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Land and building

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P MURUGAN

ACCOUNTANT

163 Points Posted on 03 May 2022

An Assessee who have an own building and now used that building for his new business, how it will treated in business and accounting, how value to be calculated?

Replies (2)

Quick Summary

This discussion clarifies how to account for a building you own and then use for your new business. For income tax purposes, its value is calculated as the original cost minus accumulated depreciation. The building is treated as a capital asset, and depreciation can be claimed on it. While this is the general rule, some complexities may arise for smaller taxpayers.

Kev Men

486 Points Posted on 03 May 2022

As per Explanation 5 to section 43(1), Where a building previously the property of the assessee is brought into use for the purpose of the business or profession after the 28th day of February, 1946, the actual cost to the assessee shall be the actual cost of the building to the assessee, as reduced by an amount equal to the depreciation calculated at the rate in force on that date that would have been allowable had the building been used for the aforesaid purposes since the date of its acquisition by the assessee.

This means that the value of the building in the books for income tax purposes will be the 'Cost minus the depreciation till date'.

The building will be considered as a capital asset/fixed asset on which depreciation will be charged.