TV Depreciation Rate: How to Calculate, Formula, Examples

Television sets are an integral part of our daily lives, providing information and entertainment. However, like any other asset, the value of televisions also depreciates with time. Hence, understanding the television depreciation rate will help you make informed financial decisions about buying or selling it.

In this article, we will explore different aspects related to the depreciation rate of TV, along with the applicable calculator method and relevant examples.

TV Depreciation Rate

The depreciation rate measures how much an asset loses in value over time. It generally represents a percentage of the initial cost of the item. A TV's depreciation rate is determined by various factors, including its kind, brand, usage, and market demand. In general, televisions have a useful life of 5 to 10 years, after which their value drastically drops.

Knowing the exact way to calculate depreciation can be useful for the purpose of taxes and accounting, especially if you consider reselling the item or just keeping a personal record of expenses. You can easily use an online depreciation calculator to calculate the value of your TV after a certain period.

LED TV Depreciation Rate

The Indian government applies a depreciation rate on LED TVs at a rate of 40%. This allows entities to claim this as a deduction on their profit and loss statements. 

Several factors influence this rate. Some of them are:

• Technological advancements

Rapid advances in LED TV technology frequently result in the obsolescence of earlier models, resulting in their value dropping quicker.

• Condition and maintenance

Well-maintained LED TVs generally hold a better value than the ones mishandled.

• Market demand

Consumer tastes and market demand rapidly change, making it a crucial factor in influencing the depreciation rate.

Television Depreciation Rate as Per Companies Act

As per the Companies Act 2013, the depreciation rate applied on television and LED TVs (any end-user devices) is as follows:

• Useful life: 3 years
• Depreciation Rate (as per Straight Line Method): 31.67%
• Depreciation Rate (as per Written Down Value): 63.16%

Television Depreciation Rate as Per Income Tax Act

As per the Income Tax Act, the depreciation rate applicable to television or LED TVs is 40%. However, this rate only applies if all the conditions under Rule 5(2) are satisfied.

You can calculate the television depreciation rate as per the applicable rate of the Income Tax Act by following two methods. They are:

• Straight Line Depreciation

Straight-line depreciation helps assess the depreciated value of assets since it assumes that the device's value decreases uniformly during its useful life. Depreciation is calculated by subtracting the residual value from the initial asset value and dividing the result by the estimated useful life. 

For instance, let's say you buy an LCD TV worth Rs.2,02,500 with a useful life of 5 years and be recycled for Rs.14,000 at the end of this period. In this case, the depreciable value is Rs.1,88,500 (2,02,500 - 14,000), and the annual depreciation equals Rs.37,700 (1,88,500 / 5).

• Written Down Value Depreciation

Written down value depreciation is a method used to calculate depreciation by considering the diminishing value of an asset. 

For example:

Value of a new LCD TV = Rs.2,00,000

Residual Value = Rs.14,000

Lifespan considered = 5 years

Depreciation for 1st year = Rs.1,86,000 * 0.40 = Rs.74,400

Depreciation for the 2nd year is calculated on the reduced value, Rs.1,11,600, as the TV value decreased.

Therefore, Depreciation for 2nd year = Rs.1,11,600 * 0.40 = Rs.44,600

It will be continued in the same way for subsequent years.

Final Word

Understanding TV depreciation rates is crucial for both individuals and organisations. You can efficiently manage your assets and make educated financial decisions if you understand how to calculate depreciation. It is also essential for entities to remain up to date about the applicable rates, as one can claim a deduction on depreciation. The Income Tax Act 1961 has laid out regulations for this type of deduction for all real and intangible properties.