Straight-Line Depreciation Calculator
Calculate annual depreciation and a full year-by-year schedule using the straight-line method.
Annual Depreciation
₹40,000.00
| Year | Depreciation Expense | Accumulated Depreciation | Book Value |
|---|---|---|---|
| 1 | ₹40,000.00 | ₹40,000.00 | ₹2,00,000.00 |
| 2 | ₹40,000.00 | ₹80,000.00 | ₹1,60,000.00 |
| 3 | ₹40,000.00 | ₹1,20,000.00 | ₹1,20,000.00 |
| 4 | ₹40,000.00 | ₹1,60,000.00 | ₹80,000.00 |
| 5 | ₹40,000.00 | ₹2,00,000.00 | ₹40,000.00 |
How to use this calculator
Enter the asset's purchase cost, its estimated salvage (resale) value at the end of its useful life, and how many years it will be used, then click Calculate. The schedule below shows the expense, accumulated depreciation, and remaining book value for each year.
How straight-line depreciation is calculated
Annual Depreciation = (Cost − Salvage Value) ÷ Useful Life. Cost is what you paid, salvage value is what you expect to get back when you dispose of the asset, and useful life is how many years you expect to use it. The same amount is charged every year, so book value (cost minus accumulated depreciation) falls in a straight line to the salvage value. Depreciation spreads a cost you have already paid over the years the asset earns; no cash leaves the business when it is charged.
Worked example: the guesses behind the schedule
The calculator opens on the espresso machine from the ROI, payback and depreciation guide: it cost ₹2,40,000, should last 5 years and sell for about ₹40,000 at the end. (2,40,000 − 40,000) ÷ 5 = ₹40,000 a year, and book value steps down from ₹2,00,000 after year 1 to ₹40,000 after year 5. The guide shows what that does to profit: the machine adds ₹1,44,000 a year of operating profit but ₹1,04,000 after depreciation. The salvage value and the life are both estimates, and each one moves the yearly charge:
- No resale assumed: salvage ₹0 gives ₹48,000 a year, ₹8,000 more expense every year.
- A company's books: Schedule II of the Companies Act, 2013 expects residual value to be no more than 5% of cost unless the company discloses why it uses more. 5% of ₹2,40,000 is ₹12,000, which gives ₹45,600 a year. A ₹40,000 salvage value (16.7% of cost) would need that justification.
- A longer life: 8 years with the same ₹40,000 salvage gives ₹25,000 a year, so each year's reported profit is higher, but the charge runs for 3 more years.
Selling before the schedule ends
Book value is not a price. Suppose the café upgrades after 3 years and sells the machine then. The schedule above puts its book value at ₹1,20,000 at the end of year 3. Sold for ₹1,00,000, the books record a ₹20,000 loss on sale: the machine wore out faster than the schedule assumed. Sold for ₹1,50,000, they record a ₹30,000 gain: it was depreciated faster than it really lost value. Either way the total over the machine's life is the same, cost minus what it sold for; the gain or loss just corrects the earlier estimates in the year of sale.
For income tax in India, depreciation follows the Income-tax Act's own block-of-assets rules and rates, not this schedule, so the yearly figure in a tax computation is usually different. This calculator is for your own books and for understanding a purchase.
Frequently Asked Questions
Why use straight-line depreciation instead of other methods?
Straight-line is the simplest method: it spreads the cost evenly, so it is easy to forecast and to check. Other methods, like declining balance or units-of-production, front-load depreciation or tie it to actual usage — useful for assets that lose value faster early on (like vehicles or tech equipment) or wear out based on output rather than time, but more complex to calculate.
How do I estimate salvage value if I'm not sure?
Look at resale prices for similar assets of the age and condition you expect at disposal. For a company's books in India, Schedule II of the Companies Act, 2013 caps residual value at 5% of original cost unless the company discloses a justification for using more. If you expect the asset to be worth nothing at the end, set salvage value to zero.
Is book value the same as market value?
No. Book value is an accounting figure — original cost minus accumulated depreciation — and often diverges significantly from what the asset would actually sell for on the open market. An asset can be fully depreciated on the books (book value near zero) while still having real resale value, or vice versa.
Does depreciation affect my cash flow?
Not directly — depreciation is a non-cash accounting expense that spreads an already-paid cost over time for reporting and tax purposes. It reduces reported profit (and often taxable income), which can lower your tax bill, but no cash actually leaves your business each year because of depreciation itself.
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