Rates of Depreciation Under Companies Act

USEFUL LIVES TO COMPUTE DEPRECIATION

PART 'A'

1. Depreciation is the systematic allocation of the depreciable amount of an asset over its useful life. The depreciable amount of an asset is the cost of an asset or other amount substituted for cost, less its residual value. The useful life of an asset is the period over which an asset is expected to be available for use by an entity, or the number of production or similar units expected to be obtained from the asset by the entity

2. For the purpose of this Schedule, the term depreciation includes amortisation.

3. Without prejudice to the foregoing provisions of paragraph 1,-

1 & 1A[(i) The useful life of an asset shall not ordinarily be different from the useful life specified in Part C and the residual value of an asset shall not be more than five per cent. of the original cost of the asset:

Provided that where a company adopts a useful life different from what is specified in Part C or uses a residual value different from the limit specified above, the financial statements shall disclose such difference and provide justification in this behalf duly supported by technical advice";]

"(ii) For intangible assets, the provisions of the accounting standards applicable for the time being in force shall apply, except in case of intangible assets (Toll Roads) created under 'Build, Operate and Transfer', 'Build, Own, Operate and Transfer' or any other form of public private partnership route in case of road projects.

Amortisation in such cases may be done as follows:-

(a) Mode of amortisation

Amortisation Rate =	Amortisation Amount --------------------------------------	x 100
	Cost of Intangible Assets (A)

Amortisation Amount =

Cost of Intangible Assets (A) x	Actual Revenue for the year (B) ---------------------------------------------------------
	Projected Revenue from Intangible Asset (till the end of the concession period) (C)<

(b) Meaning of particulars are as follows :-

Cost of Intangible Assets (A) =	Cost incurred by the company in accordance with the accounting standards.
Actual Revenue for the year (B) =	Actual revenue (Toll Charges) received during the accounting year.
Projected Revenue from Intangible Asset (C) =	Total projected revenue from the Intangible Assets as provided to the project lender at the time of financial closure / agreement.

The amortisation amount or rate should ensure that the whole of the cost of the intangible asset is amortised over the concession period.

Revenue shall be reviewed at the end of each financial year and projected revenue shall be adjusted to reflect such changes, if any, in the estimates as will lead to the actual collection at the end of the concession period.

c) Example:-

Cost of creation of Intangible Assets	Rs. 500/- Crores
Total period of Agreement	20 Years
Time used for creation of Intangible Assets	2 Years
Intangible Assets to be amortised in	18 Years

Assuming that the Total revenue to be generated out of Intangible Assets over the period would be Rs. 600 Crores, in the following manner:-

Year No.	Revenue ( In Rs. Crores)	Remarks
Year 1	5	Actual
Year 2	7.5	Estimate *
Year 3	10	Estimate *
Year 4	12.5	Estimate *
Year 5	17.5	Estimate *
Year 6	20	Estimate *
Year 7	23	Estimate *
Year 8	27	Estimate *
Year 9	31	Estimate *
Year 10	34	Estimate *
Year 11	38	Estimate *
Year 12	41	Estimate *
Year 13	46	Estimate *
Year 14	50	Estimate *
Year 15	53	Estimate *
Year 16	57	Estimate *
Year 17	60	Estimate *
Year 18	67.5	Estimate *
Total	600

'*' will be actual at the end of financial year.

Based on this the charge for first year would be Rs. 4.16 Crore (approximately) (i.e. Rs. 5/Rs. 600 x Rs. 500 Crores) which would be charged to profit and loss and 0.83% (i.e. Rs. 4.16 Crore/ Rs. 500 Crore x 100) is the amortisation rate for the first year.

Where a company arrives at the amortisation amount in respect of the said Intangible Assets in accordance with any method as per the applicable Accounting Standards, it shall disclose the same.]

PART 'B'

4. The useful life or residual value of any specific asset, as notified for accounting purposes by a Regulatory Authority constituted under an Act of Parliament or by the Central Government shall be applied in calculating the depreciation to be provided for such asset irrespective of the requirements of this Schedule.

Depreciation Rate Chart

as per Part "C" of Schedule II of The Companies Act 2013

Nature of assets	Useful Life
I. Buildings [NESD]
(a) Buildings (other than factory buildings) RCC Frame Structure	60 Years
(b) Buildings (other than factory buildings) other than RCC Frame Structure	30 Years
(c) Factory buildings	30 Year
(d) Fences, wells, tube wells	5 Years
(e) Others (including temporary structure, etc.)	3 Years
II. Bridges, culverts, bunders, etc. [NESD]	30 Years
III. Roads [NESD]
(a) Carpeted roads
(i) Carpeted Roads-RCC	10 Years
(ii) Carpeted Roads-other than RCC	5 Years
(b) Non-carpeted roads	3 Years
IV. Plant and Machinery
(i) General rate applicable to plant and machinery not covered under special plant and machinery
(a) Plant and Machinery other than continuous process plant not covered under specific industries	15 Years
2[(b) continuous process plant for which no special rate has been prescribed under (ii) below [NESD]]	25 Years
(ii) Special Plant and Machinery
(a) Plant and Machinery related to production and exhibition of Motion Picture Films
1. Cinematograph films-Machinery used in the production and exhibition of cinematograph films, recording and reproducing equipments, developing machines, printing machines, editing machines, synchronizers and studio lights except bulbs	13 Years
2. Projecting equipment for exhibition of films	13 Year
(b) Plant and Machinery used in glass manufacturing
1. Plant and Machinery except direct fire glass melting furnaces - Recuperative and regenerative glass melting furnaces	13 Years
2. Plant and Machinery except direct fire glass melting furnaces - Moulds [NESD]	8 Years
3. Float Glass Melting Furnaces [NESD]	10 Years
(c) Plant and Machinery used in mines and quarries-Portable underground machinery and earth moving machinery used in open cast mining [NESD]	8 Years
(d) Plant and Machinery used in Telecommunications [NESD]
1. Towers	18 Years
2. Telecom transceivers, switching centres, transmission and other network equipment	13 Years
3. Telecom-Ducts, Cables and optical fibre	18 Years
4. Satellites	18 Years
(e) Plant and Machinery used in exploration, production and refining oil and gas [NESD]
1. Refineries	25 Years
2. Oil and gas assets (including wells), processing plant and facilities	25 Years
3. Petrochemical Plant	25 Years
4. Storage tanks and related equipment	25 Years
5. Pipelines	30 Years
6. Drilling Rig	30 Years
7. Field operations (above ground) Portable boilers, drilling tools, well-head tanks, etc.	8 Years
8. Loggers	8 Years
(f) Plant and Machinery used in generation, transmission and distribution of power [NESD]
1. Thermal/ Gas/ Combined Cycle Power Generation Plant	40 Years
2. Hydro Power Generation Plant	40 Years
3. Nuclear Power Generation Plant	40 Years
4. Transmission lines, cables and other network assets	40 Years
5. Wind Power Generation Plant	22 Years
6. Electric Distribution Plant	35 Years
7. Gas Storage and Distribution Plant	30 Years
8. Water Distribution Plant including pipelines	30 Years
(g) Plant and Machinery used in manufacture of steel
1. Sinter Plant	20 Years
2. Blast Furnace	20 Years
3. Coke ovens	20 Years
4. Rolling mill in steel plant	20 Years
5. Basic oxygen Furnace Converter	25 Years
(h) Plant and Machinery used in manufacture of non-ferrous metals
1. Metal pot line [NESD]	40 Years
2. Bauxite crushing and grinding section [NESD]	40 Years
3. Digester Section [NESD]	40 Years
4. Turbine [NESD]	40 Years
5. Equipments for Calcination [NESD]	40 Years
6. Copper Smelter [NESD]	40 Years
7. Roll Grinder	40 Years
8. Soaking Pit	30 Years
9. Annealing Furnace	30 Years
10. Rolling Mills	30 Years
11. Equipments for Scalping, Slitting , etc. [NESD]	30 Years
12. Surface Miner, Ripper Dozer, etc., used in mines	25 Years
13. Copper refining plant [NESD]	25 Years
(i) Plant and Machinery used in medical and surgical operations [NESD]
1. Electrical Machinery, X-ray and electrotherapeutic apparatus and accessories thereto, medical, diagnostic equipments, namely, Cat-scan, Ultrasound Machines, ECG Monitors, etc.	13 Years
2. Other Equipments	15 Years
(j) Plant and Machinery used in manufacture of pharmaceuticals and chemicals [NESD]
1. Reactors	20 Years
2. Distillation Columns	20 Years
3. Drying equipments/Centrifuges and Decanters	20 Years
4. Vessel/storage tanks	20 Years
(k) Plant and Machinery used in civil construction
1. Concreting, Crushing, Piling Equipments and Road Making Equipments	12 Years
2. Heavy Lift Equipments-
Cranes with capacity of more than 100 tons	20 Years
Cranes with capacity of less than 100 tons	15 Years
3. Transmission line, Tunneling Equipments [NESD]	10 Years
4. Earth-moving equipments	9 Years
5. Others including Material Handling /Pipeline/Welding Equipments [NESD]	12 Years
(l) Plant and Machinery used in salt works [NESD]	15 Years
V. Furniture and fittings [NESD]
(i) General furniture and fittings	10 Years
(ii) Furniture and fittings used in hotels, restaurants and boarding houses, schools, colleges and other educational institutions, libraries; welfare centres; meeting halls, cinema houses; theatres and circuses; and furniture and fittings let out on hire for use on the occasion of marriages and similar functions.	8 Years
VI. Motor Vehicles [NESD]
1. Motor cycles, scooters and other mopeds	10 Years
2. Motor buses, motor lorries, motor cars and motor taxies used in a business of running them on hire	6 Years
3. Motor buses, motor lorries and motor cars other than those used in a business of running them on hire	8 Years
4. Motor tractors, harvesting combines and heavy vehicles	8 Years
5. Electrically operated vehicles including battery powered or fuel cell powered vehicles	8 Years
VII. Ships [NESD]
1. Ocean-going ships
(i) Bulk Carriers and liner vessels	25 Years
(ii) Crude tankers, product carriers and easy chemical carriers with or without conventional tank coatings.	20 Years
(iii) Chemicals and Acid Carriers:
(a) With Stainless steel tanks	25 Years
(b) With other tanks	20 Years
(iv) Liquified gas carriers	30 Years
(v) Conventional large passenger vessels which are used for cruise purpose also	30 Years
(vi) Coastal service ships of all categories	30 Years
(vii) Offshore supply and support vessels	20 Years
(viii) Catamarans and other high speed passenger for ships or boats	20 Years
(ix) Drill ships	25 Years
(x) Hovercrafts	15 Years
(xi) Fishing vessels with wooden hull	10 Years
(xii) Dredgers, tugs, barges, survey launches and other similar ships used mainly for dredging purposes	14 Years
2. Vessels ordinarily operating on inland waters-
(i) Speed boats	13 Years
(ii) Other vessels	28 Years
VIII. Aircrafts or Helicopters [NESD]	20 Years
IX. Railways sidings, locomotives, rolling stocks, tramways and railways used by concerns, excluding railway concerns [NESD]	15 Years
X. Ropeway structures [NESD]	15 Years
XI. Office equipment [NESD]	5 Years
XII. Computers and data processing units [NESD]
(i) Servers and networks	6 Years
(ii) End user devices, such as, desktops, laptops, etc.	3 Years
XIII. Laboratory equipment [NESD]
(i) General laboratory equipment	10 Yeras
(ii) Laboratory equipments used in educational institutions	5 Years
XIV. Electrical Installations and Equipment [NESD]	10 Years
XV. Hydraulic works, pipelines and sluices [NESD]	15 Years

Notes :

1. "Factory buildings" does not include offices, godowns, staff quarters.

2. Where, during any financial year, any addition has been made to any asset, or where any asset has been sold, discarded, demolished or destroyed, the depreciation on such assets shall be calculated on a pro rata basis from the date of such addition or, as the case may be, up to the date on which such asset has been sold, discarded,demolished or destroyed.

3. The following information shall also be disclosed in the accounts, namely:-

(i) depreciation methods used; and

(ii) the useful lives of the assets for computing depreciation, if they are different from the life specified in the Schedule.

4 [4(a) Useful life specified in part C of the schedule is for whole of the asset and where cost of a part of the asset is significant to total cost 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 shall be determined separately.

(b) The requirement under sub-paragraph (a) shall be voluntary in respect of the financial year commencing on or after the 1st April, 2014 and mandatory for financial statements in respect of financial years commencing on or after the 1st April, 2015]

5 [5. Depreciable amount is the cost of an asset, or other amount substituted for cost, less its residual value. Ordinarily, the residual value of an asset is often in significant but it should generally be not more than 5% of the original cost of the asset.]

6. The useful lives of assets working on shift basis have been specified in the Schedule based on their single shift working. Except for assets in respect of which no extra shift depreciation is permitted (indicated by NESD in Part C above), if an asset is used for any time during the year for double shift, the depreciation will increase by 50% for that period and in case of the triple shift the depreciation shall be calculated on the basis of 100% for that period.

7. From the date this Schedule comes into effect, the carrying amount of the asset as on that date-

(a) shall be depreciated over the remaining useful life of the asset as per this Schedule;

(b) after retaining the residual value, 5[may be recognized] in the opening balance of retained earnings where the remaining useful life of an asset is nil.

8. ''Continuous process plant'' means a plant which is required and designed to operate for twenty-four hours a day.

Note:

1. Subsititued by Notification Dated 31st March, 2014

2. Subsititued by Notification Dated 31st March, 2014.

3. Omitted by notification Dated 31st March, 2014.

1 A. Subsititued by Notification Dated 29th August, 2014 (Applicable for paragraph 3 of sub-paragraph (i) & its Proviso)

4. Subsititued by Notification Dated 29th August, 2014.

5. Subsititued by Notification Dated 29th August, 2014.

RATES OF DEPRECIATION UNDER THE COMPANIES ACT 1956

RATES OF DEPRECIATION UNDER THE COMPANIES ACT

SCHEDULE XIV (Sec. 205 and 350)

Nature of Assets

W.D.V
%

S.L.M
%

Buildings (other than factory buildings) [NESD]

1.63

Factory Buildings

3.34

Purely Temporary Erections (such as wooden structures)

100

II. Plant and Machinery

General rate applicable to,

a) plant and machinery (not being a ship) other than continuous process plant for which no special rate has been prescribed under (ii) below

Single Shift
Double Shift
Triple Shift

13.91
20.87
27.82

4.75
7.42
10.34

b) continuous process plant, other than those for which no special rate has been prescribed under (ii) below (NESD)

15.33

5.28

ii)

Special rates

Cinematograph films - Machinery used in the production and exhibition of cinematograph films [NESD] -

7.07

Recording equipment, reproducing equipment, developing machines, printing machines, editing machines, synchronisers and studio lights except bulbs

Projecting equipment of film exhibiting concerns

Cycles [NESD]

7.07

Electrical machinery, X-ray and electrotherapeutic apparatus and accessories thereto, medical, diagnostic equipments, namely, Catscan, Ultrasound Machines, ECG Monitors etc. [NESD]

7.07

Juice boiling pans (karhais) [NESD]

7.07

Motor-cars, motor cycles, scooters and other mopeds [NESD]

25.89

9.5

Electrically operated vehicles including battery powered or fuel cell powered vehicles [NESD]

7.07

Sugarcane crushers (indigenous kolhus and belans) [NESD]

7.07

Glass manufacturing concerns except direct fire glass melting furnaces - Recuperative and regenerative glass melting furnaces

Single Shift
Double Shift
Triple Shift

20
30
40

7.07
11.31
16.21

Machinery used in the manufacture of electronic goods or components

Single Shift
Double Shift
Triple Shift

15.62
23.42
31.23

5.38
8.46
11.87

Aeroplanes, aeroengines, simulators, visual system and quick engine change equipment [NESD]

16.2

5.6

Concrete pipes manufacture Moulds [NESD]

11.31

Drum container manufacture Dies [NESD]

Earth-moving machinery employed in heavy construction works, such as dams, tunnels, canals, etc. [NESD]

Glass manufacturing concerns except direct fire glass melting furnaces - Moulds [NESD]

Moulds in iron foundries [NESD]

Mineral oil concerns - Field operations (above ground) - Portable boilers, drilling tools, well-head tanks, rigs, etc. [NESD]

Mines and quarries - Portable underground machinery and earth-moving machinery used in open cast mining [NESD]

Motor buses and motor lorries other than those used in a business of running them on hire [NESD]

Motor tractors, harvesting combines [NESD]

10.

Patterns, dies and templates [[NESD]

11.

Ropeway structures - Ropeways, ropes and trestle sheaves and connected parts [NESD]

12.

Shoes and other leather goods factories - Wooden lastsused in the manufacture of shoes.

Single Shift
Double Shift
Triple Shift

30
45
60

11.31
18.96
29.05

Motor buses, motor lorries and motor taxies used in a business or running them on hire [NESD]

16.21

Rubber and plastic goods factories - Moulds [NESD]

Data processing machines including computers [NESD]

Gas cylinders including valves and regulators [NESD]

Artificial silk manufacturing machinery wooden parts

100

Cinematography films - Bulbs of studio lights

Flour mills - Rollers

Glass manufacturing concerns - Direct fire glass melting furnaces

4A.

Float Glass Melting Furnaces (NECD)

Iron and Steel industries - Rolling mill rolls

100

Match factories - Wooden match frames

Mineral oil concerns -
a) Plant used in field operations (below ground) - Distribution - returnable packages
b) Plant used in field operations (below ground) but not including assets used in field operations (distribution) - Kerbside pumps including underground tanks and fittings

Mines and quarries -
a) Tubs, windings ropes, haulage ropes and sand stowing pipes
b) Safety lamps

Salt works - Salt pans, reservoirs and condensers, etc., made of earthy, sandy or clay material or any other similar material

10.

Sugar works - Rollers

III

Furniture and Fittings -

General rates [NESD]

18.1

6.33

Rate for furniture and fittings used in hotels, restaurants and boarding houses; schools, colleges and other educational institutions, libraries; welfare centres; meeting halls, cinema houses; theatres and circus; and for furniture and fittings let out on hire for use on the occasion of marriages and similar functions [NESD]

25.88

9.5

Ships -

Ocean-going ships -

i) Fishing vessels with wooden hull [NESD]

27.05

ii) Dredgers, tugs, barges, survey launches and other similar ships used mainly for dredging purposes [NESD]

19.8

iii) Other ships [NESD]

14.6

Vessels ordinarily operating on inland waters -

i) Speed boats [NESD]

7.07

ii) Other vessels [NESD]

3.34

W.D.V. : Written Down Value
S.L.M. : Straight Line Method

Notes : Top

1. " buildings" include roads, bridges, culverts, wells and tube-wells.

2. " factory building" does not include offices, godowns, officers' and employees' quarters, roads, bridges, culverts, wells and tube-wells.

3. "speed boat" means a motor boat driven by a high speed internal combustion engine capable of propelling the boat at a speed exceeding 24 kilometres per hour in still water and so designed that when running at a speed it will plane; i.e. its bow will rise from the water.

4. where, during any financial year, any addition has been made to any asset, or where any asset has been sold, discarded, demolished or destroyed, the depreciation on such assets shall be calculated on a pro rata basis from the date of such addition or, as the case may be, up to the date on which such asset has been sold, discarded, demolished or destroyed.

5. The following information should also be disclosed in the accounts :

a. depreciation methods used; and

b. depreciation rates or the useful lives of the assets, if they are different from the principal rates specified in the Schedule.

6. The calculations of the extra depreciation for double shift working and for triple shift working shall be made separately in the proportion which the number of days for which the concern worked double shift or triple shift, as the case may be, bears to the normal number of working days during the year. For this purpose, the normal number of working days during the year shall be deemed to be -

a. in the case of a seasonal factory or concern, the number of days on which the factory or concern actually worked during the year or 180 days, whichever is greater;

b. in any other case, the number of days on which the factory or concern actually worked during the year or 240 days, whichever is greater. The extra shift depreciation shall not be charged in respect of any item of machinery or plant which has been specifically, excepted by inscription of the letters "NESD" (meaning "No Extra Shift Depreciation") against it in sub-items above and also in respect of the following items of machinery and plant to which the general rate of depreciation of 13.91% applies -

1) Accounting machines.

2) Air-conditioning machinery including room air-conditioners.

3) Building contractor's machinery.

4) Calculating machines.

5) Electrical machinery - switchgear and instruments, transformers and other stationery plant and wiring and fitting of electric light and fan installations.

6) Hydraulic works, pipelines and sluices.

7) Locomotives, rolling stocks, tramways and railways used by concerns, excluding railway concerns.

8) Mineral oil concerns field operations : i) Prime movers ii) Storage tanks (above ground) iii) Pipelines (above ground) iv) Jetties and dry docks

9) Mineral oil concerns - field operations (distribution) - kerbside pumps, including underground tanks and fittings.

10) Mineral oil concerns - refineries: i) Prime movers ii) LPG plant

11) Mines and quarries : i) Surface and underground machinery (other than electrical machinery and portable underground machinery). ii) Head-gears iii) Rails iv) Shafts and inclines v) Tramways on the surface

12) Neo-post franking machines

13) Office machinery

14) Overhead cables and wires

15) Railway sidings

16) Refrigeration plant containers, etc. (other than racks)

17) Ropeways structures : Trestle and station steel work ii) Driving and tension gearing

18) Salt works - Reservoirs, condensers, salt pans, delivery channels and piers if constructed masonry, concrete, cement, asphalt or similar materials; barges and floating plant; piers, quays and jetties; and pipelines for conveying brine if constructed of masonry, concrete, cement, asphalt or similar materials.

19) Surgical instruments

20) Tramways, electric and tramways run by internal combustion engines - permanent way cars - car trucks, car bodies, electrical equipment and motors; tram cars including engines and gears.

21) Typewriters

22) Weighing machines

23) Wireless apparatus and gear, wireless appliances and accessories.

7. "Continuous Process Plant" means a plant which is required and designed to operate 24 hours a day. Top

8. Notwithstanding anything mentioned in this Schedule, depreciation on assets, whose actual cost does not exceed Rs. 5,000 shall be provided depreciation @ 100%. Where such items constitute more than 10% of total actual cost of plant and machinery, normal Schedule XIV rates will apply.