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What is Written Down Value Method of Depreciation?

What Is the Written Down Value of a Property?

What Does the WDV Method of Depreciation Mean?

How Is Property Depreciation Calculated?

Let’s explain this better with an example.

Suppose an individual plans to sell his/her 15-year-old property whose whose details are mentioned below in the table:

Particulars

Amount

Land value at the time of purchase

₹ 45lakh

Construction cost

₹ 25 lakh

Appreciated land value

₹ 50 lakh

Total useful age

60 years

Age of the structure/number of years after construction

15 years

Depreciation on house property - Number of years after construction/total useful age of the structure (15/60)

1/4

Now, to derive the market value of the property, one has to deduct depreciation from the construction cost of the property and add the appreciated land value.

Particulars

Amount

Depreciated building price (₹ 2500000 *(1/4) = ₹ 6.25lakh Now, (₹ 25 lakh- ₹ 6.25 lakh)

₹ 18.75 lakh

Add the land appreciation value (₹ 50 lakh + ₹ 18.75 lakh)

₹ 68.75

So, the final market value that the seller might quote is ₹ 68.75 lakh.

Assets and the Standard Rate of Depreciation Applicable

Here are the assets and standard rate of depreciation for the year FY 2020-21 according to the Income Tax Act 1962.

Asset Class

Asset Type

Rate of Depreciation


Building


Residential building which does not include boarding houses and hotels


5%

Temporary constructions such as wooden structures

100%

Hotels and boarding houses

10%


Plant and machinery


Computer software and computers

60%

Motor cars which do not include cars used in business of running them on hire

15%

Books owned by assessee carrying on a profession being annual publications

100%

Books owned by assessee carrying on a profession not being annual publication

60%


Books which are owned by assessee carrying on business in running lending libraries

100%

Lorries/motor buses/taxis used in a business of running them on hire

30%

Furniture 

Any furniture and including electrical fittings 

10%

Intangible assets

Patents, trademark, copyright, franchise, know-how, or any other business or commercial rights of similar nature 

25%

Benefits of Using Written Down Value Method of Depreciation

Frequently Asked Questions