Fire Extinguisher Depreciation Rate: How to Calculate, Formula & Examples

Fire extinguishers are handheld active fire protection devices that are filled with wet or dry chemicals for extinguishing small fires. It is basically a hand-held cylindrical pressure vessel that contains an agent that can be discharged to extinguish fire. 

Like any other asset that a company owns, depreciation is also chargeable for fire extinguishers. Keep reading to learn more about depreciation rate of fire extinguishers, how to calculate it along with an example.

Fire Extinguisher Depreciation Rate 

Fire extinguishers are part of office equipment that is necessary for business in case there is an emergency. As fire extinguishers fall under the category of office equipment, therefore, they are treated as fixed assets.

Fire extinguishers are a kind of property that an assessee holds. Being a part of office equipment and hence a part of plant and machinery, depreciation of fire extinguishers is related to depreciation charged on the assets that fall under the same category. 

Like any other asset, fire extinguishers are also subject to wear and tear in case you use it. Therefore, as per Income Tax Act and Companies Act, a particular rate of depreciation is charged on fire extinguishers

Office equipment, in general, are fixed assets that companies generally require for administrative purposes. Companies intend to use office equipment for the long term; therefore, their accounting treatment is similar to fixed assets. Usually, companies classify these non-current assets as equipment, plant and property. 

Fire Extinguisher Depreciation Rate as per Income Tax Act 

Depreciation as per Income Tax Act is a deduction permitted for reduction in value of a tangible or intangible asset. For any type of asset, depreciation takes place throughout its useful life. Depreciation is a mandatory deduction that is allowed on the profit and loss statement of any business. Method for calculation of depreciation according to Income Tax Act 1961 is:

• Written Down Value Method
• Straight Line Method

Formula for calculating depreciation using Written Down Value of a block of assets is:

R = {1 – (S/C) ^1/n} x 100

In this formula

R = rate of depreciation in %

S = Scrap value of an asset after useful life

C = Cost of asset or written down value of asset

n = Remaining useful life of asset in years

While formula for calculating depreciation using Straight Line Method is:

[(Original Cost – Residual Value) / Useful Life]

According to the Income Tax Act, the rate of depreciation chargeable on fire extinguishers is the same as office equipment which comes under plant and machinery. 

However, there are different rates applicable for different types of plants and machinery. These rates also tend to change after a consecutive time period. Therefore, here are the steps that you can follow if you wish to keep yourself updated about the rate of depreciation applicable as per Income Tax Act:

1. Visit the official website of Income Tax India – Tax Charts and Tables.
2. On the page, you will be able to see a search bar where you need to type ‘depreciation rate’ and click on the ‘Search’ button.

3. Click on the first result and check the rate of depreciation applicable to fire extinguishers.

Fire Extinguisher Depreciation Rate as per Companies Act

Depreciation as per Companies Act 2013 is applicable to companies that have been incorporated or renewed after April 1^st 2013.  It is applicable since the financial year 2014-15. Depreciation can be calculated by taking into consideration the cost of the asset, its useful life and residual value. 

Depreciation rate applicable to fire extinguishers is the same as office equipment as per Companies Act 2013. The rates based on the two different calculations methods are: 

Written Down Value = 18.10%

Straight Line Method = 6.33%

Method of calculating depreciation as per Companies Act 2013 (on the basis of useful life of the assets):

• Written Down Value
• Straight Line Method

Let us take an example to understand calculation of depreciation under Companies Act 2013 for upcoming two years:

Let’s say that ABC Company Private Ltd. purchases fire extinguishers in case there is any emergency in the office. The company purchases ten of them for Rs. 2,000 each which brings the total to Rs. 20,000 for the financial year 2023-24.

Here is how the depreciation calculation works:

Using Written Down Value Method:

By calculating depreciation of fire extinguishers using the written-down value method, we can find out the reduced value of the asset. 

Using Straight Line Method:

As is evident from the calculation above, calculating depreciation can be quite complex and time-consuming. Therefore, you can use any online calculator available these days to ease the entire process. 

You simply need to enter the cost of asset, residual value/salvage value in percentage, method of depreciation calculation and life of asset. In a few seconds, you will get a depreciation timeline along with opening value, depreciation and closing value for the entire life of an asset.

Final Word

Whether you own a fire extinguisher or any other asset in that case, it is essential to find out its depreciation to avail it as deduction in the profit and loss statement. This will help you to cope up with the expenditure of maintaining any type of asset in your company. As per both Income Tax Act of 1961 and Companies Act of 2013, calculating depreciation is mandatory for accounting and taxation purposes. 

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