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Ramesh Sharma
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  1. CA Vishnu Ram Enlightened

    In simple terms, a block of assets is a grouping of similar assets that are used for the same business purpose, on which depreciation is calculated collectively rather than individually. This concept is crucial for ensuring a uniform method of depreciation and avoiding the cumbersome process of calcRead more

    In simple terms, a block of assets is a grouping of similar assets that are used for the same business purpose, on which depreciation is calculated collectively rather than individually. This concept is crucial for ensuring a uniform method of depreciation and avoiding the cumbersome process of calculating depreciation for each asset separately.

    Key Points:

    • Definition & Purpose:
      The Income Tax Act, 1961 (particularly under Section 32) groups together assets that are similar in nature and use, such as all machinery, all computers, or all vehicles used in a business, into what is called a block of assets.

      • This approach simplifies the calculation of depreciation by applying the same depreciation rate to the entire group.

    • How It Works:

      • Cost Accumulation: The cost of all assets in a block is combined.

      • Depreciation Calculation: Depreciation is then computed on the entire block’s cost, and the written down value is carried forward from one year to the next for the entire block.

      • Adjustments: When new assets are added or old assets are disposed of, the block’s cost is adjusted accordingly.

    • Benefits:

      • Simplification: This method reduces administrative burden, especially for businesses with a large number of similar assets.

      • Uniformity: It ensures consistency in how depreciation is claimed over time.

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Ramesh Sharma
Enlightened
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  1. CA Vishnu Ram Enlightened

    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.

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Ramesh Sharma
Enlightened
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  1. CA Sanjiv Kumar Enlightened Chartered Accountant

    Depreciation allows you to spread the cost of a capital asset over its useful life. Under the Income Tax Act, this deduction is primarily governed by Section 32, and the most common method used is the Written Down Value (WDV) method. Here’s a straightforward guide on how to calculate it: Step 1: DetRead more

    Depreciation allows you to spread the cost of a capital asset over its useful life. Under the Income Tax Act, this deduction is primarily governed by Section 32, and the most common method used is the Written Down Value (WDV) method. Here’s a straightforward guide on how to calculate it:

    Step 1: Determine the Cost of Acquisition

    • Starting Point:
      Begin with the purchase price of the asset. Add any incidental expenses (like installation, transportation, and registration fees) that are directly attributable to acquiring the asset. This gives you the asset’s total cost.

    Step 2: Classify the Asset

    • Type of Asset:
      Assets are generally classified as tangible (buildings, machinery, vehicles) or intangible (patents, copyrights).

    • Depreciable vs. Non-Depreciable:
      Note that certain assets, such as land and goodwill (as per current provisions), are not eligible for depreciation.

    Step 3: Choose the Appropriate Depreciation Method

    • Written Down Value (WDV) Method:
      Under this method, depreciation is calculated on the remaining value of the asset after deducting depreciation claimed in previous years.

      • Calculation for the Year:

        Depreciation=(Cost of Asset−Accumulated Depreciation)×Prescribed Rate\text{Depreciation} = (\text{Cost of Asset} – \text{Accumulated Depreciation}) \times \text{Prescribed Rate}Depreciation=(Cost of Asset−Accumulated Depreciation)×Prescribed Rate

    • Straight-Line Method (SLM):
      In certain cases (like some power generation undertakings), the Straight-Line Method is applicable, where depreciation is spread evenly over the asset’s useful life.

    Step 4: Apply the Prescribed Depreciation Rate

    • Rate Determination:
      The Income Tax Act specifies different rates for various types of assets. For example, buildings, machinery, and computers each have their own rates.

    • Example:
      If a machine costs ₹10 lakh and the prescribed rate is 15% under the WDV method, the first year’s depreciation would be:

      ₹10,00,000×15%=₹1,50,000₹10,00,000 \times 15\% = ₹1,50,000₹10,00,000×15%=₹1,50,000

      The Written Down Value at the end of the first year would then be:

      ₹10,00,000−₹1,50,000=₹8,50,000₹10,00,000 – ₹1,50,000 = ₹8,50,000₹10,00,000−₹1,50,000=₹8,50,000

      In the second year, you’d calculate depreciation on ₹8,50,000 using the same rate.

    Step 5: Record and Carry Forward

    • Documentation:
      Maintain detailed records of the asset’s cost, the depreciation claimed each year, and the resulting Written Down Value.

    • Continuity:
      These records ensure that the depreciation is correctly calculated over the asset’s useful life and help in future tax assessments.

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Ramesh Sharma
Enlightened
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  1. CA Manish Kumar Gupta Enlightened

    Closing a Capital Gains Account Scheme (CGAS) account requires following the proper procedure, especially when only interest remains. Since your branch manager has requested Form G with the Assessing Officer's (AO) endorsement, here’s the step-by-step guide to get it: Step 1: Prepare Form G Form G iRead more

    Closing a Capital Gains Account Scheme (CGAS) account requires following the proper procedure, especially when only interest remains. Since your branch manager has requested Form G with the Assessing Officer’s (AO) endorsement, here’s the step-by-step guide to get it:

    Step 1: Prepare Form G

    Form G is the prescribed form under the Capital Gains Accounts Scheme, 1988, for closing the account and withdrawing the remaining funds. You need to fill out the form with:
    ✅ Your personal details (Name, PAN, Address, Account No.)
    ✅ Bank details where the capital gain account is held
    ✅ Reason for closure (In your case, only interest remains)
    ✅ Details of amount already disbursed and remaining balance

    Step 2: Approach Your Jurisdictional Assessing Officer (AO)

    • Find out who your AO is by checking the Income Tax Department’s e-filing portal https://www.incometax.gov.in.

    • Visit the AO’s office with:
      📄 Duly filled Form G
      📄 Passbook/Statement of your CGAS account
      📄 Copy of PAN Card
      📄 Copy of Last ITR filed
      📄 Bank’s request letter (if any)

    Step 3: Obtain AO’s Endorsement

    • Submit Form G along with documents to the AO.

    • The AO will verify whether the capital gain amount was utilized as per the exemption rules.

    • If satisfied, they will endorse and sign Form G, permitting closure.

    Step 4: Submit to the Bank

    • After getting AO’s approval, submit the endorsed Form G to your bank.

    • The bank will process the closure and release the remaining interest amount (after TDS deduction, if applicable).

    • Ensure you take the final statement from the bank for your records.

    Key Points to Note

    ✔️ Timelines may vary depending on AO’s workload, so follow up if needed.
    ✔️ Interest earned is taxable as per your income slab.
    ✔️ If you face delays, you may escalate the matter with your jurisdictional Principal Commissioner of Income Tax (PCIT).

    Once done, your Capital Gains Account will be officially closed, and you can use the interest as per your requirement. ✅

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Ramesh Sharma
Enlightened
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  1. CA Manish Kumar Gupta Enlightened

    When you deposit your capital gains into a Capital Gains Account Scheme (CGAS) to claim an exemption under sections like 54, 54F, or 54EC, you may later need to withdraw funds from this account when you actually make the required investment. Key Point:There is no distinct, numbered form prescribed iRead more

    When you deposit your capital gains into a Capital Gains Account Scheme (CGAS) to claim an exemption under sections like 54, 54F, or 54EC, you may later need to withdraw funds from this account when you actually make the required investment.

    Key Point:
    There is no distinct, numbered form prescribed in the Income Tax Act specifically for the withdrawal of funds from a Capital Gains Account. Instead, the process is carried out online.

    How It Works:

    • Online Application:
      You are required to log in to the official Income Tax e-filing portal where the Capital Gains Account Scheme is managed.

      • Within this online module, you will find an option to submit a withdrawal request.

      • You need to furnish the necessary details, such as the amount you intend to withdraw and the purpose of the withdrawal (for example, for acquiring a new asset to claim an exemption).

    • Supporting Documents:
      Along with your online request, you must upload or submit the relevant documents, such as evidence of the intended investment. This ensures that the withdrawal is used in accordance with the provisions of the Act.

    • Approval Process:
      Once your request is submitted, the authorities will process it. On approval, the funds will be released from the Capital Gains Account and can be used to make the qualifying investment.

    Bottom Line:

    There isn’t a separate “Form 10D” or similar for withdrawing funds. Instead, you complete a withdrawal application through the online Capital Gains Account Scheme portal on the Income Tax e-filing website. This streamlined process is designed to facilitate the smooth utilization of your capital gains for eligible investments.

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Ramesh Sharma
Enlightened
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  1. CA Manish Kumar Gupta Enlightened

    Yes, profit earned from the sale of land, building, or both is chargeable to Capital Gains Tax under the Income Tax Act, 1961. However, the tax treatment depends on the holding period of the asset: 1️⃣ Type of Capital Gain: ✔ Short-Term Capital Gain (STCG): If the land/building is sold within 24 monRead more

    Yes, profit earned from the sale of land, building, or both is chargeable to Capital Gains Tax under the Income Tax Act, 1961. However, the tax treatment depends on the holding period of the asset:

    1️⃣ Type of Capital Gain:

    ✔ Short-Term Capital Gain (STCG):

    • If the land/building is sold within 24 months from the date of purchase, the profit is treated as short-term capital gain (STCG).

    • Taxable as per your income tax slab rate.

    ✔ Long-Term Capital Gain (LTCG):

    • If the land/building is held for more than 24 months, the profit is classified as long-term capital gain (LTCG).

    • Taxed at 20% with indexation benefit under Section 112.

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Ramesh Sharma
Enlightened
Asked: In:

  1. CA Manish Kumar Gupta Enlightened

    Yes, there are specific bonds available under the Income Tax Act that allow you to invest your capital gains and claim tax relief. One of the primary avenues is provided under Section 54EC of the Act. How It Works: Section 54EC Bonds:If you have incurred capital gains from the sale of an asset, youRead more

    Yes, there are specific bonds available under the Income Tax Act that allow you to invest your capital gains and claim tax relief. One of the primary avenues is provided under Section 54EC of the Act.

    How It Works:

    • Section 54EC Bonds:
      If you have incurred capital gains from the sale of an asset, you can invest those gains in specified bonds—such as those issued by the National Highways Authority of India (NHAI) or the Rural Electrification Corporation (REC).

    • Tax Exemption:
      By investing in these bonds, you can claim an exemption from capital gains tax on the invested amount, up to a certain limit (currently ₹50 lakh per financial year).

    • Holding Period:
      These bonds are non-convertible and must be held for a minimum period, usually three years, to avail the tax benefit.

    Key Points to Remember:

    • Investment Limit:
      The exemption is available up to the prescribed limit per financial year.

    • Purpose:
      This measure encourages the flow of capital into infrastructure and other government-promoted sectors.

    • No Other Eligible Bonds:
      While Section 54EC is the most common route for capital gains bonds, always review the latest provisions, as tax laws can evolve.

    By investing your capital gains in these bonds, not only do you help fund critical infrastructure projects, but you also reduce your tax liability. This strategy can be an effective way to manage your taxes while supporting national development initiatives.

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Ramesh Sharma
Enlightened
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  1. CA Manish Kumar Gupta Enlightened

    Hi, Reinvesting your capital gains into another capital asset can be highly beneficial because it allows you to defer or even reduce your tax liability. Here’s how it works: Tax Exemption/Deferral: By reinvesting your gains into a qualifying asset (such as residential property under Section 54 or otRead more

    Hi,

    Reinvesting your capital gains into another capital asset can be highly beneficial because it allows you to defer or even reduce your tax liability. Here’s how it works:

    • Tax Exemption/Deferral: By reinvesting your gains into a qualifying asset (such as residential property under Section 54 or other assets under Section 54F of the Income Tax Act), you can claim an exemption on the tax that would otherwise be payable on your capital gains. This means you keep more of your money working for you rather than handing it over as tax.

    • Enhanced Investment Growth: Deferring the tax liability means that the full amount of your gains is available for reinvestment. This boosts your capital, allowing for potentially higher returns over time through compounding.

    • Improved Cash Flow: Since you’re not required to pay the tax immediately, you retain liquidity and can allocate funds strategically across different assets or opportunities.

    • Long-Term Financial Planning: Utilizing these exemptions effectively supports a more tax-efficient investment strategy, helping you build wealth over the long term without unnecessary tax erosion.

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Ramesh Sharma
Enlightened
Asked: In:

  1. CA Vishnu Ram Enlightened

    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.

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