Depreciation Calculator
Here’s how to use the Depreciation Calculator I provided:
Step-by-Step Guide
1. Enter Input Values
- Initial Asset Value (₹): Enter the original purchase price of the asset.
(Example: ₹1,00,000 for a machine) - Salvage Value (₹): Enter the estimated resale/scrap value at the end of its useful life.
(Example: ₹10,000 if the machine can be sold after 5 years) - Useful Life (Years): Enter how many years the asset will be used.
(Example: 5 years)
2. Select Depreciation Method
- Straight Line Method:
- Depreciation is the same every year.
- Formula:
[
\text{Annual Depreciation} = \frac{\text{Initial Value} – \text{Salvage Value}}{\text{Useful Life}}
] - Best for assets that lose value evenly (e.g., furniture, buildings).
- Reducing Balance Method:
- Depreciation is higher in early years and decreases over time.
- Formula:
[
\text{Depreciation Rate} = 1 – \left(\frac{\text{Salvage Value}}{\text{Initial Value}}\right)^{\frac{1}{\text{Useful Life}}}
] - Best for assets that lose value faster initially (e.g., vehicles, electronics).
3. Click “Calculate Depreciation”
- The calculator will compute and display results based on your chosen method.
Example Calculations
Case 1: Straight Line Method
- Input:
- Initial Value = ₹1,00,000
- Salvage Value = ₹10,000
- Useful Life = 5 years
- Output:
- Annual Depreciation = ₹18,000
[
\frac{1,00,000 – 10,000}{5} = 18,000
] - Total Depreciation in 5 years = ₹90,000
Case 2: Reducing Balance Method
- Input:
- Initial Value = ₹1,00,000
- Salvage Value = ₹10,000
- Useful Life = 5 years
- Output:
- Depreciation Rate ≈ 36.9%
- Year-by-Year Breakdown:
Year Depreciation (₹) Remaining Value (₹)
1 36,900 63,100
2 23,300 39,800
3 14,700 25,100
4 9,300 15,800
5 5,800 ~10,000 (Salvage) Key Notes ✅ Straight Line → Simple, equal yearly deductions.
✅ Reducing Balance → Higher tax benefits early (used in income tax).
❌ Salvage Value cannot exceed Initial Value.
❌ Useful Life must be ≥ 1 year.