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Lease machinery, equipment and fit-outs from ₹25 lakh to ₹100 crore.
Check eligibilityWhat depreciation is
Depreciation matches an asset's cost with the years it helps earn revenue. It is a non-cash charge: the cash went out when the asset was bought. In India, books and tax follow separate rules.
1
Book depreciation: under Ind AS 16 or AS 10, charged over useful life on a straight-line or reducing-balance basis.
2
Schedule II: the Companies Act, 2013 gives indicative useful lives, such as 15 years for general plant and machinery, and a residual value usually up to 5% of cost.
3
Tax depreciation: income-tax rules apply written-down value rates to blocks of assets, such as 15% a year for most plant and machinery.
4
Half-rate rule: for tax, an asset put to use for less than 180 days in a year gets half the normal rate for that year.
Because book and tax depreciation differ, book profit and taxable profit differ too. The timing gap is accounted for as deferred tax.
When each kind applies
The same machine is depreciated twice: once in the accounts and once for tax. Each follows its own rules.
WHAT CHANGES
Book depreciation
Tax depreciation
Governed by
Ind AS 16 or AS 10, with Schedule II
Income-tax law and rules
Method
Straight-line or reducing balance
Mostly written-down value on asset blocks
Life or rate
Expected use, with Schedule II as a guide
Prescribed rates by class of asset
Purpose
True and fair profit
Taxable income
How it works for equipment
Straight-line depreciation = (cost − residual value) ÷ useful life. Written-down value applies a fixed rate each year to the cost not yet depreciated, so the charge is highest in the early years.
If you own the asset.
You charge book depreciation in your accounts and claim tax depreciation on the block, as long as you own the asset and use it for the business.
If you lease it.
Under an operating lease the lessor, as owner, claims depreciation. Under Ind AS 116 you depreciate a right-of-use asset, usually over the lease term.
Tax treatment of a lease depends on its terms and facts. Confirm it with your tax adviser.
Where it shows up
Book and tax depreciation on ₹1 crore of kit
ILLUSTRATIVE
A warehousing company buys ₹1 crore of material-handling equipment and puts it to use early in the financial year. In its books it uses a 15-year life and a 5% residual value: (₹100 lakh − ₹5 lakh) ÷ 15 = about ₹6.33 lakh a year. For tax, the equipment joins the plant and machinery block at 15%: ₹15 lakh in year one, then 15% of ₹85 lakh, or ₹12.75 lakh, in year two. Tax depreciation runs ahead of book depreciation early on, creating a deferred tax liability that reverses later.