by Schedule II prescribes the useful lives of assets, based on which companies calculate depreciation. Unlike the earlier Companies Act, 1956, which specified rates, the 2013 Act recommends useful life, and companies can use any depreciation method (Straight Line or Written Down Value) based on these lives.
Useful Life and Depreciation under Schedule II
The depreciation is computed on the basis of:
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Asset’s useful life, not pre-defined rate.
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Residual value (usually not more than 5% of the original cost).
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Depreciation method (SLM or WDV) chosen by the company.
Below is a table of commonly used asset categories and their useful lives as per Schedule II:
| Asset Type | Useful Life (Years) | Notes |
|---|---|---|
| 1. Buildings | – | – |
| (a) Factory buildings | 30 | Includes industrial premises. |
| (b) RCC Office buildings | 60 | Used for administrative purposes. |
| (c) Temporary structures | 3 | Includes tin sheds and temporary sheds. |
| 2. Plant & Machinery | 15 | General category unless otherwise specified. |
| Special cases (continuous process) | 25 | If continuous process without manual intervention. |
| 3. Furniture & Fixtures | 10 | Includes chairs, tables, desks, partitions, etc. |
| 4. Office Equipment | 5 | Includes computers (except servers), printers, calculators, etc. |
| 5. Vehicles | – | – |
| (a) Motorcars (other than for hire) | 8 | Vehicles owned and used by the company. |
| (b) Motorcars (used in business of hire) | 6 | For companies like transport, cab services, etc. |
| (c) Motorcycles, scooters, etc. | 10 | All two-wheelers or similar vehicles. |
| 6. Computers and Servers | – | – |
| (a) Servers & networks | 6 | Includes routers, hubs, data storage equipment. |
| (b) Desktop computers | 3 | General office use. |
| (c) Laptops | 3 | Portability-specific equipment. |
| 7. Intellectual Property Rights (IPR) | – | Depreciated over useful life. |
| (a) Patents, copyrights | Based on legal life | Typically based on legal protection life (e.g., 10-20 years). |
| (b) Trademarks, brands | Based on useful life | Company’s estimate, supported by evidence. |
| 8. Intangible Assets | As per AS 26 / Ind AS 38 | No specific life; amortised based on actual useful life of the asset. |
Depreciation Formula (Straight Line Method)
Depreciation per Year = [Cost – Residual Value] /Useful Life (years)
💡 Key Notes:
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If a company uses a useful life different from Schedule II, it must disclose the justification in its financial statements.
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Residual value should generally not exceed 5% of the original cost of the asset.
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Companies can follow Straight Line Method (SLM) or Written Down Value Method (WDV).
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Depreciation is charged from the date of addition and up to the date of disposal of the asset.
Example: Depreciation Calculation (SLM)
Asset: Plant & Machinery
Cost: ₹10,00,000
Useful life: 15 years
Residual value: ₹50,000 (5%)
Depreciable amount: ₹10,00,000 – ₹50,000 = ₹9,50,000
Annual Depreciation (SLM): ₹9,50,000 / 15 = ₹63,333.33
Summary
| Asset | Useful Life | Method (Suggested) |
|---|---|---|
| Buildings (Factory) | 30 years | SLM or WDV |
| Plant & Machinery | 15 years | WDV (commonly used) |
| Furniture & Fixtures | 10 years | SLM or WDV |
| Office Equipment | 5 years | SLM |
| Vehicles (own use) | 8 years | WDV |
| Computers | 3 years | SLM |
| Servers/Networking | 6 years | SLM |
| Intangibles (IP, Patents) | Legal/Useful life | Amortised over useful life |
