Schedule II — Useful Life of Asset

What is Schedule II?

Schedule II of the Companies Act, 2013 sets out the useful life of every category of tangible asset for the purpose of computing book depreciation. Before the 2013 Act, Schedule XIV prescribed rates of depreciation. Schedule II replaced rates with useful lives, aligning Indian corporate accounting with the principle followed under IND AS 16 and IAS 16.

Once a company knows the useful life from Schedule II, it picks one of two depreciation methods:

• Straight-Line Method (SLM) — annual depreciation = (cost − residual value) / useful life
• Written Down Value (WDV) — annual depreciation = WDV at start of year × applicable rate (derived from the useful life)

Residual value is capped at 5% of the original cost unless the company can justify a different number. Both SLM and WDV are acceptable, and a company can use different methods for different asset classes — but it must be consistent within a class and disclose the policy.

Schedule II at a glance — useful lives by asset class

The full table covers dozens of categories. The most-referenced lines for procurement and asset teams:

• Buildings — RCC frame: 60 years; non-RCC: 30 years; temporary: 3 years
• Plant & Machinery (general) — 15 years (continuous-process plant: 25 years)
• Furniture & Fittings — 10 years
• Office Equipment — 5 years
• Computers — end-user (laptop, desktop) — 3 years
• Computers — servers and networking — 6 years
• Motor Vehicles — passenger: 8 years; commercial: 6 years
• Electrical installations — 10 years
• Lab equipment — 10 years (general); 5 years for educational

Companies may also adopt a component approach — separately depreciating significant components of a single asset over their distinct useful lives. The component approach is mandatory under IND AS 16 and recommended under Schedule II.

Why Schedule II matters for procurement teams

Procurement is where the depreciation clock starts. Three implications:

1. Asset class assignment at GRN — the moment goods are received, the asset class (and therefore useful life) must be assigned. A wrong class means wrong depreciation for the entire life of the asset, often discovered only at audit.
2. Capitalization vs expensing decision — items below the company's capitalization threshold are expensed; above the threshold, they enter the asset register and Schedule II applies. Many companies have inconsistent thresholds across procurement and finance.
3. Component identification at PO stage — for high-value assets, components should be identified in the BOM at PO stage so the asset register can split them. Doing this retroactively after capitalization is painful.

How TRAXX handles Schedule II

• Schedule II asset class taxonomy is built into the chart of assets — no manual mapping
• Useful life and method are pre-filled at GRN based on the procurement category
• Both SLM and WDV are supported; method per asset class is configurable per company
• The Depreciation Engine runs monthly with full audit trail and reversal capability
• Component accounting is supported for assets with multiple significant components
• Derecognition on disposal triggers automatic gain/loss-on-sale entries — usable directly in Ind AS-converged statements

Common Schedule II mistakes

• Using Income Tax Act rates for book depreciation (a different regime entirely)
• Not separating components — depreciating a building and its lift over the same life
• Setting residual value below 5% without supporting documentation
• Switching depreciation method mid-year without retrospective adjustment
• Forgetting to update useful life when the asset is significantly upgraded mid-life (refurbishment)

Last updated: 2026-04-29