Depreciation life rate refers to the percentage rate at which a fixed asset is depreciated each year. This rate is typically determined based on the asset’s estimated useful life and its residual value. The most commonly used method for calculating depreciation life rate is the straight-line method, which assumes that the asset depreciates at a constant rate over its useful life.

For example, if a company purchases a machine for ₹1,00,000 and expects it to have a useful life of 10 years with no residual value, it may use a straight-line method to calculate the depreciation life rate. The calculation would be:

(₹1,00,000 – ₹0) / 10 = ₹10,000 per year

This means that the company would record a depreciation expense of ₹10,000 each year for the next 10 years until the machine is fully depreciated. The depreciation life rate in this case would be 10% per year.

Different depreciation methods can lead to different depreciation life rates, and it is important for companies to select the method that best suits their needs and the nature of their assets. Ultimately, the depreciation life rate helps companies to allocate the cost of the asset over its useful life, which is important for financial reporting and tax purposes.