Depreciation as per Companies Act

USEFUL LIVES TO COMPUTE DEPRECIATION

PART ‘A’

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.

For the purpose of this Schedule, the term depreciation includes amortisation.
Without prejudice to the foregoing provisions of paragraph 1,—

(i) In case of such class of companies, as may be prescribed and whose financial statements comply with the accounting standards prescribed for such class of companies under section 133 the useful life of an asset shall not normally be different from the useful life and the residual value shall not be different from that as indicated in Part C, provided that if such a company uses a useful life or residual value which is different from the useful life or residual value indicated therein, it shall disclose the justification for the same.

(ii) In respect of other companies the useful life of an asset shall not be longer than the useful life and the residual value shall not be higher than that prescribed in

Part C.

(iii) For intangible assets, the provisions of the Accounting Standards mentioned under sub-para (i) or (ii), as applicable, shall apply.

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.

PART ‘C’

Subject to Parts A and B above, the following are the useful lives of various tangible assets:

Nature of assets Useful Life

Buildings [NESD]

(a) Buildings (other than factory buildings) RCC Frame Structure 60 Years

(b) Buildings (other than factory buildings) other than RCC Frame Structure 30 Years

(d) Fences, wells, tube wells 5 Years

(e) Others (including temporary structure, etc.) 3 Years

Bridges, culverts, bunders, etc. [NESD] 30 Years

III. Roads [NESD]

(a) Carpeted roads

(i) Carpeted Roads-RCC 10 Years

(ii) Carpeted Roads-other than RCC 5 Years

(b) Non-carpeted roads 3 Years

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 under specific industries – 15 Years

(b) continuous process plant for which no special rate has been prescribed under (ii) below [NESD] – 8 Years

(ii) Special Plant and Machinery

(a) Plant and Machinery related to production and exhibition of Motion Picture Films

Cinematograph films—Machinery used in the production and exhibition of cinematograph films, recording and reproducing equipments, developing machines, printing machines, editing machines, synchronizers and studio lights except bulbs – 13 Years

Projecting equipment for exhibition of films -do-

(b) Plant and Machinery used in glass manufacturing

Plant and Machinery except direct fire glass melting furnaces —

Recuperative and regenerative glass melting furnaces 13 Years

Plant and Machinery except direct fire glass melting furnaces —

Moulds [NESD] 8 Years

Float Glass Melting Furnaces [NESD] 10 Years

underground machinery and earth moving machinery used in open cast mining [NESD] 8 Years

(d) Plant and Machinery used in Telecommunications [NESD]

Towers 18 Years
Telecom transceivers, switching centres, transmission and other network equipment 13 Years

Telecom—Ducts, Cables and optical fibre 18 Years
Satellites -do-

(e) Plant and Machinery used in exploration, production and refining oil and gas [NESD]

Refineries 25 Years
Oil and gas assets (including wells), processing plant and facilities -do-
Petrochemical Plant -do-
Storage tanks and related equipment -do-
Pipelines 30 Years
Drilling Rig -do-
Field operations (above ground) Portable boilers, drilling tools, well-head tanks, etc. 8 Years

Loggers –do

(f ) Plant and Machinery used in generation, transmission and distribution of power [NESD]

Thermal/ Gas/ Combined Cycle Power Generation Plant 40 Years
Hydro Power Generation Plant -do-
Nuclear Power Generation Plant -do-
Transmission lines, cables and other network assets -do-
Wind Power Generation Plant 22 Years
Electric Distribution Plant 35 Years
Gas Storage and Distribution Plant 30 Years
Water Distribution Plant including pipelines -do-

(g) Plant and Machinery used in manufacture of steel

Sinter Plant 20 Years
Blast Furnace -do-
Coke ovens -do-
Rolling mill in steel plant -do-
Basic oxygen Furnace Converter 25 Years

(h) Plant and Machinery used in manufacture of non-ferrous metals

Metal pot line [NESD] 40 Years
Bauxite crushing and grinding section [NESD] -do-
Digester Section [NESD] -do-
Turbine [NESD] -do-
Equipments for Calcination [NESD] -do-
Copper Smelter [NESD] -do-
Roll Grinder 40 Years
Soaking Pit 30 Years
Annealing Furnace -do-
Rolling Mills -do-
Equipments for Scalping, Slitting , etc. [NESD] -do-
Surface Miner, Ripper Dozer, etc., used in mines 25 Years
Copper refining plant [NESD] -do-

(i) Plant and Machinery used in medical and surgical operations [NESD]

Electrical Machinery, X-ray and electrotherapeutic apparatus and accessories thereto, medical, diagnostic equipments, namely,

Cat-scan, Ultrasound Machines, ECG Monitors, etc. 13 Years

Other Equipments. 15 Years

(j) Plant and Machinery used in manufacture of pharmaceuticals and chemicals [NESD]

Reactors 20 Years
Distillation Columns -do-
Drying equipments/Centrifuges and Decanters -do-
Vessel/storage tanks –do

(k) Plant and Machinery used in civil construction

Concreting, Crushing, Piling Equipments and Road Making

Equipments 12 Years

Heavy Lift Equipments—

Cranes with capacity of more than 100 tons 20 Years

Cranes with capacity of less than 100 tons 15 Years

Transmission line, Tunneling Equipments [NESD] 10 Years
Earth-moving equipments 9 Years
Others including Material Handling /Pipeline/Welding Equipments [NESD] 12 Years

(l) Plant and Machinery used in salt works [NESD] 15 Years

Furniture and fittings [NESD]

(i) General furniture and fittings 10 Years

(ii) Furniture and fittings used in hotels, restaurants and boarding houses, schools, 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. – 8 Years

Motor Vehicles [NESD]
Motor cycles, scooters and other mopeds 10 Years
Motor buses, motor lorries, motor cars and motor taxies used in a business of running them on hire – 6 Years

Motor buses, motor lorries and motor cars other than those used in a business of running them on hire – 8 Years

Motor tractors, harvesting combines and heavy vehicles -do-
Electrically operated vehicles including battery powered or fuel cell powered vehicles – 8 Years

VII. Ships [NESD]

Ocean-going ships

(i) Bulk Carriers and liner vessels 25 Years

(ii) Crude tankers, product carriers and easy chemical carriers with or without conventional tank coatings. 20 Years

(iii) Chemicals and Acid Carriers:

(a) With Stainless steel tanks 25 Years

(b) With other tanks 20 Years

(iv) Liquified gas carriers 30 Years

(v) Conventional large passenger vessels which are used for cruise purpose also -do-

(vi) Coastal service ships of all categories -do-

(vii) Offshore supply and support vessels 20 Years

(viii) Catamarans and other high speed passenger for ships or boats –do

(ix) Drill ships 25 Years

(x) Hovercrafts 15 Years

(xi) Fishing vessels with wooden hull 10 Years

(xii) Dredgers, tugs, barges, survey launches and other similar ships used mainly for dredging purposes – 14 Years

Vessels ordinarily operating on inland waters—

(i) Speed boats 13 Years

(ii) Other vessels 28 Years

VIII. Aircrafts or Helicopters [NESD] 20 Years

Railways sidings, locomotives, rolling stocks, tramways and railways used by concerns, excluding railway concerns [NESD] – 15 Years

Ropeway structures [NESD] 15 Years
Office equipment [NESD] 5 Years

XII. Computers and data processing units [NESD]

(i) Servers and networks 6 Years

(ii) End user devices, such as, desktops, laptops, etc. 3 Years

XIII. Laboratory equipment [NESD]

(i) General laboratory equipment 10 Years

(ii) Laboratory equipments used in educational institutions 5 Years

XIV. Electrical Installations and Equipment [NESD] 10 years

Hydraulic works, pipelines and sluices [NESD] 15 Years

Notes.—

“Factory buildings” does not include offices, godowns, staff quarters.
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.

The following information shall also be disclosed in the accounts, namely:—

(i) depreciation methods used; and

(ii) the useful lives of the assets for computing depreciation, if they are different from the life specified in the Schedule.

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.

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 insignificant but it should generally be not more than 5% of the original cost of the asset.

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.

From the date this Schedule comes into effect, the carrying amount of the asset as

on that date—

(a) shall be depreciated over the remaining useful life of the asset as per this

Schedule;

(b) 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.

‘‘Continuous process plant’’ means a plant which is required and designed to operate for twenty-four hours a day.