Depreciation for FY 2026-27: one asset list, two schedules, and the gap between them

Summary

A company's fixed assets are depreciated twice every year, under two different laws that share no number: Schedule II of the Companies Act, 2013 works from useful lives, and s.33 of the Income-tax Act, 2025 (the old s.32) works from block rates. For FY 2026-27 the tax half runs under the new Act for the first time, and the difference between the two closing figures is the deferred tax line the auditor will ask about.

The situation

Every September the same file gets rebuilt. The depreciation workbook in circulation is a 2014-vintage Excel from a content site, one of them downloaded more than ten thousand times, and it does one Act only. The Companies Act schedule lives in one sheet, the income-tax computation in another, and the two are reconciled by hand in a third, if at all. The common failure is not a wrong rate. It is a "Schedule II rate table" that is not what Schedule II contains, a formula that keeps charging after the useful life has run out, and an income-tax block whose opening figure was never typed in, so the whole tax column is confidently wrong by exactly that amount.

The rule

Companies Act, 2013, Schedule II. Depreciation is the systematic allocation of the depreciable amount over the asset's useful life. Part C prescribes the life per class; there is no rate table in the Schedule. Residual value "shall not be more than five per cent of the original cost of the asset". A company may adopt a different life or residual value, but the financial statements must disclose the difference and justify it, supported by technical advice. Where an asset is used on double shift, depreciation for that period increases by 50%; on triple shift, by 100%; classes marked NESD (no extra shift depreciation) get neither. Component accounting, where a significant part has a different life from the whole, is mandatory for financial years beginning on or after 1 April 2015. The useful lives that decide most registers:

Straight-line charge is (cost less residual) over the life; written-down-value uses the rate that takes cost to residual over the life, both pro-rated on days from the date the asset is available for use, and both stop when the carrying amount reaches residual value.

Income-tax Act, 2025, s.33. The Act took effect on 1 April 2026, so FY 2026-27 (tax year 2026-27) is the first year the tax computation runs under it. Depreciation is s.33, "Deduction for depreciation", re-enacting the old s.32: written-down value on the block of assets at prescribed rates. Three sub-rules matter in an ordinary register:

The block rates in use this season are the familiar ones: buildings 5% / 10% / 40%, furniture 10%, plant and machinery 15%, hire vehicles 30%, computers and software 40%, ships 20%, aircraft 40%, intangibles 25%. They are being taken to be unchanged. Every 2026 commentary located still cites "Rule 25 of the draft Rules", and the notified Income-tax Rules, 2026 have not been read against that table by me or, as far as I can find, by anyone publishing on it. Treat the rates as the working assumption they are, not as a settled fact, until the notified appendix has been checked.

Deferred tax. The Companies Act closing net block and the income-tax closing written-down value differ, and that difference multiplied by the applicable tax rate is the deferred tax liability (book higher than tax) or asset (tax higher than book) that the accounting standard on income taxes requires. The two schedules are the input; the deferred tax line is the output.

Where people go wrong

A rate table called Schedule II. The Schedule prescribes lives. The percentage columns in the circulating workbooks are someone's derived SLM and WDV rates for a 5% residual, and they stop being right the moment a company adopts a different residual, a different life with disclosure, or a double shift. If the sheet has no useful-life column, it is not computing Schedule II.

The wrong section number for the new Act. More than one widely-read source describes income-tax depreciation under the 2025 Act as "section 34". It is s.33 as passed; the 180-day rule is s.33(4) and additional depreciation is s.33(8) and (9). Separately, a workbook published for FY 2026-27 still labels its tax half "Section 32" and "s.32(1)(iia)": those are 1961 Act numbers, and a Form 3CD cross-reference built on them is wrong for this year.

An opening WDV of nil. The income-tax block's opening figure comes from last year's tax computation and from nowhere else. Import an asset list, never type the opening WDV, and the block depreciates the year's additions only: understated depreciation, understated closing WDV, and a deferred tax figure wrong by the same amount, with nothing on the page looking odd.

Charging past the end. A formula that multiplies opening value by a rate every year keeps going after the useful life has run out and after the carrying amount has reached residual. Schedule II stops at residual and at the end of the life; the sheet has to be told to.

Extra shift on a NESD asset. Furniture, office equipment, computers and most buildings carry NESD. Shift working affects general plant and machinery, not the whole register.

The 180-day test is "acquired and put to use". An asset bought in September and commissioned in February falls on the half-rate side even though the purchase was in the first half.

What to do

1. Rebuild the register with a useful-life column and a residual-value column per asset, and record the justification for any life or residual that departs from Part C. If you want it in Excel, a free workbook with the 27 Part C lives and the 13 blocks pre-loaded is at a free fixed-asset register workbook
2. Carry every income-tax block's opening WDV from last year's computation into this year's file before you look at any output, and initial it.
3. Mark shift days only against classes that permit extra-shift depreciation, and enter disposal dates so the charge stops on the day.
4. Compute both closing figures, take the difference, and tie the deferred tax movement to last year's balance before the audit file is closed.
5. Cite s.33 of the Income-tax Act, 2025 (old s.32) in the tax audit working papers for FY 2026-27, and note that the block rates rest on the 1961 Act's Appendix I pending a check of the notified Rules.

The tool

I kept rebuilding this every audit season, so I built it once as a browser page: one asset list in, both schedules out. You enter each asset with its Schedule II class, cost, date of capitalisation and residual, and the page simulates depreciation year by year from that date, so a life that expired three years ago has already stopped charging; it handles double and triple shift days, mid-year disposals and the residual floor, then computes the income-tax block under s.33 with the 180-day split, additional depreciation and its brought-forward balance, and a switch that withdraws the additional allowance for a company on the s.200 or s.201 flat rate, and shows the deferred tax difference between the two closing figures. It flags any block that holds carried-in assets but a nil opening WDV, because that is the one figure only you can supply. It does not do component accounting, revaluation, impairment, right-of-use assets or MAT, it does not know your opening WDVs, and it does not check the block rates against the notified Rules for you. Nothing is uploaded; the register stays in your browser and exports as CSV.

Run both depreciation schedules from one asset list

Sources

1. Schedule II to the Companies Act, 2013 (Part A principles, Part C useful lives, residual value, extra shift, component accounting) — https://ca2013.com/schedule/schedule-ii/
2. TaxTMI — s.33 of the Income-tax Act, 2025 as passed, compared with the Bill (the section number, s.33(4), s.33(8)/(9)) — https://www.taxtmi.com/tmi_notes?id=2117
3. EZTax — s.33 of the Income-tax Act, 2025, text — https://eztax.in/income-tax-act-2025/section-33
4. TaxTMI — Depreciation: new s.33 against old s.32 — https://www.taxtmi.com/manuals?id=1085
5. TaxTMI — Additional depreciation: new s.33(8) against old s.32(1)(iia) — https://www.taxtmi.com/manuals?id=1090
6. TaxTMI — Clause 200 against s.115BAA; Clause 201 against s.115BAB — https://www.taxtmi.com/tmi_notes?id=1665 and https://www.taxtmi.com/tmi_notes?id=1666
7. TaxGuru — Schedule II of the Companies Act, 2013 (residual value; component accounting) — https://taxguru.in/company-law/schedule-ii-of-companies-act-2013.html
8. ClearTax — income-tax depreciation rate table (the Appendix I rates as commonly reproduced) — https://cleartax.in/s/depreciation-income-tax-act
9. CAclubindia — Depreciation calculator as per Companies Act 2013 in Excel (the 10,000-download file) — https://www.caclubindia.com/share_files/depreciation-calculator-as-per-companies-act-2013-in-excel-70503.asp
10. ABCAUS — Excel depreciation calculator, Companies Act 2013 (version 05.05, maintained since 2014) — https://abcaus.in/companies-act/excel-depreciation-calculator-companies-act-2013.html