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TMI BlogCost of acquisition in case of depreciable asset: Clause 75 of the Income Tax Bill, 2025 vs. Section 50A of the Income Tax Act, 1961X X X X Extracts X X X X X X X X Extracts X X X X ..... l factor in calculating capital gains. It is essential to compare this with the existing Section 50A of the Income Tax Act, 1961, which similarly deals with depreciable assets and their cost of acquisition. Objective and Purpose The primary objective of Clause 75 is to streamline the computation of capital gains for depreciable assets by adjusting the cost of acquisition. This adjustment is necessary because depreciable assets typically undergo value reduction due to wear and tear, which is accounted for through depreciation. The legislative intent is to ensure that taxpayers who have benefited from depreciation deductions do not receive an undue tax advantage when these assets are sold. By aligning the cost of acquisition with the adjust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, 1961 Section 50A, inserted by the Finance (No. 2) Act, 1998, addresses the cost of acquisition for depreciable assets where depreciation has been claimed u/s 32(1)(i). It mandates that the provisions of Sections 48 and 49 apply with the modification that the written down value, as defined in Section 43(6), is taken as the cost of acquisition. This ensures that the capital gains calculation is based on the adjusted value of the asset, reflecting its depreciated state. The section focuses on maintaining tax equity by ensuring that the tax liability corresponds to the actual economic gain derived from the asset's disposal. By modifying the cost of acquisition to the written down value, it prevents the realization of artificial gains o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equitable tax outcome. Compliance with this section is crucial to avoid potential disputes with tax authorities over capital gains calculations. Comparative Analysis The comparison between Clause 75 and Section 50A reveals both similarities and differences in their approach to depreciable assets. Both provisions aim to ensure that the cost of acquisition reflects the asset's depreciated value, thereby preventing tax avoidance through inflated asset values. However, they differ in their reference sections and the broader tax implications. Clause 75's linkage to Sections (clauses) 72 and 73 suggests a more integrated approach to managing capital gains and losses, potentially offering broader tax planning opportunities. In contrast, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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