Depreciation Calculator
Calculate straight-line depreciation expense for business assets. Free online calculator estimates annual depreciation, depreciation rate, and book value over the useful life of any tangible asset for accounting purposes.
About This Calculator
The Depreciation Calculator helps business owners, accountants, and financial analysts compute straight-line depreciation for tangible business assets. Depreciation is the systematic allocation of an asset's cost over its useful life, reflecting the reduction in value due to wear and tear, obsolescence, or age. This calculator determines annual depreciation expense, the depreciation rate as a percentage, total depreciation over the asset's life, and the remaining book value at any year.
The straight-line method is the simplest and most commonly used depreciation method. The formula is: Annual Depreciation = (Asset Cost - Salvage Value) / Useful Life. The Depreciation Rate is calculated as (1 / Useful Life) × 100%. For example, a machine purchased for ₹500,000 with a salvage value of ₹50,000 and a useful life of 10 years would have an annual depreciation of (₹500,000 - ₹50,000) / 10 = ₹45,000 per year, with a depreciation rate of 10%.
Regional Notes
India: The Income Tax Act prescribes depreciation rates using the Written Down Value (WDV) method for most assets. However, straight-line depreciation is commonly used for financial reporting under the Companies Act, 2013, particularly for assets like buildings (5% SLM), furniture (10% SLM), and computers (40% SLM).
United States: The IRS requires most tangible property to be depreciated using MACRS (Modified Accelerated Cost Recovery System), which uses declining balance methods. Straight-line depreciation is available as an alternative for certain assets and is required for financial reporting under GAAP.
United Kingdom: HMRC uses capital allowances instead of depreciation for tax purposes. The Annual Investment Allowance (AIA) allows businesses to deduct the full cost of qualifying plant and machinery up to £1 million. Straight-line depreciation is used for financial reporting under UK GAAP and IFRS.
Frequently Asked Questions
What is straight-line depreciation?
Straight-line depreciation is the simplest method of allocating the cost of a tangible asset over its useful life. It spreads the cost evenly across each year of the asset's service life, resulting in equal depreciation expense every year. The formula is: Annual Depreciation = (Asset Cost - Salvage Value) / Useful Life.
How do I calculate annual depreciation using the straight-line method?
To calculate annual straight-line depreciation, subtract the salvage value from the asset cost, then divide by the useful life in years. For example, an asset costing ₹10,000 with a ₹1,000 salvage value and 5-year life has annual depreciation of (₹10,000 - ₹1,000) / 5 = ₹1,800 per year.
What assets can be depreciated for business purposes?
Depreciable assets include machinery, equipment, vehicles, buildings, furniture, computers, and other tangible property used in business. Assets that cannot be depreciated include land, cash, inventory, accounts receivable, and intangible assets like brand value and intellectual property rights.
What is salvage value in depreciation?
Salvage value (also called residual value) is the estimated amount an asset will be worth at the end of its useful life. For example, a vehicle purchased for ₹50,000 with a ₹5,000 salvage value after 5 years means the total depreciation over 5 years is ₹45,000. The salvage value is subtracted from the cost before calculating annual depreciation.
How does depreciation affect business taxes in India, US, and UK?
In India, depreciation is claimed under the Income Tax Act using the Written Down Value (WDV) method at prescribed rates. In the US, the IRS allows Modified Accelerated Cost Recovery System (MACRS) and Section 179 deductions. In the UK, capital allowances replace depreciation for tax purposes, with Annual Investment Allowance (AIA) available on plant and machinery. Straight-line depreciation is used for financial reporting, while tax depreciation often follows different rules.
What is the difference between straight-line and declining balance depreciation?
Straight-line depreciation spreads equal expense each year, while declining balance depreciation applies a fixed percentage to the remaining book value, resulting in higher expenses in early years. For example, a ₹10,000 asset with 5-year life: straight-line gives ₹1,800/year, while double-declining gives ₹4,000 in year 1, ₹2,400 in year 2, and so on.
Is the Depreciation Calculator free to use?
Yes, all calculators on Calculy are completely free to use with no registration required.
Can I share my depreciation calculation results?
Yes, the calculator saves your inputs in the URL, so you can copy the page link and share it. Anyone opening the link will see the same asset cost, salvage value, and useful life with pre-filled results.