Profit on sale of car
This query is : Resolved
23 September 2011
Suppose X sells his car of Rs.100000 (original cost of Rs. 70000).
Now he passes journal entry like
Bank/Cash A/c ...Dr
To Car A/c ......Cr
To Profit on Sale of Car A/c ...Cr
Now What treatment I should pass if I am going to file Income Tax Return.
Whether it is considered in Business profit or not?
Now he passes journal entry like
Bank/Cash A/c ...Dr
To Car A/c ......Cr
To Profit on Sale of Car A/c ...Cr
Now What treatment I should pass if I am going to file Income Tax Return.
Whether it is considered in Business profit or not?
24 September 2011
If the car was a personal asset, no taxability.
However, if the car was a business asset, then treatment will be as follows:
Situation 1: The block of assets to which the car belongs continues to exist after the disposal of the car.
In this case, the sale price of the car will be reduced from the WDV. No taxability.
Situation 2: The car was the only asset in the block of assets and the block of assets ceases to exist after disposal.
The profit on sale of car will be taxable as Short Term Capital Gain under the head Capital Gains.
However, if the car was a business asset, then treatment will be as follows:
Situation 1: The block of assets to which the car belongs continues to exist after the disposal of the car.
In this case, the sale price of the car will be reduced from the WDV. No taxability.
Situation 2: The car was the only asset in the block of assets and the block of assets ceases to exist after disposal.
The profit on sale of car will be taxable as Short Term Capital Gain under the head Capital Gains.
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