Question
Depreciation under the Companies Act vs the Income-tax Act — what is the difference?
Answer
Bottom line: The Companies Act depreciates each asset over its useful life; income tax uses fixed block rates on the written-down value.
1. Companies Act
Schedule II sets useful lives (for example, computers 3 years, general plant 15 years); you charge SLM or WDV over that life, asset by asset.
2. Income-tax
Section 32 groups assets into blocks and applies set rates — 15% plant and machinery, 10% furniture, 40% computers — on the block's WDV.
3. The gap
The difference between the two methods is a common source of deferred tax.
Use our Depreciation Calculator (Excel).
This answer is general information based on the law as it stood when written and is not professional advice on your specific situation. Verify the current position and consult a qualified professional before acting. See our disclaimer.