CS Executive · Tax Laws and Practice · Capital Gains
Under the Income-tax Act, 2025, Rao Ltd has a block of depreciable assets with opening written down value Rs 12 lakh. During the year it acquires an asset in the block costing Rs 3 lakh and sells one asset of the block for Rs 20 lakh, incurring transfer expenses of Rs 1 lakh; other assets remain in the block. What is the deemed capital gain?
The deemed short-term capital gain is Rs 4 lakh. The consideration of Rs 20 lakh exceeds the sum of transfer expenses Rs 1 lakh, opening written down value Rs 12 lakh and additions Rs 3 lakh, totalling Rs 16 lakh.
- ARs 5 lakh short-term
- BRs 4 lakh short-termCorrect
- CRs 8 lakh short-term
- DNil, as the block continues to exist
Explanation
Section 74(2): excess of consideration over (expenses + opening WDV + actual cost of additions) is short-term gain. Total = 1 + 12 + 3 = 16 lakh. Excess = 20 - 16 = Rs 4 lakh. Rs 5 lakh omits the transfer expense.
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