What is depreciation and how is it calculated?

Depreciation is the reduction in an asset's book value over its useful life. Common methods include Straight Line, Declining Balance, and Sum of Years.

Which method is best for tax reporting?

The right method depends on your accounting policy and applicable tax rules. Straight Line is simplest; others reflect faster early value loss.

Free Depreciation Calculator
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Q: Can the calculator support all three methods for the same asset?

Yes. Switch between Straight Line, Declining Balance, and Sum of Years to compare schedules for the same inputs.

Compare Straight Line, Declining Balance, and Sum of Years depreciation methods
for fixed assets with instant schedules and summary results. No signup needed.

Cost of Asset

₹

Salvage Value (%)

Useful Life (Years)

Cost of Asset

₹

Salvage Value (%)

Useful Life (Years)

Rate of Depreciation (%)

Cost of Asset

₹

Salvage Value (%)

Useful Life (Years)

Check your Results Here!

Depreciation per Year ₹0

Closing Book Value ₹0

What is Depreciation?

Depreciation is the allocation of an asset's cost over its useful life. It reflects the reduction in value caused by wear and tear, usage, obsolescence, or passage of time.

Straight Line keeps the charge even, Declining Balance applies a fixed rate to the opening value, and Sum of Years front-loads the expense into the earlier years.

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Cost of Asset

The original acquisition cost before any depreciation is applied.

📈

Salvage Value

The estimated residual value remaining at the end of the asset's useful life.

📅

Useful Life

The expected number of years the asset will be used in the business.

How to Use This Depreciation Calculator

Select a method, enter the asset details, and review the year-by-year depreciation schedule instantly.

Enter the Asset Cost

Start with the original purchase price of the asset.

Set Salvage Value and Life

Enter the residual value percentage and useful life in years. Declining Balance also uses the depreciation rate.

Choose the Depreciation Method

Switch between Straight Line, Declining Balance, and Sum of Years to compare schedules.

Read the Instant Results

The calculator updates the summary value, closing book value, and year-by-year table automatically.

Depreciation Formulas Explained

These are the standard depreciation methods used across asset and accounting workflows.

Straight Line

Annual depreciation = (Cost of Asset − Salvage Value) ÷ Useful Life

Declining Balance

Depreciation expense = Opening book value × Rate of depreciation

Sum of Years

Depreciation expense = (Remaining life ÷ Sum of years digits) × (Cost of Asset − Salvage Value)

Useful terms

Cost of Asset = original purchase price
Salvage Value = estimated residual value at end of useful life
Useful Life = expected number of years the asset is in service

Factors That Affect Depreciation

Depreciation depends on the asset's cost, expected residual value, useful life, and the method selected for reporting.

Cost of Asset

A higher acquisition cost increases the depreciable base and raises annual depreciation.

Method / Rate

Straight Line is even, Declining Balance is rate-based, and Sum of Years is front-loaded.

Useful Life

A longer useful life spreads depreciation across more years, reducing the annual charge.

Depreciation Calculator for Different Methods

Compare how the same asset behaves under each standard depreciation method.

Method	Typical Use	Output Pattern
Straight Line	Assets with even consumption	Constant yearly depreciation
Declining Balance	Assets that lose value faster early on	Higher depreciation in early years
Sum of Years	Front-loaded expense recognition	Reducing depreciation over time

* Results are estimates and should be aligned with your accounting policy, tax rules, and audit requirements before reporting.

Worked Examples

Two short examples to help you verify calculations quickly.

Example 1: Office Laptop

Cost: ₹60,000 · Salvage: 10% · Useful life: 3 years · Method: Straight Line

Annual depreciation = (₹60,000 - ₹6,000) ÷ 3 = ₹18,000

Example 2: Delivery Van

Cost: ₹800,000 · Salvage: 5% · Useful life: 8 years · Method: Declining Balance (20% rate)

Year 1 depreciation ≈ ₹160,000; closing ≈ ₹640,000. Use the calculator to view full schedule.

Which Depreciation Method Should You Choose?

Use the method that fits the nature of the asset and your reporting requirements.

Straight Line

Best for assets that wear evenly over time and where a stable annual charge is preferred.

Example: buildings, office furniture, and similar long-life assets.

Declining Balance / Sum of Years

Best when an asset loses more value in the early years or when front-loaded expense recognition is desired.

Example: computers, vehicles, and equipment with faster early wear.

Frequently Asked Questions

Depreciation is the reduction in an asset's book value over its useful life. It can be calculated using methods such as Straight Line, Declining Balance, or Sum of Years depending on how the asset's value is expected to decline.

In most cases, yes. A longer useful life spreads the depreciable amount over more years, which lowers the annual expense under Straight Line and Sum of Years.

The right method depends on your accounting policy and the rules you follow for financial statements or tax returns. Straight Line is the simplest, while the other methods better reflect faster early value loss.

Straight Line spreads the depreciable amount evenly across the useful life. Declining Balance applies a percentage to the opening value, so depreciation is higher in the early years.

Salvage value is the estimated residual value an asset will have at the end of its useful life. It is the amount left after depreciation is applied.

Yes. Each tab uses the same asset base, salvage value, and useful life inputs where applicable, then calculates the schedule for the selected method.

A depreciation schedule is a year-by-year table showing the opening value, depreciation expense, and closing book value of an asset over time.

Yes. This calculator uses standard depreciation formulas for the three methods shown. Final reporting should still follow your accounting policy and any applicable statutory requirements.

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Free Depreciation Calculator Calculate Asset Value Instantly

What is Depreciation?

Cost of Asset

Salvage Value

Useful Life

How to Use This Depreciation Calculator

Depreciation Formulas Explained

Straight Line

Declining Balance

Sum of Years

Useful terms

Factors That Affect Depreciation

Cost of Asset

Method / Rate

Useful Life

Depreciation Calculator for Different Methods

Worked Examples

Example 1: Office Laptop

Example 2: Delivery Van

Which Depreciation Method Should You Choose?

Straight Line

Declining Balance / Sum of Years

Frequently Asked Questions

What is depreciation and how is it calculated?

Does a longer useful life always reduce annual depreciation?

Which method is best for tax reporting?

What is the difference between Straight Line and Declining Balance?

What does salvage value mean?

Can the calculator support all three methods for the same asset?

What is a depreciation schedule?

Is the depreciation calculated by this tool accurate?

Try the Hitech Billsoft Software today and grow your business

Explore More Financial Tools

Free Depreciation Calculator
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