Section 50A of ITA, 1961 : Section 50A: Special Provision For Cost Of Acquisition In Case Of Depreciable Asset

Explanation using Example

Imagine Mrs. Sharma owns a machinery business and she bought a machine for Rs. 1,00,000 in 2018. Over the years, she claimed depreciation on this machine and the written down value (WDV) as per her books in 2023 is Rs. 60,000. Now, she decides to sell the machine for Rs. 80,000. To calculate the capital gains for income tax purposes, instead of using the original cost of Rs. 1,00,000, she must use the WDV of Rs. 60,000 as the cost of acquisition, since she had claimed depreciation on the asset. Thus, her capital gains would be Rs. 20,000 (Sale price - WDV).