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How to Calculate Depreciation as per Schedule II of Companies Act

Updated: Jun 6, 2023

Schedule II of the Companies Act, 2013 deals with depreciation. Depreciation refers to a measure of loss of value of a depreciable asset arising from use, the passage of time or obsolescence either through technological or market changes. Depreciable assets includes cars, machinery, buildings, intangible assets etc.

For Tangible Assets

1. Methods of computing depreciation

Before computing depreciation one should know that residual value should not be more than 5% of cost of asset.

Straight line method -

Where the amount of depreciation over the years would remain same through out the life of the assets

Computation under Straight line method

Formula for calculation is

Depreciation = Cost of the asset- Residual Value

Life of the asset

Eg. Computer Purchase price is Rs 1 lakh, then Residual Value is Rs 5,000(i.e 5%of Rs 1 Lakh)

Answer. Depreciation = (1,00,000-5000)/3 is equals to Rs 31,666.67

Note Useful life was taken from Schedule II of companies act 2013.

Written down value method-

Under this method depreciation amount goes on decreasing as it is calculated on carrying value of the asset

Computation under Written Down Value method

Depreciation = Carrying value of asset×Rate of depreciation

Rate of depreciation =(1-(s/c)^(1/n))*100

S = Scrap value at the end of the useful life of assets

C = Cost of assets

n = Useful life of assets given under schedule II of companies Act

^ = Symbol Used is Exponential

Above Formula Can be Used For Calculating Deprecation As Companies Act 2013 in Excel Sheet.

Just Select Replace s,c,n with Excel Cells while using.

Eg. Computer Purchase price is Rs 1 lakh, then Residual Value is Rs 5,000(i.e 5%of Rs 1 Lakh)

Answer. Depreciation = (1,00,000-5000)*63.16% is equals to Rs 60,002

Some Important points while calculating depreciation as per companies act 2013

  • For assets in which NESD (No Exta Shift Depreciation) is mentioned in Schedule – II, the depreciation remains same irrespective of the no. of work shifts.

  • For other assets, if the asset is used for double shifts during any time of the year then the depreciation shall be increased by 50% for that period. Similarly if asset is used for triple shifts then depreciation shall be increased by 100% for that period.

  • Each Part of an item of an asset with a cost significant in relation to the total cost of the item shall be depreciated separately. Where cost of the part of the asset and useful life of that part is different from the useful life of the remaining asset, useful life of that significant part should be determined separately.

The following assets life has been given in the schedule II of companies Act, 2013

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