Depreciation calculator India

SLM vs WDV: which method to use for restaurants

Indian restaurants typically maintain two sets of depreciation — one for financial reporting (Companies Act 2013 or books of accounts) and one for income tax computation (Income Tax Act 1961). The difference creates a timing difference that is a common source of deferred tax adjustments.

• SLM (Straight-Line Method): Equal depreciation each year over the useful life. Companies Act 2013 Schedule II specifies useful lives — 10 years for furniture, 3 years for computers, 30 years for permanent buildings. Simple to explain to stakeholders, creates a smoother P&L charge. Most restaurant P&L presentations to investors use SLM-based depreciation.
• WDV (Written-Down Value): A fixed percentage is applied to the opening book value each year. The Income Tax Act 1961 specifies WDV rates — 15% for plant & machinery, 40% for computers, 10% for furniture. Depreciation is higher in early years (front-loaded) — this reduces taxable income more in Year 1 and Year 2, which can be advantageous for new restaurants. WDV is the default for income tax computation.

Practical guidance: Use SLM for your monthly P&L (divide annual SLM depreciation by 12 for your monthly charge). Use WDV rates when filing your income tax return to compute taxable income. The difference is reconciled via deferred tax in your balance sheet if you maintain formal accounts.

Income Tax Act Schedule II depreciation rates for restaurants

Under the Income Tax Act 1961, the following WDV rates apply to common restaurant assets:

• Kitchen equipment / plant & machinery (general): 15% WDV per year.
• Computers and software: 40% WDV per year. A ₹80,000 POS system depreciates ₹32,000 in Year 1, ₹19,200 in Year 2, etc.
• Furniture and fixtures: 10% WDV per year. Dining chairs and tables depreciate slowly.
• Air conditioning equipment: 15% WDV per year.
• Electrical fittings (including CCTV, lighting): 10% WDV per year.
• Commercial vehicles (delivery bikes): 30% WDV per year. A ₹1.2L delivery bike depreciates ₹36,000 in Year 1.
• Buildings (permanent): 10% WDV. Temporary structures (fit-out lease improvements): 40%.

Leasehold fit-out (interior renovation of a rented premises) is typically classified as “Building (temporary)” or “Plant & Machinery” and depreciated at 40% WDV or over the remaining lease term under SLM — whichever results in higher depreciation per the principle of prudence. Consult your CA for the appropriate classification based on your lease agreement.

Depreciation and your restaurant P&L

Depreciation is a non-cash charge in your P&L — it reduces reported profit without any cash outflow. For a restaurant with ₹30L in fixed assets (equipment, furniture, fit-out) depreciating at an average 10–15% per year, annual depreciation of ₹3–4.5L can make the difference between a paper profit and paper loss, even if cash flow is healthy.

Include depreciation in your monthly EBITDA vs EBIT analysis. Restaurant investors and lenders often use EBITDA (Earnings Before Interest, Tax, Depreciation, and Amortisation) to evaluate unit economics — adding back depreciation normalises for differences in asset age and capital intensity across outlets.

Where this fits

• P&L statement — monthly depreciation from this calculator feeds into your restaurant P&L as a fixed operating expense below gross profit
• Startup cost estimator — the capital expenditure items from your startup cost become the assets you depreciate here; Year 1 depreciation significantly affects your Year 1 P&L
• Equipment list builder — use equipment costs from your BOM as asset costs in this depreciation calculator
• Break-even calculator — include annual depreciation as a fixed cost in your break-even computation for more accurate unit economics
• P6 — Unit economics pillar — full guide on restaurant P&L structure, prime cost, food cost, depreciation, EBITDA, and profitability benchmarks