India, the WDV method is mandatory and you cannot switch from it for tax purposes. Under the Companies Act 2013 (for financial reporting), Schedule II prescribes useful lives rather than rates, but a company may use either method — however, once chosen, the method should be applied consistently for the same class of assets. Changing depreciation methods mid-life for financial reporting requires prior-period restatement and disclosure in notes to accounts, and is generally rare and requires specific justification.

What is the depreciation rate formula under the WDV method?

The WDV depreciation rate is derived from the asset cost, salvage value, and useful life using: Rate = (1 − (Salvage Value ÷ Asset Cost)^(1÷Useful Life)) × 100. For a ₹5 lakh asset with ₹50,000 salvage value and 5-year life: Rate = (1 − (50,000÷5,00,000)^(1÷5)) × 100 = (1 − (0.1)^0.2) × 100 = (1 − 0.631) × 100 = 36.9% p.a. This rate, applied to the declining book value each year, mathematically ensures the book value reaches exactly the salvage value at the end of useful life.