Taxation of Gains on Disposal of Depreciable Business Assets (Balancing Charge) - (New) Section 38(1)(b) / (Old) Section 41(2)

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....sposal of Depreciable Business Assets (Balancing Charge) [ Section 38(1)(b) ] When you sell a business asset (like machinery or a vehicle) for more than its Written Down Value (WDV), the profit is treated as "deemed business income" rather than a capital gain. This is known as a balancing charge. This provision applies when a tangible asset is: • sold • discarded ....

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....la: [A] - [C] (Sale Price minus Book Value) • Scenario II: Sold for more than the Original Cost [A > B] • Formula: [B] - [C] (Original Cost minus Book Value) Mandatory Conditions for Taxation [Section 38(2)(b)] This profit is only taxable as business income if both of the following are true: • Owned by Assessee - The Asset owned by the assessee. ....

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....t is the actual money and it does not include any other thing or benefit which can be converted in terms of money. If the amount calculated under Step II is more than the amount of Step I, then tax treatment of such surplus is as follows: • So much of the surplus which is equal to the amount of depreciation already claimed, is taxable as balancing charge u/s 41(2) as business incom....