What is the Depreciation?
Depreciation spreads an asset's cost across its useful life. Straight-line charges an equal amount every year; written down value charges a fixed percentage of the reducing balance, so depreciation is heaviest early on.
Indian companies commonly use straight-line for accounting under the Companies Act, while the Income Tax Act mandates WDV for most asset blocks.
Formula & worked example
WDV = Opening book value × rate
Worked example: a ₹10,00,000 asset with ₹50,000 salvage over 8 years. Straight-line charges ₹1,18,750 every year. Under WDV at 25%, year one charges ₹2,50,000 and year two ₹1,87,500 — front-loading the expense, which suits assets that genuinely lose value fastest when new, like vehicles and computers.
How to use this depreciation calculator
- Enter the asset cost including installation and freight.
- Set the salvage value you expect at the end of its life.
- Choose the method — straight line for accounts, WDV for income tax.
- For WDV, enter the applicable rate from the Income Tax rules.
Smart tips
- WDV front-loads the deduction, which improves early-year cash flow through lower taxable profit.
- Common Income Tax WDV rates: 15% for plant and machinery, 40% for computers, 10% for furniture.
- Additional depreciation of 20% is available on new plant and machinery for manufacturers.
- For personal decisions like buying a car, straight-line understates the early loss — real depreciation is closer to WDV.
Frequently asked questions
What is the difference between SLM and WDV?
Straight-line charges the same amount each year. WDV charges a percentage of the reducing balance, so more depreciation falls in the early years.
Which depreciation method should I use?
Indian companies typically use straight-line for statutory accounts and WDV for income tax, since the Income Tax Act prescribes WDV for most blocks.
What is salvage value?
The estimated resale or scrap value at the end of the asset's useful life. It is not depreciated.
How fast does a car depreciate?
Roughly 15–20% in year one and about 50% by year five — closer to a WDV pattern than straight-line.
Want the theory behind the numbers? Read our business guides on the Money Blog.