CAPITAL GAINS ON DEPRECIABLE ASSETS UNDER SECTION 50

   

  • The provisions of Sec 50 are applicable in case of a Depreciable asset being transferred, other than transfer of a Depreciable Power generating unit. Computation of Capital gains can be made in the following two situations: 

i.   On the last day of the previous year, written down value of the Block of Assets is Zero. [Sec 50(1)]: 

Step

Description

I

Calculate full value of Sale consideration of the depreciable assets, which have been transferred during the previous year & fall within the same block of assets.

II

Calculate the total of the following:

§   Expenditure incurred wholly & exclusively in connection with such transfer(s);

§   The written down value of the block of assets at the beginning of the previous year;

§   The actual cost of any asset(s) falling within the block of assets acquired at any time during the previous year.

III

If Step I is more than Step II difference is chargeable as Short Term Capital gains, else if Step I is equal to or less than Step II then Sec 50(1) is not applicable & there is no taxable capital gain.

  ii.  When the Block of Assets is empty in the last day of the previous year. [Sec 50(2)]: 

Step

Description

I

Calculate the Written down value of the block of assets the beginning of the previous year.

II

Add: Actual Cost of any asset(s) falling within that block of assets acquired by the assessee during the previous year

III

From the full value of Sale Consideration of the depreciable assets transferred & falling within the same block of assets deduct the following:

§   Total of Step I & II, i.e., the cost of acquisition;

§   Expenditure incidental to transfer.

IV

Resultant figure is termed as Short Term Capital Gains.

         PLEASE NOTE:

  • The Capital Gain arising in the above two situations is always Short Term Capital Gain.

  • In case of transfer of two or more depreciable assets Capital gains has to be calculated for the whole block of in totality;

  • It is not necessary that depreciation is allowed in the year of transfer only, even if it is allowed in earlier years capital gains shall be calculated as per mode specified u/s 50 only.