Depreciation Calculator
Depreciation Calculator
Depreciation of an asset year by year by the straight-line or the written-down-value (declining balance) method, from its cost, salvage value and useful life.
Depreciation in year 1
An asset costing $10,00,000, salvage $50,000, a 10-year life, straight-line
Straight-line and written-down value
WDV: Dt = d × book value at the start of year t; d = 1 − (S ÷ C)1 ÷ n
- C
- the cost of the asset
- S
- the salvage (residual) value
- n
- the useful life in years
- d
- the WDV rate, which brings the book value to exactly S after n years
Worked example
An asset costing $10,00,000, salvage $50,000, a 10-year life, straight-line
Depreciable amount = 10,00,000 − 50,000 = $9,50,000
Each year = 9,50,000 ÷ 10 = $95,000
By WDV instead: d = 1 − (50,000 ÷ 10,00,000)1/10 = 25.89%
WDV year 1 = $2,58,866; year 2 = $1,91,854
Book value of 10,00,000, salvage 50,000, 10-year life
| Year | Straight-line | Written-down value |
|---|---|---|
| 1 | $9,05,000 | $7,41,134 |
| 2 | $8,10,000 | $5,49,280 |
| 3 | $7,15,000 | $4,07,091 |
| 5 | $5,25,000 | $2,23,607 |
| 7 | $3,35,000 | $1,22,823 |
| 10 | $50,000 | $50,000 |
Two ways to spread the cost of an asset
Depreciation spreads what an asset costs, less what it will be worth at the end, over the years it is used. The straight-line method charges the same amount every year: an asset costing $10,00,000 with a salvage value of $50,000 and a ten-year life is depreciated by $95,000 a year. The written-down-value method, also called declining balance, charges a fixed percentage of whatever book value is left, so the charge is largest in the first year and shrinks. The rate that lands exactly on the salvage value after ten years is 25.89%; after three years the book value is $4,07,091 by WDV against $7,15,000 straight-line.
Which to use depends on how the asset is used up. Accounting standards (Ind AS 16, like IAS 16) ask for the method that reflects the pattern in which the asset’s benefits are consumed; machines and vehicles that lose value fastest when new suit WDV. In India, the Companies Act, 2013 (Schedule II) says the useful life shall not ordinarily differ from the lives it lists and the residual value shall not exceed 5% of cost, unless a different estimate is justified and disclosed. The example’s 5% salvage follows that ceiling.
Tax depreciation is a separate calculation. India’s income-tax law applies prescribed WDV rates to blocks of assets with no salvage value, with its own rules for assets used for part of a year, so the figure in your tax return usually differs from the one in your accounts. This page does not apply those rates. It also charges a full year in the first year; if you bought the asset partway through, your accounts may charge only part of a year. For pricing work that uses the yearly charge as a fixed cost, see the break-even calculator. This is arithmetic on the figures you enter, not financial advice.
Frequently asked questions
How do I calculate straight-line depreciation?
(Cost − salvage) ÷ useful life. (10,00,000 − 50,000) ÷ 10 = $95,000 a year.
How is the written-down-value rate worked out?
The rate that takes cost down to salvage over the life is 1 − (salvage ÷ cost)1 ÷ life. For 50,000 on 10,00,000 over 10 years it is 25.89%. You can also enter a rate yourself.
Is book depreciation the same as tax depreciation?
No. Income-tax law uses its own prescribed rates on blocks of assets and ignores salvage value, so tax and book figures usually differ.
What salvage value should I use?
Your realistic estimate of the asset’s value at the end of its life. Under the Companies Act, 2013, Schedule II, residual value should not ordinarily exceed 5% of cost.
Related calculators
References
- Companies Act, 2013, Schedule II (Useful lives to compute depreciation), Part A: para 1, depreciation is the systematic allocation of the depreciable amount of an asset over its useful life; para 3, the useful life shall not ordinarily differ from Part C and the residual value shall not be more than five per cent of the original cost, unless a different estimate is justified and disclosed.
- Ind AS 16, Property, Plant and Equipment, paragraphs 50–62 (converged with IAS 16): the depreciable amount is allocated over the useful life; methods include straight-line, diminishing balance and units of production, chosen to reflect how the asset’s benefits are consumed.
- Income-tax Act, 1961, section 32: tax depreciation on a block of assets at prescribed written-down-value rates, with no salvage value. The Income-tax Act, 2025 replaced the 1961 Act from 1 April 2026 and renumbers the provision. Tax depreciation is separate from the depreciation in a company’s accounts.