Hardware Refresh Cycles and Depreciation

A consultant will write that government GPUs depreciate at 40 percent, or 25, or 15, as per GFR. Ask them for the rule number and watch the room cool. The General Financial Rules, 2017 tell you how to distinguish capital from revenue, how to keep inventories and asset accounts, how to dispose of goods, and — in places — how to compute a depreciated value when government property is lost, damaged or condemned. They are not a secret Companies Act schedule for H100s.

Union government accounts are still largely cash. A rupee spent on a GPU is a rupee spent. Depreciation as a charge against income is a concept that lives cleanly in commercial and PSU books, in some accrual-reforming states, and in TCO models that finance officers use to compare options. It does not become law because a slide says GFR. CAG will still ask whether the asset exists, whether it is used, and whether disposal followed the rules. Those questions are real. An invented percentage is not.

This guide separates three files that vendors collapse: the legal asset file, the management refresh file, and the TCO write-down you show a CFO. Keep them labelled. Prcept will not invent a statutory rate to make a three-year swap look mandatory.

What GFR and CAG actually touch

GFR 2017 rules on capital and revenue (Rules 98–99 and neighbours) tell you when a GPU cluster is capital expenditure — a tangible asset of a permanent nature, or an improvement that extends utility — and when a repair, a cloud invoice or a one-month rental is revenue. That classification decides the budget head. It does not decide the useful life.

Inventory and asset rules require item-wise lists, physical verification and a disposal path. When stores are lost, damaged or condemned, compilations of GFR have long included worked percentages — famously 20 percent for vehicles and 15 percent for certain other stores — to estimate a depreciated value for the loss case. That is a valuation device for a write-off file. It is not a standing depreciation tariff for every server in the SDC, and it is not a licence to pick 15 percent for GPUs because computers are similar.

CAG audit looks for regularity, existence and utilisation. An idle eight-GPU node bought for AI and used as a warm room heater is a utilisation finding waiting to happen. GASAB has worked for years on fixed-asset guidance and on a longer walk toward accrual. Some PSUs and autonomous bodies already depreciate under their own adopted standards or the Companies Act. Read the book the entity actually keeps. Do not import a rate from a neighbour's balance sheet and call it CAG's number.

Three clocks that are not the same

The warranty clock is contractual: three or five years, parts, next-business-day, on-site or return-to-bench. When it ends, AMC begins or risk sits with you.

The useful-life clock is a management estimate. Commercial GPU practice often plans three to five years before the card is too slow, too inefficient, or out of driver support for the frameworks you need. That is an engineering and market fact. It is not enacted. A 2023 card can still infer a 7B in 2028. A 2023 card may be the wrong buy for a 2028 training ambition. Write the workload you are dating the card to.

The accounting clock, where it exists, follows the entity's finance code: Income-tax useful-life notions for commercial taxpayers, company-law schedules for companies, a state accrual manual for some departments, or nothing but cash for many others. If your PAO has never posted depreciation on IT gear, a TCO model that charges 40 percent a year is a comparison tool. Label it so. A PAC that thinks you invented a statutory charge will not be soothed by a footnote you add later.

Keep the clocks in separate columns. Mixing them is how a refresh becomes a fake legal duty.

Clock	Who owns it	What you may write	What you may not write
Warranty / AMC	Contract	Ends on [date]; AMC at [quoted %] thereafter	GFR requires AMC at 10 percent
Engineering useful life	CIO + SI, with a reason	We plan [3/4/5] years because [driver / power / workload]	The Act requires replacement in year four
Accounts depreciation	FA / PAO / corporate books	If we are on accrual, we follow [named standard]	CAG's GPU rate is 40 percent
TCO write-down	The comparison sheet	For comparison we spread capex over [N] years	This spread is the sanctioned depreciation

Refresh without theatre

Buy for the workload you will run, not for the keynote you attended. Inference on small models can ride a generation longer than training. If year-two training never arrived, do not refresh because a new SKU exists. Utilise, then refresh.

Write a residual-value assumption as an assumption. A used A100 still has a market. A custom air-gapped node with a locked firmware may not. Disposal under GFR is a process — condemnation, reserve price, GeM or advertised sale, data sanitisation — not a line that says residual 20 percent because a blog liked the shape.

Pair refresh with the software pin. A new card that needs a new CUDA, a new runtime and a new eval is a project. Budget the eval labour or you will refresh the silicon and freeze the model in fear. Income-tax 40 percent on computers, where it applies to an assessee, is a tax computation. It is still not a secretariat refresh order.

Sanitisation is part of the clock

A GPU leaving the register is not a sale of a toaster. Weights, caches and residual corpus fragments live on disks and sometimes in firmware-adjacent stores. The refresh or disposal file needs a sanitisation certificate that names the method and the officer who watched it. GFR disposal without wipe is how a used-card market becomes a leak.

If you reassign rather than dispose, write the new workload on the same day. Reassignment is the cheapest refresh. It is also the one CAG understands: the asset exists, it is used, the purpose changed on a dated note. A crate in the store with a hope of future training is not a reassignment.

Objections you will hear — and what to do with them

These are the lines that stall the file. Answer them in the room, then put the answer in the note. A spoken answer without paper will be forgotten by the next officer.

Income-tax allows 40 percent on computers, so that is the government rate

Income-tax depreciation is a tax computation for assessees to whom that Act applies. A secretariat is not free to mint a tax rate into a GFR duty. If your entity files ITR and claims that block, that is a tax file. It is still not a refresh order.

CAG will object if we keep five-year-old GPUs

CAG will object if the assets are missing, idle, or disposed of without process. Age is not automatically irregularity. Utilisation and process are.

We must refresh because the vendor is ending the SKU

End-of-sale is not end-of-life, and end-of-life is not end-of-inference. Ask for the last driver date and the last security patch date. Then decide.

Put 25 percent in the DPR so finance can follow it

You may put a TCO spread in the DPR if you label it a modelling choice. You may not call it GFR. We will walk out of a review that needs us to lie about the rule.

A four-week asset and refresh file

1. Week 1: list every GPU and host in the asset register. Match serials. Note warranty end, location, and who has the keys.
2. Week 2: pull 90 days of utilisation. Mark idle. Write one sentence on what each node is for.
3. Week 3: ask finance which book you are on — cash, state accrual, company, PSU manual. Copy the depreciation rule they actually apply, or write no depreciation charge in departmental accounts.
4. Week 4: write the refresh decision as engineering plus utilisation plus warranty, with a TCO spread clearly labelled as a model. Start any disposal on the GFR path, including sanitisation.

How this shows up in the file

Subject: GPU / AI-host refresh and asset treatment — [entity].

These assets are recorded at [register reference]. Departmental accounts are [cash / accrual standard]. No GFR rule prescribing a standing depreciation percentage for GPUs has been relied upon. A TCO comparison, if attached, spreads capex over [N] years as a modelling choice only. Refresh is recommended / not recommended because [utilisation, warranty, workload], not because an accounting rate elapsed. Disposal, if any, will follow GFR inventory and condemnation procedure and a sanitisation certificate.

This note is not legal or accounting advice. No statutory GPU depreciation percentage is asserted. Label every TCO spread as a model.

This article is informational field guidance for Indian public institutions, not legal, procurement, tax, accounting, tariff or engineering advice. Confirm against the current Gazette, GFR, GeM term, SERC tariff order, IndiaAI portal rule, CAG mandate, DPDP text, departmental finance manual and your counsel before you file it. Figures are methods and order-of-magnitude illustrations, not a dataset of real deployments and not a substitute for a live quote.