Direct taxes

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

11 May 2013 can anybody explain the clear relation ship between terminal depreciation , balancing charge & capital gains

CA Sourabh Agarwal

CA Sourabh Agarwal (Expert)
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11 May 2013 These terms are used only in case of undertaking engaged in generation or generation and distribution of power. They use SLM basis of depreciation.
Suppose I have a machine having Original Cost as Rs. 100. Current WDV Rs. 75.

Now If asset is Sold for ---

1) Rs. 60, difference (i.e. Rs. 15) is terminal depreciation. [Sec. 32(1)(iii)]

2) Rs. 95, difference (i.e. Rs. 20) is Balancing Charge. [Sec. 41(2)]

3) Any amount over Rs. 100 will be taxable as either LTCG or STCG. [Here Cost of Acquisition would be 100]

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