Before knowing the Depreciation Rate as Per Companies Act For AY 2020-21, we must know the meaning of depreciation. In simple words, depreciation is a reduction in the value of assets over time, due in particulars to wear and tear.
In technical words, we can say that Depreciation is the systematic allocation of the depreciable amount of an asset over its useful life, where 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.
Provision of Depreciation
Under the Income Tax Act and in companies Act, depreciation is provided on the Fixed Assets.
Under Income Tax, Depreciation is provided on the basis of percentage (%) of the written down value (WDV) of fixed assets. In new companies act, depreciation is allowed on the basis of the useful life of assets and residual value. No depreciation rate is given in the schedule.
In this article, we have compiled the useful life of various tangible assets as given in companies act 2013 and rate of depreciation applicable if assets are purchased on or after 01st April 2014 and residual value as 5%.
Depreciation Rate as Per Companies Act For AY 2020-21: Chart
Here is the complete chart of Depreciation Rate as Per Companies Act For AY 2020-21 in PDF format, which shows the rate of depreciation on fixed assets as per Schedule II of The Companies Act 2013
Points to Remember
For calculating Depreciation as per Companies Act 2013, the following points need to remember:-
⚫ Depreciation is calculated by considering the useful life of assets, cost, and residual value.
⚫ Any method WDV or SLM can be used.
⚫ Depreciation method used needs to be disclosed in accounts.
⚫ The useful life of assets needs to be disclosed when it is taken differently from Schedule II.
⚫ If there is any change in assets, which means to say assets are sold, discarded, demolished, or destroyed then the calculation is made according to the date of such events.
Feedback/Suggestion- Hope you all find it useful, please give your valuable feedback & let us know if there is an error. Thanks in Advance
Compiled by- CA Chirag Agarwal (Practicing Chartered Accountants)
This post was last updated on February 6, 2021 5:09 PM