The benefit of indexation while computing capital gains is provided under Section 48 of the Income Tax Act, 1961. This provision allows for the adjustment of the cost of acquisition and improvement of a long-term capital asset to account for inflation, using the Cost Inflation Index (CII). Section 4Read more
The benefit of indexation while computing capital gains is provided under Section 48 of the Income Tax Act, 1961. This provision allows for the adjustment of the cost of acquisition and improvement of a long-term capital asset to account for inflation, using the Cost Inflation Index (CII).
Section 48 – Computation of Capital Gains:
“The income chargeable under the head ‘Capital Gains’ shall be the difference between the full value of consideration received or accruing from the transfer of a capital asset and the cost of acquisition of the asset and the cost of any improvement to the asset, as increased by the Cost Inflation Index (CII), in the case of a long-term capital asset.”
Benefit of Indexation:
Reduces Taxable Capital Gains: By inflating the cost of your asset, indexation reduces the overall gain on which tax is calculated.
More Beneficial for Long-term Assets: Since assets held for a longer time usually appreciate significantly, indexation can lead to a lower tax liability when you eventually sell the asset.
When is Indexation Allowed?
Only for Long-Term Capital Assets: Indexation is applicable only to long-term assets (held for more than 36 months).
For Both Purchase Cost and Improvement Costs: You can adjust both the purchase cost and any improvement costs using the CII.
If Indexation is Opted, It Must Be Applied to Both Purchase and Improvement Costs: Once you choose to apply indexation, you must apply it to both the original purchase price and any improvement made to the asset.
As per Section 55(2)(b) of the Income Tax Act, 1961, for a capital asset acquired before 1st April 2001, the taxpayer has a special option to calculate the cost of acquisition. Section 55(2)(b) – Cost of Acquisition for Assets Acquired Before 1st April 2001: “Where the capital asset became the propeRead more
As per Section 55(2)(b) of the Income Tax Act, 1961, for a capital asset acquired before 1st April 2001, the taxpayer has a special option to calculate the cost of acquisition.
Section 55(2)(b) – Cost of Acquisition for Assets Acquired Before 1st April 2001:
“Where the capital asset became the property of the assessee before the 1st day of April, 2001, the cost of acquisition shall be deemed to be— (i) the actual cost of acquisition of the asset; or (ii) the fair market value (FMV) of the asset as on 1st April, 2001, whichever is higher.”
Explanation in Simple Terms:
If you acquired a capital asset (such as land, a building, or unlisted shares) before 1st April 2001, you don’t have to stick to the original purchase price. Instead, you can choose to take the Fair Market Value (FMV) as on 1st April 2001, which could help reduce your capital gains tax liability.
How to Determine FMV (Fair Market Value) as on 1st April 2001?
For Land or Property: FMV can be determined through a registered valuer who assesses the asset’s value as of 1st April 2001.
For Listed Shares: FMV is generally taken as the highest price quoted on a recognized stock exchange on 1st April 2001.
For Other Assets: FMV can be determined based on market trends, valuation reports, or any government-approved reference rates.
The cost of acquisition of a capital asset is determined as per Section 55 of the Income Tax Act, 1961. It varies depending on whether the asset was purchased, inherited, gifted, or acquired before a specific date. Section 55(2) – Cost of Acquisition of a Capital Asset:“For the purposes of sectionsRead more
The cost of acquisition of a capital asset is determined as per Section 55 of the Income Tax Act, 1961. It varies depending on whether the asset was purchased, inherited, gifted, or acquired before a specific date.
Section 55(2) – Cost of Acquisition of a Capital Asset: “For the purposes of sections 48 and 49,— (a) in relation to any capital asset,— (i) where the capital asset became the property of the assessee before 1st day of April, 2001, the cost of acquisition shall be either— (A) the actual cost of acquisition of the asset; or (B) the fair market value (FMV) of the asset as on 1st April, 2001, whichever is higher.”
Explanation in Simple Terms:
If You Purchased the Asset:
The cost of acquisition is the actual purchase price paid, including any registration fees, brokerage, or legal expenses.
If the Asset was Inherited or Gifted:
The original cost of acquisition of the previous owner is considered.
The holding period of the previous owner is also taken into account to determine whether the gain is short-term or long-term.
If the Asset was Acquired before 1st April 2001:
The taxpayer has an option to take either the actual purchase price or the Fair Market Value (FMV) as of 1st April 2001, whichever is higher.
For Assets Declared under the Income Declaration Scheme, 2016:
The cost of acquisition is deemed to be the FMV as of 1st June 2016 (as per Section 49(5)).
Indexed Cost of Acquisition (Applicable to Long-Term Capital Assets):
If the asset qualifies for indexation benefit (available for immovable property, unlisted shares, debt funds, etc.), the cost is adjusted for inflation using the Cost Inflation Index (CII).
Formula:
Indexed Cost of Acquisition=Original Cost×CII of Year of SaleCII of Year of Purchase\text{Indexed Cost of Acquisition} = \frac{\text{Original Cost} \times \text{CII of Year of Sale}}{\text{CII of Year of Purchase}}Indexed Cost of Acquisition=CII of Year of PurchaseOriginal Cost×CII of Year of Sale
Practical Example:
Suppose you bought a house in 1995 for ₹10 lakhs, and you are selling it in 2025.
Instead of ₹10 lakhs, you can take the FMV as of 1st April 2001 (say ₹25 lakhs).
If the CII for 2001-02 was 100 and the CII for 2025-26 is 400, then:
According to Section 49(5) of the Income Tax Act, 1961, as inserted through the Income Declaration Scheme, 2016, the cost of acquisition of a capital asset declared under the scheme shall be deemed to be the fair market value (FMV) as on 1st June 2016. Section 49(5) – Cost of Acquisition in case ofRead more
According to Section 49(5) of the Income Tax Act, 1961, as inserted through the Income Declaration Scheme, 2016, the cost of acquisition of a capital asset declared under the scheme shall be deemed to be the fair market value (FMV) as on 1st June 2016.
Section 49(5) – Cost of Acquisition in case of Declaration under IDS, 2016: “Where any capital asset has been declared under the Income Declaration Scheme, 2016, and the fair market value of such asset as on 1st June 2016 has been taken into account for the purposes of that Scheme, then, notwithstanding anything contained in this Act, the cost of acquisition of the asset shall be deemed to be such fair market value.”
If a person had any undisclosed income and used it to acquire a capital asset (such as land, property, or shares), they had an option to disclose it under the Income Declaration Scheme (IDS), 2016. This scheme allowed people to pay tax on undisclosed income and make their assets legally recognized.
Cost of Acquisition: The purchase price of the asset is ignored, and instead, the FMV as on 1st June 2016 is considered as its cost for capital gains purposes.
Impact on Capital Gains Calculation:
When the declared asset is later sold, capital gains will be calculated using FMV as of 1st June 2016 as the acquisition cost.
If the sale price is higher than this FMV, capital gains tax applies.
If the sale price is lower than the FMV, a capital loss may be claimed.
Benefit to Taxpayers: This provision ensures that individuals who declared their undisclosed assets under IDS, 2016, do not face double taxation when they sell the asset.
“'Transfer' means—(a) the sale, exchange, relinquishment, or extinguishment of any rights in a capital asset;(b) the gift of any such asset; and(c) any other mode of transferring such asset or any interest therein.” Explanation:This provision establishes a very broad definition of “transfer” for theRead more
“’Transfer’ means— (a) the sale, exchange, relinquishment, or extinguishment of any rights in a capital asset; (b) the gift of any such asset; and (c) any other mode of transferring such asset or any interest therein.”
Explanation: This provision establishes a very broad definition of “transfer” for the purposes of computing capital gains. It is not limited to a simple sale for money. Instead, any transaction that results in a change of the beneficial ownership of an asset is considered a transfer. This includes:
Sale or Exchange: When you sell or exchange your asset for money or another asset.
Relinquishment/Extinguishment: When you give up or lose your rights in the asset.
Gift: When you transfer the asset without receiving any consideration, such as gifting it to a family member or through a will.
Other Modes: Any other method by which the ownership or the right to enjoy the benefits of the asset is passed on to someone else.
When an asset is transferred by way of gift, through a will, or by inheritance, the provisions for computing capital gains follow a “carry-forward” principle. This means: Cost of Acquisition:The cost that was originally incurred by the previous owner is carried forward. In other words, you will useRead more
When an asset is transferred by way of gift, through a will, or by inheritance, the provisions for computing capital gains follow a “carry-forward” principle. This means:
Cost of Acquisition: The cost that was originally incurred by the previous owner is carried forward. In other words, you will use the original purchase cost (plus any improvement costs, if applicable) paid by the previous owner rather than a market value or zero-cost.
Holding Period: The holding period of the asset is also inherited from the previous owner. This is important because if the asset had already been held for a long period (thus qualifying as a long-term asset), it will continue to be treated as such in your hands. This can have a significant impact on the applicable tax rate and the availability of indexation benefits.
Tax Implication: When you eventually sell the asset, the capital gain is computed by subtracting the inherited cost (adjusted for inflation, if applicable) from the sale proceeds. Even though you did not pay anything for the asset at the time of receiving it, the earlier cost and holding period remain in effect for tax purposes.
This approach ensures that the tax benefits achieved by holding an asset over the long term (such as lower long-term capital gains tax rates) are not lost when the asset is transferred by gift or inheritance.
Since you held the house for 5 years, it qualifies as a long-term capital asset. This means any profit (capital gain) from the sale will be taxed as long-term capital gains. Under the current provisions effective from Budget 2025, the applicable tax rate for long-term capital gains on residential prRead more
Since you held the house for 5 years, it qualifies as a long-term capital asset. This means any profit (capital gain) from the sale will be taxed as long-term capital gains. Under the current provisions effective from Budget 2025, the applicable tax rate for long-term capital gains on residential property is 12.5%.
However, if you choose to reinvest the gains into another residential property within the prescribed period (typically one year before or two years after the sale, or within three years in case of construction), you may be eligible for an exemption under Section 54. If you don’t reinvest, then you will be liable to pay tax at 12.5% on the net gain—calculated as the sale proceeds minus the adjusted purchase cost and any allowable expenses.
Hi, In the current framework of the Indian Income Tax Act, there isn’t a broad exemption for capital gains under Section 10. In the past, there was an exemption for certain long-term capital gains on the sale of listed equity shares (under what was formerly known as Section 10(38)), but that benefitRead more
Hi,
In the current framework of the Indian Income Tax Act, there isn’t a broad exemption for capital gains under Section 10. In the past, there was an exemption for certain long-term capital gains on the sale of listed equity shares (under what was formerly known as Section 10(38)), but that benefit was withdrawn a few years back with subsequent amendments.
Today, capital gains—whether short-term or long-term—are generally taxed according to the provisions specific to capital gains (such as under Sections 112A for equity and the rules applicable to real estate, debt funds, gold, etc.). However, there are specific reliefs available when you reinvest your gains in a new asset (like under Sections 54, 54EC, or 54F), but these are separate from any exemptions that might have been provided under Section 10.
In short, under the current law, you won’t find a provision in Section 10 that exempts capital gains outright.
In the Indian context—with the recent Budget 2025 changes in mind—capital gains tax is structured primarily by the asset type and the duration for which you hold the asset. Here's a handmade breakdown: For Listed Equity Shares & Equity Mutual Funds:• Short-Term Gains: If these are held for lessRead more
In the Indian context—with the recent Budget 2025 changes in mind—capital gains tax is structured primarily by the asset type and the duration for which you hold the asset. Here’s a handmade breakdown:
For Listed Equity Shares & Equity Mutual Funds: • Short-Term Gains: If these are held for less than 12 months, the gains are now taxed at 20%. • Long-Term Gains: When held for 12 months or more, gains attract a rate of 12.5%, with an exemption threshold that has been increased modestly (now around ₹1.25 lakh).
For Immovable Property (Real Estate): • Short-Term Gains: If the property is sold within 24 months, the gains are taxed as per your applicable income tax slab rates. • Long-Term Gains: For properties held longer than 24 months, the tax rate has been set at 12.5%. (Note that the traditional indexation benefit has been removed in recent changes, which simplifies the calculation.)
For Debt Mutual Funds & Gold: • Short-Term Gains: When these assets are held for less than 36 months, the gains are added to your income and taxed according to your individual slab rates. • Long-Term Gains: For holding periods of 36 months or more, the gains are generally taxed at 20%, but you still benefit from the indexation adjustment to account for inflation.
Under the Income Tax Act, depreciation is generally available only on assets that you own. Here's how this rule applies to a building taken on lease: Operating Lease:If you lease a building under an operating lease, the building remains the property of the lessor. Result: No depreciation can be claiRead more
Under the Income Tax Act, depreciation is generally available only on assets that you own. Here’s how this rule applies to a building taken on lease:
Operating Lease: If you lease a building under an operating lease, the building remains the property of the lessor.
Result: No depreciation can be claimed on the building itself since you do not own it.
Finance Lease: In cases where the lease arrangement qualifies as a finance lease, the lessee is treated, for tax purposes, as the owner of the asset.
Result: You may be eligible to claim depreciation on the leased building.
Leasehold Improvements: Even with an operating lease, if you incur expenses to improve the leased premises (and these improvements are capitalized as assets), you may claim depreciation on those improvements.
When is the benefit of indexation allowed while computing capital gain?
The benefit of indexation while computing capital gains is provided under Section 48 of the Income Tax Act, 1961. This provision allows for the adjustment of the cost of acquisition and improvement of a long-term capital asset to account for inflation, using the Cost Inflation Index (CII). Section 4Read more
The benefit of indexation while computing capital gains is provided under Section 48 of the Income Tax Act, 1961. This provision allows for the adjustment of the cost of acquisition and improvement of a long-term capital asset to account for inflation, using the Cost Inflation Index (CII).
See lessIn respect of capital asset acquired before 1st April, 2001 is there any special method to compute cost of acquisition?
As per Section 55(2)(b) of the Income Tax Act, 1961, for a capital asset acquired before 1st April 2001, the taxpayer has a special option to calculate the cost of acquisition. Section 55(2)(b) – Cost of Acquisition for Assets Acquired Before 1st April 2001: “Where the capital asset became the propeRead more
As per Section 55(2)(b) of the Income Tax Act, 1961, for a capital asset acquired before 1st April 2001, the taxpayer has a special option to calculate the cost of acquisition.
Explanation in Simple Terms:
If you acquired a capital asset (such as land, a building, or unlisted shares) before 1st April 2001, you don’t have to stick to the original purchase price. Instead, you can choose to take the Fair Market Value (FMV) as on 1st April 2001, which could help reduce your capital gains tax liability.
How to Determine FMV (Fair Market Value) as on 1st April 2001?
-
-
-
See lessFor Land or Property: FMV can be determined through a registered valuer who assesses the asset’s value as of 1st April 2001.
For Listed Shares: FMV is generally taken as the highest price quoted on a recognized stock exchange on 1st April 2001.
For Other Assets: FMV can be determined based on market trends, valuation reports, or any government-approved reference rates.
How cost of acquisition is calculated in capital gain?
The cost of acquisition of a capital asset is determined as per Section 55 of the Income Tax Act, 1961. It varies depending on whether the asset was purchased, inherited, gifted, or acquired before a specific date. Section 55(2) – Cost of Acquisition of a Capital Asset:“For the purposes of sectionsRead more
The cost of acquisition of a capital asset is determined as per Section 55 of the Income Tax Act, 1961. It varies depending on whether the asset was purchased, inherited, gifted, or acquired before a specific date.
Explanation in Simple Terms:
If You Purchased the Asset:
The cost of acquisition is the actual purchase price paid, including any registration fees, brokerage, or legal expenses.
If the Asset was Inherited or Gifted:
The original cost of acquisition of the previous owner is considered.
The holding period of the previous owner is also taken into account to determine whether the gain is short-term or long-term.
If the Asset was Acquired before 1st April 2001:
The taxpayer has an option to take either the actual purchase price or the Fair Market Value (FMV) as of 1st April 2001, whichever is higher.
For Assets Declared under the Income Declaration Scheme, 2016:
The cost of acquisition is deemed to be the FMV as of 1st June 2016 (as per Section 49(5)).
Indexed Cost of Acquisition (Applicable to Long-Term Capital Assets):
If the asset qualifies for indexation benefit (available for immovable property, unlisted shares, debt funds, etc.), the cost is adjusted for inflation using the Cost Inflation Index (CII).
Formula:
Indexed Cost of Acquisition=Original Cost×CII of Year of SaleCII of Year of Purchase\text{Indexed Cost of Acquisition} = \frac{\text{Original Cost} \times \text{CII of Year of Sale}}{\text{CII of Year of Purchase}}Indexed Cost of Acquisition=CII of Year of PurchaseOriginal Cost×CII of Year of Sale
Practical Example:
Suppose you bought a house in 1995 for ₹10 lakhs, and you are selling it in 2025.
Instead of ₹10 lakhs, you can take the FMV as of 1st April 2001 (say ₹25 lakhs).
If the CII for 2001-02 was 100 and the CII for 2025-26 is 400, then:
Indexed Cost=₹25,00,000×400100=₹1crore\text{Indexed Cost} = \frac{₹25,00,000 \times 400}{100} = ₹1 croreIndexed Cost=100₹25,00,000×400=₹1crore
If the house is sold for ₹1.5 crore, then:
Capital Gain=Sale Price−Indexed Cost=₹1.5crore−₹1crore=₹50lakhs.\text{Capital Gain} = \text{Sale Price} – \text{Indexed Cost} = ₹1.5 crore – ₹1 crore = ₹50 lakhs.Capital Gain=Sale Price−Indexed Cost=₹1.5crore−₹1crore=₹50lakhs.
Tax at 12.5% (as per Budget 2025 changes) would be ₹6.25 lakhs.
This method ensures fair tax computation by adjusting for inflation over the years.
See lessIf any undisclosed income [in the form of investment in capital asset] is declared under Income Declaration Scheme, 2016, then what should be the cost of acquisition of such capital asset?
According to Section 49(5) of the Income Tax Act, 1961, as inserted through the Income Declaration Scheme, 2016, the cost of acquisition of a capital asset declared under the scheme shall be deemed to be the fair market value (FMV) as on 1st June 2016. Section 49(5) – Cost of Acquisition in case ofRead more
According to Section 49(5) of the Income Tax Act, 1961, as inserted through the Income Declaration Scheme, 2016, the cost of acquisition of a capital asset declared under the scheme shall be deemed to be the fair market value (FMV) as on 1st June 2016.
See lessWhat constitutes ‘transfer’ while calculating capital gain as per Income-tax Law?
“'Transfer' means—(a) the sale, exchange, relinquishment, or extinguishment of any rights in a capital asset;(b) the gift of any such asset; and(c) any other mode of transferring such asset or any interest therein.” Explanation:This provision establishes a very broad definition of “transfer” for theRead more
“’Transfer’ means—
(a) the sale, exchange, relinquishment, or extinguishment of any rights in a capital asset;
(b) the gift of any such asset; and
(c) any other mode of transferring such asset or any interest therein.”
Explanation:
This provision establishes a very broad definition of “transfer” for the purposes of computing capital gains. It is not limited to a simple sale for money. Instead, any transaction that results in a change of the beneficial ownership of an asset is considered a transfer. This includes:
-
-
-
-
See lessSale or Exchange: When you sell or exchange your asset for money or another asset.
Relinquishment/Extinguishment: When you give up or lose your rights in the asset.
Gift: When you transfer the asset without receiving any consideration, such as gifting it to a family member or through a will.
Other Modes: Any other method by which the ownership or the right to enjoy the benefits of the asset is passed on to someone else.
What are the provisions relating to computation of capital gain in case of transfer of asset by way of gift, will, etc.?
When an asset is transferred by way of gift, through a will, or by inheritance, the provisions for computing capital gains follow a “carry-forward” principle. This means: Cost of Acquisition:The cost that was originally incurred by the previous owner is carried forward. In other words, you will useRead more
When an asset is transferred by way of gift, through a will, or by inheritance, the provisions for computing capital gains follow a “carry-forward” principle. This means:
Cost of Acquisition:
The cost that was originally incurred by the previous owner is carried forward. In other words, you will use the original purchase cost (plus any improvement costs, if applicable) paid by the previous owner rather than a market value or zero-cost.
Holding Period:
The holding period of the asset is also inherited from the previous owner. This is important because if the asset had already been held for a long period (thus qualifying as a long-term asset), it will continue to be treated as such in your hands. This can have a significant impact on the applicable tax rate and the availability of indexation benefits.
Tax Implication:
When you eventually sell the asset, the capital gain is computed by subtracting the inherited cost (adjusted for inflation, if applicable) from the sale proceeds. Even though you did not pay anything for the asset at the time of receiving it, the earlier cost and holding period remain in effect for tax purposes.
This approach ensures that the tax benefits achieved by holding an asset over the long term (such as lower long-term capital gains tax rates) are not lost when the asset is transferred by gift or inheritance.
See lessI have sold a house which had been purchased by me 5 years ago. Am I required to pay any tax on the profit earned by me on account of such sale?
Since you held the house for 5 years, it qualifies as a long-term capital asset. This means any profit (capital gain) from the sale will be taxed as long-term capital gains. Under the current provisions effective from Budget 2025, the applicable tax rate for long-term capital gains on residential prRead more
Since you held the house for 5 years, it qualifies as a long-term capital asset. This means any profit (capital gain) from the sale will be taxed as long-term capital gains. Under the current provisions effective from Budget 2025, the applicable tax rate for long-term capital gains on residential property is 12.5%.
However, if you choose to reinvest the gains into another residential property within the prescribed period (typically one year before or two years after the sale, or within three years in case of construction), you may be eligible for an exemption under Section 54. If you don’t reinvest, then you will be liable to pay tax at 12.5% on the net gain—calculated as the sale proceeds minus the adjusted purchase cost and any allowable expenses.
See lessAre any capital gains exempt under section 10?
Hi, In the current framework of the Indian Income Tax Act, there isn’t a broad exemption for capital gains under Section 10. In the past, there was an exemption for certain long-term capital gains on the sale of listed equity shares (under what was formerly known as Section 10(38)), but that benefitRead more
Hi,
In the current framework of the Indian Income Tax Act, there isn’t a broad exemption for capital gains under Section 10. In the past, there was an exemption for certain long-term capital gains on the sale of listed equity shares (under what was formerly known as Section 10(38)), but that benefit was withdrawn a few years back with subsequent amendments.
Today, capital gains—whether short-term or long-term—are generally taxed according to the provisions specific to capital gains (such as under Sections 112A for equity and the rules applicable to real estate, debt funds, gold, etc.). However, there are specific reliefs available when you reinvest your gains in a new asset (like under Sections 54, 54EC, or 54F), but these are separate from any exemptions that might have been provided under Section 10.
In short, under the current law, you won’t find a provision in Section 10 that exempts capital gains outright.
See lessAt what rates capital gains are charged to tax?
In the Indian context—with the recent Budget 2025 changes in mind—capital gains tax is structured primarily by the asset type and the duration for which you hold the asset. Here's a handmade breakdown: For Listed Equity Shares & Equity Mutual Funds:• Short-Term Gains: If these are held for lessRead more
In the Indian context—with the recent Budget 2025 changes in mind—capital gains tax is structured primarily by the asset type and the duration for which you hold the asset. Here’s a handmade breakdown:
For Listed Equity Shares & Equity Mutual Funds:
• Short-Term Gains: If these are held for less than 12 months, the gains are now taxed at 20%.
• Long-Term Gains: When held for 12 months or more, gains attract a rate of 12.5%, with an exemption threshold that has been increased modestly (now around ₹1.25 lakh).
For Immovable Property (Real Estate):
• Short-Term Gains: If the property is sold within 24 months, the gains are taxed as per your applicable income tax slab rates.
• Long-Term Gains: For properties held longer than 24 months, the tax rate has been set at 12.5%. (Note that the traditional indexation benefit has been removed in recent changes, which simplifies the calculation.)
For Debt Mutual Funds & Gold:
See less• Short-Term Gains: When these assets are held for less than 36 months, the gains are added to your income and taxed according to your individual slab rates.
• Long-Term Gains: For holding periods of 36 months or more, the gains are generally taxed at 20%, but you still benefit from the indexation adjustment to account for inflation.
Whether deduction of depreciation is allowed on building taken on lease?
Under the Income Tax Act, depreciation is generally available only on assets that you own. Here's how this rule applies to a building taken on lease: Operating Lease:If you lease a building under an operating lease, the building remains the property of the lessor. Result: No depreciation can be claiRead more
Under the Income Tax Act, depreciation is generally available only on assets that you own. Here’s how this rule applies to a building taken on lease:
-
-
-
-
-
See lessOperating Lease:
If you lease a building under an operating lease, the building remains the property of the lessor.
Result: No depreciation can be claimed on the building itself since you do not own it.
Finance Lease:
In cases where the lease arrangement qualifies as a finance lease, the lessee is treated, for tax purposes, as the owner of the asset.
Result: You may be eligible to claim depreciation on the leased building.
Leasehold Improvements:
Even with an operating lease, if you incur expenses to improve the leased premises (and these improvements are capitalized as assets), you may claim depreciation on those improvements.