Passing a depreciation entry in TallyPrime takes about a minute. Working out the amount is where the real thought goes. Tally's own help pages say TallyPrime does not currently let you set a depreciation percentage on an asset ledger and post it automatically, so you calculate the figure yourself and record it through a journal voucher.
This guide covers the whole job, from choosing between the WDV and SLM methods to the exact voucher, using one machine bought for ₹5,00,000 as the running example. Most Indian firms already keep their books in accounting software like Tally, which is why the depreciation entry in TallyPrime is a task nearly every accountant meets at year-end.
Does TallyPrime Calculate Depreciation on Its Own?
Not at this time. According to Tally's help documentation, a percentage cannot be set up at the fixed asset accounting or item level for automatic calculation; instead, the documentation directs the user to a manual journal voucher. Some third-party articles mention automatic depreciation in Tally Prime.
Therefore, consult the release notes of your particular version for more information. Tally Prime is excellent for maintaining a clean trail. Every item is on its own ledger, and the voucher records the transaction, and the balance sheet reflects the reduced value. Therefore, the depreciation entry in Tally is short. The estimation part is where companies falter. It depends on which method you choose.
Which Method Should You Choose: WDV or SLM?
Most small and medium-sized companies can be covered by two techniques. Every year, the straight-line approach assesses the same sum. The written-down value method charges a set percentage on the balance left after prior depreciation; therefore, the cost decreases with time.
The option is somewhat legal. Useful lives are set in Schedule II and residual value is capped at five percent of cost by the Companies Act of 2013, but businesses are free to choose either approach in their records. For tax purposes, the Income-tax Act uses the WDV approach to blocks of assets at set rates. Plenty of firms end up with two sets of numbers, one for the books and one for the return. Your choice changes the amount in the depreciation entry in TallyPrime, not the way the voucher is passed.
When the WDV Method Fits
Computers, vehicles, and other assets that lose usefulness early suit it well. It also mirrors the tax computation, which keeps reconciliation light.
When the SLM Method Fits
Furniture and general machinery that give steady service usually belong here. Auditors like it because every year looks the same.
How Do You Calculate Depreciation Under the WDV Method?
Consider a machine acquired on April 1, 2025, for ₹5,00,000 and immediately put into service to see how much goes into a depreciation entry in Tally Prime. Under tax laws, general plant and machinery are often depreciated at 15%; therefore, utilize that.
Year one is ₹5,00,000 × 15%, which gives ₹75,000 and leaves a written-down value of ₹4,25,000. Year two is 15% of ₹4,25,000, which gives ₹63,750 and leaves ₹3,61,250. Year three comes to about ₹54,188 and leaves ₹3,07,062.
The asset never reaches zero under this approach. That is normal, and it is one reason the written-down value method is rarely used to write an asset down to scrap value.
How Do You Calculate Depreciation Under the SLM Method?
The same asset gives a different depreciation entry in TallyPrime under SLM. For the books, the straight-line method starts from Schedule II, which gives general plant and machinery a useful life of 15 years on a single-shift basis. Assume a residual value of 5 percent, which is ₹25,000. The yearly charge is (₹5,00,000 minus ₹25,000) ÷ 15, so about ₹31,667. After three years, the book value is ₹4,05,000, and the effective depreciation rate works out to roughly 6.33 percent a year.
|
Year |
WDV charge (15%) |
WDV closing value |
SLM charge |
SLM closing value |
|
1 |
₹75,000 |
₹4,25,000 |
₹31,667 |
₹4,68,333 |
|
2 |
₹63,750 |
₹3,61,250 |
₹31,667 |
₹4,36,667 |
|
3 |
₹54,188 |
₹3,07,062 |
₹31,667 |
₹4,05,000 |
The gap in year one is large, ₹75,000 against ₹31,667. That is why book profit and taxable profit can differ for a new asset, and why a note on method belongs in your working file.
How Do You Pass the Depreciation Entry in TallyPrime Step by Step?
Once the amount is ready, the depreciation journal entry itself is short. The steps below follow Tally's help documentation.
Set Up the Ledgers First
Create a depreciation ledger under Indirect Expenses, for example Depreciation on Machinery. Tally allows one ledger per asset type or a single ledger for all assets. Each asset should also have its own fixed asset ledger, such as Machinery, under Fixed Assets. One generic Fixed Assets ledger makes year-end work painful.
Post the Journal Voucher
Press Alt+G (Go To), choose Create Voucher and press F7 for Journal. Debit the depreciation ledger and enter ₹75,000. Credit the fixed asset ledger, and Tally fills the amount automatically. Save with Ctrl+A. A narration such as "Being depreciation on machinery at 15% WDV for FY 2025-26" will help your auditor later. The finished depreciation journal entry looks like the table below.
|
Particulars |
Debit |
Credit |
|
Depreciation on Machinery A/c Dr. |
₹75,000 |
|
|
To Machinery A/c |
|
₹75,000 |
Some accountants keep cost unaltered for the fixed asset register and instead use a different accumulated depreciation ledger. Every year, use whatever your auditor demands.
What Happens When You Buy an Asset Part-Way Through the Year?
Start with the correct pricing. Usually derived from the vendor bill, which many businesses already track in accounts payable software- capitalised cost encompasses the purchase price, freight, and installation. If your GST program or return process displays input tax credit claimed on the asset, usually that tax is not added to the cost.
Then check the timing. An asset used for less than 180 days in the year of purchase gets only half the usual rate for tax reasons. Our machine, which went into service on October 20, 2025, ran for around 163 days before March 31, 2026. For that year, tax depreciation is half of ₹75,000, or ₹37,500. Many businesses in the books charge depreciation pro rata from the day the asset was ready for use, so producing a different figure for the same year.
Do You Know?
Under tax rules, a ₹5,00,000 machine put to use in October at a 15% rate earns ₹37,500 of depreciation in year one, not ₹75,000. The 180-day rule halves the charge, and the unclaimed half is not lost, because the written-down value stays higher for later years
Should You Keep Tracking Assets in TallyPrime or Move to Fixed Asset Software?
For a business having only a few hundred goods, documenting depreciation alongside a basic spreadsheet usually helps. Keep one line item for every asset, showing the first cost, new purchases, percentage rates, and resulting costs, then total it every year. Your fixed asset register- this spreadsheet should always match the general ledger numbers.
Once assets number several hundred units, cover numerous branch sites, or call for simultaneous compliance standards with Income-tax rules and Companies Act requirements, complexity rises greatly. This specific scenario marks the point where dedicated fixed asset accounting solutions begin to justify their expense, primarily by executing dual depreciation computations concurrently and maintaining a unified ledger record.
Initiating migration prematurely introduces unnecessary expenditure along with extensive staff training requirements. Conversely, delaying implementation results in a year-end period consumed entirely by the task of matching disparate spreadsheet data. A reasonable indicator for timing such a shift occurs when the duration required for reconciliation exceeds the time needed for initial data entry.
Why Do Depreciation Entries Go Wrong So Often?
Most errors in a depreciation entry in TallyPrime repeat. The opening written-down value is carried over wrongly, so every later year is off. An asset added in November is depreciated for a full year. Tax rates get used in books that follow Schedule II lives, or the reverse, with no note explaining why. Two vouchers get posted for the same year, so the depreciation entry in Tally doubles up, because nobody checked the ledger first.
The solution is boring, yet effective. Agree prior to filing, file just one time, and always inform your accountant if changing an old year's voucher. Keeping with a single approach each subsequent year counts for more than what specific method was chosen.
When Should You Ask a Chartered Accountant?
Bring an asset in to ask questions about the blocks of assets, the sale of an asset, and anything that relates to taxes. Tax depreciation is applied to blocks of assets rather than individual assets; therefore, if you sell a single machine, you may have to adjust your entire block.
Also, please note that the Income Tax Act, 2025 went into effect on April 1st, 2026. This act renumbered the section relating to depreciation; however, reports indicate that the block method and WDV rates remained unchanged. Therefore, verify which section applies currently and what the WDV rates are prior to filing.
Pro-tip
You should create separate depreciation books for categories of assets, like equipment, office furniture, and computer hardware, with one page for each showing starting balances, purchases, relevant depreciation, and totals. Compare these to the principal fixed asset registers, and create the journal entry only once.
Conclusion
Three options set before opening the voucher are required for a depreciation entry in Tally Prime: selecting the approach, determining the rate or useful life span, and choosing the beginning date. The real entry is a credit to fixed assets and a debit to depreciation. Maintain a working sheet, enter it once, and be consistent. Talk to your chartered accountant about tax laws. A small business accounting software with a clean asset ledger should be okay. The important thing is the habit stays consistent.
