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Lakshy (Semi-Qualified C.A. PGDFM BCom.)     22 June 2016

Depreciation rate on computer software


What is depreciation rate for Computer Software as per Companies Act 2013 with latest amendment applicable ?.

 13 Replies


chetan (student of icai-vapi branch)     22 June 2016

on computer 60%

Lakshy (Semi-Qualified C.A. PGDFM BCom.)     22 June 2016

In Which head under Schedule II of Companies Act 2013 ? Now useful lifes to be used instead of Rate. Please reply.

CA Harshal Totla

CA Harshal Totla (Chartered Accountant)     22 June 2016

As per schedule ii of companies act,2013 depreciation is to be provided on assets based on their useful lives given in schedule. The useful lives given in the context of Computers and data processing units [NESD] are:
(i) Servers and networks 6 Years
(ii) End user devices, such as, desktops, laptops, etc.
3 years.
Computer software will be depreciated using the useful life applicable to desktop/laptop i.e.3 year.
Salvage value can also be taken for the purpose of calculation but not more than 5% of original cost of asset unless you have justifiable reason for taking higher value.

1 Like

Lakshy (Semi-Qualified C.A. PGDFM BCom.)     22 June 2016

Whether erstwile rates are still in force on option basis or completely eliminated ?

CA Harshal Totla

CA Harshal Totla (Chartered Accountant)     22 June 2016

Sir you have to compulsorily follow schedule ii

Dineshchandan (articled assistant)     22 June 2016

software is an intangible asset. it can't be equated with computer or laptop.

as per my view schedule II doesn't cover intangible assets. should go wth the accounting standard for depreciating the software I.e license life of software or its economic value.
1 Like
CA Harshal Totla

CA Harshal Totla (Chartered Accountant)     22 June 2016

Mr.Dineshchandan thanks for correcting me. My view was based on the assumption that as software cannot be used without the computer/laptop so they have to be depreciated using useful life applicable to computer/laptop. But your view seems to be more correct, AS 26 will be applicable in this case which says economic life of software shall be 3-5 years. In support of this view i have found one article you can also visit on this link- https://www.forum.charteredclub.com/threads/schedule-ii-vs-schedule-xiv-%E2%80%93-depreciation-in-companies-act-2013.871/
2 Like
Happy sood

Happy sood (Student)     23 June 2016

on computers softwares 60%
Deepak Sahani

Deepak Sahani (Tax Consultant )     03 July 2018

What would be the useful life of a software under companies act 2013?

Kartikey Jain

Kartikey Jain (Intern)     04 July 2018

No useful life for Softwares has been mentioned in the Schedule II of Companies Act 2013 as it has not covered the Intangible Assets. So, in case of softwares, management will estimate its useful life for computing depreciation. As per AS 26 on Intangible Assets, one may opt for useful life of 3-5 years

For Eg - In case of softwares like SAP, which have a long duration utility, management may take 10 years as its useful life. It should disclose it in its notes along with the reason.

CA Shiwam Kumar Bharti

CA Shiwam Kumar Bharti (Finance/IT/Taxation/Management Consulting)     14 July 2018

Useful life of Computer Software has not been mentioned in Companies Act 2013, but in AS 26 its mentioned as 3-5 Years.

So as above mentioned by senior members, For the softwares which come along with the computer/server and can not be used separately, should be depreciated as per Computer/Server (as mentioned in Companies Act 2013).

Softwares which are purchased separately and whose use is not dependent on any specific machine should be depreciated as per AS 26, which mentions to depreciate it taking its useful life 3-5 years.

Indira Priyadarsini Kota

Indira Priyadarsini Kota (Student)     29 January 2021

What is the rate of depreciation for computers and softwares under income tax act?

Lakshy (Semi-Qualified C.A. PGDFM BCom.)     29 January 2021

Its 40%

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