The depreciation rate on mobile phones in India is 15% per annum under the Income Tax Act, 1961, calculated using the Written Down Value (WDV) method. Smartphones fall under the plant and machinery block for tax purposes. Under the Companies Act, 2013, they are treated as office equipment or end-user computing devices with a useful life of three to five years.
Depreciation rate on mobile phones under Indian law
Two regulatory frameworks govern how businesses account for mobile phone depreciation, each with a distinct approach.
Income Tax Act, 1961
The Income Tax Act groups assets into blocks rather than tracking individual items. Mobile phones fall under the plant and machinery category, and the 15% depreciation rate applies to the aggregate WDV of this block at the close of the financial year.
For the year of purchase, the device must be actively used for business purposes for more than 180 days to claim the full 15%. If it is put to use for fewer than 180 days, only half the rate (7.5%) applies for that year.
Companies Act, 2013
Schedule II of the Companies Act is based on the expected functional lifespan of an asset rather than fixed percentage blocks. Smartphones typically fall under one of two categories:
- End-user computing devices: three-year useful life
- General office equipment: five-year useful life
Companies may adopt a different lifespan, provided they include a technical justification in their financial notes.
How to calculate depreciation on mobile phones
The WDV method applies the depreciation rate to the reduced book value each year, not the original purchase price. This means the deduction amount decreases annually as the asset ages.
For example, consider a smartphone purchased for ₹40,000:
- Year 1: 15% of ₹40,000 = ₹6,000 deduction; closing book value ₹34,000
- Year 2: 15% of ₹34,000 = ₹5,100 deduction; closing book value ₹28,900
This cycle continues until the device is sold or discarded, at which point the sale value is deducted from the block, and the 15% rate applies to the remaining balance.
Common mistakes when claiming mobile phone depreciation
Even straightforward depreciation claims are frequently disallowed during assessments due to avoidable errors. Businesses should watch for these:
- Incorrect ownership: Claiming depreciation on devices billed in an employee's personal name rather than the registered company's name with its GSTIN.
- No usage apportionment: Failing to apportion the claim when a phone is used for both business and personal purposes.
- Wrong calculation method: Applying the Straight Line Method (SLM) for income tax filings instead of the mandatory WDV approach.
- Missing documentation: Losing original tax invoices needed to verify the purchase date and installation, which determines whether the full or half rate applies.
Conclusion
Correct classification, proper documentation and consistent asset tracking are essential to support mobile phone depreciation claims and avoid disallowances. As the number of devices increases, managing these calculations manually becomes error-prone.
TallyPrime helps businesses streamline asset tracking, automate depreciation calculations and maintain compliant financial records without added complexity.
