9/15/23, 2:02 PM Schedule II — Rate of Depreciation — The Companies Act, 2013
SCHEDULE II — RATE OF DEPRECIATION
— THE COMPANIES ACT, 2013
As per Schedule II along with Section 123 of the Companies Act, 2013 useful lives to Compute
Depreciation.
As per 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,—
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 relevant Indian Accounting Standards (Ind AS) shall apply. Where a
company is not required to comply with the Indian Accounting Standards (Ind AS), it shall comply
with relevant Accounting Standards under Companies (Accounting Standards) Rules, 2006."],
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:-
1. Mode of amortisation
Amortisation Amount x 100
Amortisation Rate = --------------------------------------
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Cost of Intangible Assets (A)
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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 incurred by the company in accordance with the
Cost of Intangible Assets (A) = 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
1 5 Actual
2 7.5 Estimate *
3 10 Estimate *
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4 12.5 Estimate *
5 17.5 Estimate *
6 20 Estimate *
7 23 Estimate *
8 27 Estimate *
9 31 Estimate *
10 34 Estimate *
11 38 Estimate *
12 41 Estimate *
13 46 Estimate *
14 50 Estimate *
15 53 Estimate *
16 57 Estimate *
17 60 Estimate *
18 67.5 Estimate *
Total 600
As per Part B
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.
As per Part C
As per Part C, subject to Parts A and B above, the following are the useful lives of various tangible assets:
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9/15/23, 2:02 PM Schedule II — Rate of Depreciation — The Companies Act, 2013
Nature of assets Useful Life
in years
I. Buildings [NESD]
(a) Buildings (other than factory buildings) RCC Frame Structure 60
(b) Buildings (other than factory buildings) other than RCC Frame Structure 30
(c) Factory buildings 30
(d) Fences, wells, tube wells 5
(e) Others (including temporary structure, etc.) 3
II. Bridges, culverts, bunders, etc. [NESD] 30
III. Roads [NESD]
(a) Carpeted roads
(i) Carpeted Roads — RCC 10
(ii) Carpeted Roads — other than RCC 5
(b) Non-carpeted roads 3
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 15
under specific industries
(b) Continuous process plant for which no special rate has been prescribed 25
under (ii) below [NESD]
(ii) Special Plant and Machinery
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9/15/23, 2:02 PM Schedule II — Rate of Depreciation — The Companies Act, 2013
(a) Plant and Machinery related to production and exhibition of
Motion Picture Films
1. Cinematograph films — Machinery used in the production and 13
exhibition of cinematograph films, recording and reproducing equipments,
developing machines, printing machines, editing machines, synchronisers
and studio lights except bulbs
2. Projecting equipment for exhibition of films 13
(b) Plant and Machinery used in glass manufacturing
1. Plant and Machinery except direct fire glass melting furnaces — 13
Recuperative and regenerative glass melting furnaces
2. Plant and Machinery except direct fire glass melting furnaces — Moulds 8
[NESD]
3. Float Glass Melting Furnaces [NESD] 10
(c) Plant and Machinery used in mines and quarries — Portable 8
underground machinery and earth moving machinery used in open
cast mining [NESD]
(d) Plant and Machinery used in Telecommunications [NESD]
1. Towers 18
2. Telecom transceivers, switching centres, transmission and other 13
network equipment
3. Telecom — Ducts, Cables and optical fibre 18
4. Satellites 18
(e) Plant and Machinery used in exploration, production and refining
oil and gas [NESD]
1. Refineries 25
2. Oil and gas assets (including wells), processing plant and facilities 25
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3. Petrochemical Plant 25
4. Storage tanks and related equipment 25
5. Pipelines 30
6. Drilling Rig 30
7. Field operations (above ground) Portable boilers, drilling tools, well- 8
head tanks, etc.
8. Loggers 8
(f) Plant and Machinery used in generation, transmission and
distribution of power [NESD]
1. Thermal/Gas/Combined Cycle Power Generation Plant 40
2. Hydro Power Generation Plant 40
3. Nuclear Power Generation Plant 40
4. Transmission lines, cables and other network assets 40
5. Wind Power Generation Plant 22
6. Electric Distribution Plant 35
7. Gas Storage and Distribution Plant 30
8. Water Distribution Plant including pipelines 30
(g) Plant and Machinery used in manufacture of steel
1. Sinter Plant 20
2. Blast Furnace 20
3. Coke ovens 20
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4. Rolling mill in steel plant 20
5. Basic oxygen Furnace Converter 25
(h) Plant and Machinery used in manufacture of non-ferrous metals
1. Metal pot line [NESD] 40
2. Bauxite crushing and grinding section [NESD] 40
3. Digester Section [NESD] 40
4. Turbine [NESD] 40
5. Equipments for Calcination [NESD] 40
6. Copper Smelter [NESD] 40
7. Roll Grinder 40
8. Soaking Pit 30
9. Annealing Furnace 30
10. Rolling Mills 30
11. Equipments for Scalping, Slitting, etc. [NESD] 30
12. Surface Miner, Ripper Dozer, etc., used in mines 25
13. Copper refining plant [NESD] 25
(i) Plant and Machinery used in medical and surgical operations
[NESD]
1. Electrical Machinery, X-ray and electrotherapeutic apparatus and 13
accessories thereto, medical, diagnostic equipments, namely, Cat-scan,
Ultrasound Machines, ECG Monitors, etc.
2. Other Equipments Back to Top
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(j) Plant and Machinery used in manufacture of pharmaceuticals and
chemicals [NESD]
1. Reactors 20
2. Distillation Columns 20
3. Drying equipments/Centrifuges and Decanters 20
4. Vessel/storage tanks 20
(k) Plant and Machinery used in civil construction
1. Concreting, Crushing, Piling Equipments and Road Making Equipments 12
2. Heavy Lift Equipments — 20
Cranes with capacity of more than 100 tons Cranes with capacity of less 15
than 100 tons
3. Transmission line, Tunnelling Equipments [NESD] 10
4. Earth-moving equipments 9
5. Others including Material Handling /Pipeline/Welding Equipments 12
[NESD]
(l) Plant and Machinery used in salt works [NESD] 15
V. Furniture and fittings [NESD]
(i) General furniture and fittings 10
(ii) Furniture and fittings used in hotels, restaurants and boarding houses, schools, 8
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
VI. Motor Vehicles [NESD]
1. Motor cycles, scooters and other mopeds 10
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2. Motor buses, motor lorries, motor cars and motor taxies used in a business of 6
running them on hire
3. Motor buses, motor lorries and motor cars other than those used in a business 8
of running them on hire
4. Motor tractors, harvesting combines and heavy vehicles 8
5. Electrically operated vehicles including battery powered or fuel cell powered 8
vehicles
VII. Ships [NESD]
1. Ocean-going ships
(i) Bulk Carriers and liner vessels 25
(ii) Crude tankers, product carriers and easy chemical carriers with or without 20
conventional tank coatings
(iii) Chemicals and Acid Carriers: 25
(a) With Stainless steel tanks
(b) With other tanks 20
(iv) Liquefied gas carriers 30
(v) Conventional large passenger vessels which are used for cruise purpose 30
also
(vi) Coastal service ships of all categories 30
(vii) Offshore supply and support vessels 20
(viii) Catamarans and other high speed passenger for ships or boats 20
(ix) Drill ships 25
(x) Hovercrafts 15
(xi) Fishing vessels with wooden hull Back to Top
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(xii) Dredgers, tugs, barges, survey launches and other similar ships used 14
mainly for dredging purposes
2. Vessels ordinarily operating on inland waters —
(i) Speed boats 13
(ii) Other vessels 28
VIII. Aircrafts or Helicopters [NESD] 20
IX. Railways sidings, locomotives, rolling stocks, tramways and railways used by 15
concerns, excluding railway concerns [NESD]
X. Ropeway structures [NESD] 15
XI. Office equipment [NESD] 5
XII. Computers and data processing units [NESD]
(i) Servers and networks 6
(ii) End user devices, such as, desktops, laptops, etc. 3
XIII. Laboratory equipment [NESD]
(i) General laboratory equipment 10
(ii) Laboratory equipments used in educational institutions 5
XIV. Electrical Installations and Equipment [NESD] 10
XV. Hydraulic works, pipelines and sluices [NESD] 15
Notes
1. "Factory buildings" does not include offices, godowns and 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:— Back to Top
i. Depreciation methods used; and
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ii. The useful lives of the assets for computing depreciation, if they are different from the life
specified in the Schedule.
4.
i. Useful life specified in Part C of the Schedule is for whole of the asset. 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.
ii. 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. 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.
6. From the date this Schedule comes into effect, the carrying amount of the asset as on that date—
1. shall be depreciated over the remaining useful life of the asset as per this Schedule;
2. after retaining the residual value, shall be recognised in the opening balance of retained earnings
where the remaining useful life of an asset is nil.
7. ‘‘Continuous process plant’’ means a plant which is required and designed to operate for twenty-four
hours a day.
Amendments
1. Substituted by Notification Dated 31st March, 2014 - Original Content (Superseded & Substituted - Refer
Notification Dated- 29 August,2014)
2. Substituted by Notification Dated 31st March, 2014
In PART C, in Para 5, in item IV, in sub-item (i), for clause (b)
"(b) continuous process plant for which no special rate has been prescribed under (ii) below [NESD] - 8
years."
the following clause shall be substituted namely:-
"(b) continuous process plant for which no special rate has been prescribed under (ii) below [NESD] - 25
years."
3. Omitted by Notification Dated 31st March, 2014.
Under the heading 'Notes', appearing after Part 'C', Paragraph 5,
Original Omitted Content - "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."
4. Substituted by Notification Dated 29,August, 2014.
In part 'A', in paragraph 3, for sub-paragraph (1),
"The useful life of an asset shall not be longer then the useful life specified in part 'C' and the residual
value of an asset shall not be more than five percent of the original cost
of the asset :
Provided that where a company uses a useful life or residual value of the asset which is different from
the above limits, justification for the difference shall be disclosed in its
financial statement."
the following sub-paragraph shall be substituted namely:-
"The useful life of an asset shall not ondinarily 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".
5. Substituted by Notification Dated 29,August, 2014. Back to Top
After Part C, for paragraph (4),
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"4 Useful life specified in part C of the schedule is for whole of the asset.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."
the following paragraph shall be substituted namely:-
"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".
6. Substituted by Notification Dated 29,August, 2014.
In paragraph 7,in sub-paragraph (b) for the words "shall be recognized", the words "may be reconized"
shall be substituted.
7. Substituted by Notification Dated 17th, November, 2016.
In Schedule II, under Part- A in para-3, in sub - paragraph (ii) for brackets, letters and words
For intangible assets, the provisions of the accounting standards applicable for the time being in force
shall apply
the following shall be substituted,
["(ii) For intangible assests, the relevant Indian Accounting Standards (Ind AS) shall apply. Where a
compmany is not required to comply with the Indian Accounting
Standrads (Ind AS), it shall comply with relevant Accounting Standrads under Companies (Accounting
Standards) Rules, 2006."],
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