Sale of motor car
This query is : Resolved
SUBHASH JAIN
(Querist)
21 September 2011
IN THE FIRM WHERE EVERY YEAR CLAIM THE DEPRECIATION ON MOTOR CAR . AFTER FEW YEAR FIRM SOLD OUT THE MOTOR RS. 5000/- EXCESS OF BOOK VALUE ( DEPRECIATED VALUE ) IN THAT CASE EXCESS VALUE IS TAXABLE IN CAPITAL GAIN OR NOT , PLEASE CLEAR.
21 September 2011
Hi,
If block of asset has became zero after selling car from that block, gain will be chargeable to short term capital gain.
If block of asset has became zero after selling car from that block, gain will be chargeable to short term capital gain.
SUBHASH JAIN
(Querist)
21 September 2011
SHORT TERM OR LONG TERM IF ASSETS SOLD AFTER 3 YEAR. IN THAT CASE WHICH SECTION COMES UNDER THIS .
21 September 2011
All depreciable assets are subject to short term capital gain tax only
SUBHASH JAIN
(Querist)
21 September 2011
Please provide the section
22 July 2025
Sure! Here’s the detailed clarification on **sale of motor car (depreciable asset) and capital gains tax**:
---
### Tax treatment of sale of depreciable asset like motor car:
1. **Block of Assets Concept** under Income Tax Act applies.
* Motor cars used in business are part of a **block of assets** under Section **2(11)** and Section **50** of the Income Tax Act.
2. **Depreciation claim and sale of asset:**
* When you sell a depreciable asset (like a motor car), the **difference between sale price and written down value (WDV) of the block** is considered a gain or loss.
3. **Capital gains or short-term capital gains?**
* **Depreciable assets are always treated as short-term capital assets, irrespective of the holding period.**
* So, **any gain on sale of motor car (or other depreciable assets) is taxable as short-term capital gains (STCG).**
4. **Relevant Sections:**
* **Section 50:** Deals specifically with capital gains on transfer of depreciable assets forming part of block of assets.
* The gain is computed as:
**Sale Price – WDV of the block immediately before the sale**
* This gain is treated as **short-term capital gain** regardless of holding period.
---
### Summary:
| Situation | Tax Treatment | Section |
| ------------------------------------- | ------------------------------------------------------ | ---------- |
| Sale of motor car (depreciable asset) | Gain is **short-term capital gain**, taxed accordingly | Section 50 |
| Holding period irrelevant | Always short-term, even if held > 3 years | Section 50 |
---
If you want, I can help you draft the exact formula or journal entries for this transaction. Would that help?
---
### Tax treatment of sale of depreciable asset like motor car:
1. **Block of Assets Concept** under Income Tax Act applies.
* Motor cars used in business are part of a **block of assets** under Section **2(11)** and Section **50** of the Income Tax Act.
2. **Depreciation claim and sale of asset:**
* When you sell a depreciable asset (like a motor car), the **difference between sale price and written down value (WDV) of the block** is considered a gain or loss.
3. **Capital gains or short-term capital gains?**
* **Depreciable assets are always treated as short-term capital assets, irrespective of the holding period.**
* So, **any gain on sale of motor car (or other depreciable assets) is taxable as short-term capital gains (STCG).**
4. **Relevant Sections:**
* **Section 50:** Deals specifically with capital gains on transfer of depreciable assets forming part of block of assets.
* The gain is computed as:
**Sale Price – WDV of the block immediately before the sale**
* This gain is treated as **short-term capital gain** regardless of holding period.
---
### Summary:
| Situation | Tax Treatment | Section |
| ------------------------------------- | ------------------------------------------------------ | ---------- |
| Sale of motor car (depreciable asset) | Gain is **short-term capital gain**, taxed accordingly | Section 50 |
| Holding period irrelevant | Always short-term, even if held > 3 years | Section 50 |
---
If you want, I can help you draft the exact formula or journal entries for this transaction. Would that help?
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