As per Section 44AB:"Every person carrying on business or profession, if his turnover exceeds the prescribed limits, shall get his accounts audited and furnish the report of such audit in the prescribed form before the specified date." The term "specified date" is explained in Explanation (ii) to SeRead more
As per Section 44AB:“Every person carrying on business or profession, if his turnover exceeds the prescribed limits, shall get his accounts audited and furnish the report of such audit in the prescribed form before the specified date.”
The term “specified date” is explained in Explanation (ii) to Section 44AB:“’Specified date’ means the due date for furnishing the return of income under sub-section (1) of section 139.”
FY 2024–25, the due dates are as follows:
Category of Assessee | Due Date for Tax Audit Report (Form 3CA/3CB & 3CD) |
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Individuals / Firms / LLP / Companies liable for audit u/s 44AB | 30th September 2024 |
If covered under Transfer Pricing provisions (u/s 92E) | 31st October 2024 |
When it comes to determining the “actual cost” of an asset for tax purposes, the Income Tax Act, 1961 requires you to consider all the expenses incurred in acquiring and putting the asset to use. Here’s a step-by-step guide: Step 1: Identify the Base Cost For Purchased Assets:This is the price you aRead more
When it comes to determining the “actual cost” of an asset for tax purposes, the Income Tax Act, 1961 requires you to consider all the expenses incurred in acquiring and putting the asset to use. Here’s a step-by-step guide:
Step 1: Identify the Base Cost
For Purchased Assets:
This is the price you actually paid for the asset.
For Gifts or Inherited Assets:
The actual cost is usually the market value on the date of transfer or as provided by Section 48 of the Act.
Step 2: Add Incidental Expenses
Include all expenses directly attributable to acquiring the asset, such as:
Stamp duty and registration fees
Brokerage and legal fees
Any other charges incurred in the acquisition process
Step 3: Include Capital Improvements
If you have incurred expenses on improvements or renovations that add to the asset’s value (and these are capital in nature), include these in your cost calculation.
Step 4: Determine the Total Actual Cost
Sum Up:
The actual cost is the aggregate of the base cost, incidental expenses, and capital improvements.
This figure represents the total expenditure made to bring the asset into a usable condition.
Step 5: Adjust for Inflation (if Applicable)
Indexation Benefit:
For long-term capital gains purposes, you may apply the Cost Inflation Index (CII) to the actual cost. However, note that indexation is applied after calculating the actual cost.
Key Takeaways
Actual Cost = Purchase Price (or Market Value) + Incidental Expenses + Capital Improvements.
For Long-Term Assets:
Use indexation on the actual cost to adjust for inflation when computing capital gains.
Documentation:
Maintain all receipts and documents to support each component of the cost.
By carefully calculating these components, you can accurately determine the actual cost of your asset as required by the Income Tax Act. This helps ensure that your capital gains calculations are precise and that you optimize your tax benefits.
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