Wdv of block
This query is : Resolved
11 May 2016
Mr.X has block of assets worth Rs.1 crore. Dep rate of block is 15%. Entire block is destroyed due to fire. Rs.10 lakhs is recieved from insurance company. What is the tax treatment?? Please help me
12 May 2016
You have to book as loss by fire in your accounts and set off assets with received from insurance company.
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12 May 2016
by entering loss in your books of accounts you will reduce your company profit. your tax will be calculated with the loss of assets which is booked in your P&L Account.
13 May 2016
its treats as short term capital loss not come under business income.
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13 May 2016
Sir then how to treat 10lakhs insurance claim?? And 90lakhs will be the short term capital loss??
03 August 2025
Here’s how the WDV block loss and insurance claim are treated for tax purposes in your case:
Situation Recap:
Block WDV = ₹1 crore
Depreciation rate = 15%
Entire block destroyed by fire
Insurance claim received = ₹10 lakhs
Tax Treatment:
Insurance claim (₹10 lakhs):
Considered as capital receipt.
It is taxable as capital gains if it exceeds the block’s WDV.
But here, claim is less than WDV, so it’s just a capital receipt to be adjusted against the block.
Loss on block:
Since the entire block is destroyed, the block is considered to have ceased to exist.
The block WDV is ₹1 crore, claim received is ₹10 lakhs → net loss = ₹90 lakhs.
This loss is treated as short-term capital loss under Income Tax Act.
It cannot be claimed as business loss, only as capital loss.
You can set off this loss against other capital gains (if any) in the same year.
If not set off fully, can be carried forward for 8 assessment years for set-off against future capital gains.
Summary:
Aspect Tax Treatment
Insurance claim (₹10L) Capital receipt, part of block adjustment
Loss on block (₹90L) Short-term capital loss, set off against capital gains only
Practical Accounting:
Debit Insurance claim (asset) ₹10L
Debit Loss on asset ₹90L (capital loss)
Credit Asset block ₹1 crore (write off block)
Situation Recap:
Block WDV = ₹1 crore
Depreciation rate = 15%
Entire block destroyed by fire
Insurance claim received = ₹10 lakhs
Tax Treatment:
Insurance claim (₹10 lakhs):
Considered as capital receipt.
It is taxable as capital gains if it exceeds the block’s WDV.
But here, claim is less than WDV, so it’s just a capital receipt to be adjusted against the block.
Loss on block:
Since the entire block is destroyed, the block is considered to have ceased to exist.
The block WDV is ₹1 crore, claim received is ₹10 lakhs → net loss = ₹90 lakhs.
This loss is treated as short-term capital loss under Income Tax Act.
It cannot be claimed as business loss, only as capital loss.
You can set off this loss against other capital gains (if any) in the same year.
If not set off fully, can be carried forward for 8 assessment years for set-off against future capital gains.
Summary:
Aspect Tax Treatment
Insurance claim (₹10L) Capital receipt, part of block adjustment
Loss on block (₹90L) Short-term capital loss, set off against capital gains only
Practical Accounting:
Debit Insurance claim (asset) ₹10L
Debit Loss on asset ₹90L (capital loss)
Credit Asset block ₹1 crore (write off block)
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