Inverter Battery Depreciation Rate: How To Calculate, Formula & Examples

If you own an inverter battery for your business, you must be aware of the tax benefits on the depreciation of assets. Under Section 32 of the Income Tax Act, you can claim a deduction against the depreciation of assets in the profit and loss statement. However, the calculation must be based on the depreciation rate specified in the Company Act and Income Tax Act. 

This article details the depreciation rate of inverter batteries and how to calculate it in different methods. Read on!

Inverter Battery Depreciation Rate

It is important to remember that holding an asset that generates value is referred to as a capital asset. This generally happens when a company intends to use it to generate revenue. 

In any organisation, power is an essential component as it is used in various applications like electric motors, UPS, speed controllers and many more. The inverter battery is a standalone equipment, converting DC voltage into AC voltage. This ensures that the power supply is continuous and uninterrupted. 

Thus, it is considered a fixed asset as it is a long-term investment. However, every asset, including an inverter battery, is subject to wear and tear due to regular usage. So as per the Companies Act of 2013 and Income Tax Act of 1961, the value of this asset depreciates. Therefore, a definite depreciation rate is applicable.

Depreciation Rate of Inverter Battery As Per Income Tax

Under the Income Tax Act, depreciation is the decreased value of an asset due to regular usage and is a deductible expense. This signifies that you can claim the depreciation amount as a deduction depending on the asset's useful life.

In the scenario of tangible assets, you can claim deductions against plant and machinery, furniture, buildings and so on. Simultaneously, for intangible assets, you can claim deductions against trademarks, franchises, licences and so on. As an inverter battery falls under the "Plant and Machinery" category, the depreciation rate of inverter batteries is 15% according to Income Tax Act (as calculated under the Written Down Value method). 

This depreciation rate varies depending on the useful life, type of asset, and depreciation method. So if you want to find the precise depreciation rate, there is a convenient way. All you need to do is follow the instructions below:

• Navigate to the official website of Income Tax India - Tax Charts and Tables.
• A web page will appear on the screen. Locate the search bar option.

• Type in "depreciation rates" in the given space and hit on the "Search" tab.
• A web page with the list of depreciation rates applicable for different assets will appear on the screen. 

Depreciation Rate on Inverter Battery As Per Companies Act

Depreciation as per the Companies Act of 2013 applies to assets purchased on or after 1 April 2014. It does not specify any depreciation rates but postulates the useful life of different assets. You can calculate the depreciation rate using the depreciation formula and the useful life prescribed in Schedule II of the Companies Act. 

According to the Companies Act, depreciation rates applicable on inverter battery is as follows:

• Written Down Value (WDV) = 18.10%
• Straight Line Method (SLM) = 6.33%

Both of these methods adopt different approaches to determining depreciation rates. For instance, SLM does not involve any complicated procedure. Here, the chargeable amount of depreciation is fixed and equal for every year. 

WDV, on the other hand, is the diminishing balance method. In this method, the asset's amount of depreciation is chargeable on the asset's reducing value every year at a fixed rate. In this case, depreciation is generally higher in the initial phase and steadily decreases. 

Inverter Battery Depreciation Rate Calculator

It is easy for small businesses to write off expenses whenever it occurs. However, this is not the case for businesses where there is an involvement of fixed assets like inverter batteries and other machinery. It is the scenario where depreciation rates as per the Companies Act and Income Tax Act come into play. 

Here is the given formula for calculating the depreciation rate using the SLM method:

Depreciation = Original Cost – Residual Value / Useful Life.

For a comprehensive understanding, let's consider an example:

Suppose a company purchases an inverter battery at the cost of Rs 50,000, and the useful life is 5 years. Its salvage value is 10 years. Then, after applying the SLM formula, the chargeable depreciation is Rs 5000 (approx).

On the other hand, you can also calculate the depreciation rate using the WDV method. Here's the formula: 

R = {1 – (S/C) ^1/n.

Here, 

'C' is the cost of an asset or written down value of an asset

 'n' signifies the remaining useful life of the asset

'S' stands for scrap value at the end of the asset's useful life

It is quite understandable that such calculations can be quite complex, leaving room for errors. In such a scenario, you can use an online calculator to avoid such hitches. This online tool is easily available on different websites and has a user-friendly interface. All you need to do is enter information such as the cost of an asset, salvage or residual value in %, the asset's life and the depreciation method. They show the required result within a few seconds. In addition, you can alter the life of assets and see how it affects the depreciation rate. 

Final Word

As per Income Tax Act, depreciation is stated as an expense, and it is crucial to consider it in order in the profit and loss statement. Moreover, as per the Companies Act 2013, it is also compulsory to charge depreciation in their profit and loss statement. So, whether you own an inverter or any other asset, it is important to keep an eye on its depreciation rate as per the applicable official rates.

Also Know About:
1. Plant and machinery depreciation rate: Calculation process, example and formulas
2. TV Depreciation Rate: How to Calculate, Formula, Examples
3. 20% TCS On International Travel Credit Card Spends