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Income tax 2022-2023

Sujana (92 Points)

17 April 2023

Sale of building accounting treatment in PGBP when it's given as credit side of Profit and loss account

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Pranjal Gupta (141 Points)
Replied 17 April 2023

Under the provisions of the Income Tax Act, the sale of a building is considered as a capital asset and the gains or losses arising from the sale are taxable under the head 'Capital Gains' and not under the head 'Profit and Loss' in the Profit and Loss Account.

However, if the building is sold as part of the business operations, the gains or losses arising from the sale are taxable under the head 'Profits and Gains of Business or Profession' (PGBP) and not as capital gains.

In such cases, the accounting treatment for the sale of a building under PGBP would involve the following steps:

Determine the cost of acquisition of the building, including any expenses incurred in acquiring the building such as stamp duty, registration charges, brokerage fees, etc.
Determine the net book value of the building as on the date of sale by deducting any depreciation claimed on the building till the date of sale from the cost of acquisition.
Determine the sale consideration received for the building, and calculate the profit or loss on the sale by deducting the net book value of the building as on the date of sale from the sale consideration.
Show the profit or loss on the sale of the building as a separate line item in the Profit and Loss Account under the head 'Profits and Gains of Business or Profession'.

It is important to note that the tax treatment of the sale of a building under PGBP would also depend on various factors such as the nature of the building, the period of holding, etc., and the calculation of capital gains or business profits should be done as per the provisions of the Income Tax Act. It is advisable to consult a tax professional for proper guidance on the tax treatment of the sale of a building.

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Sujana (92 Points)
Replied 17 April 2023

Is the sale of building when allowed as deductions income from business Statement then does it falls under block of asset do we allow depreciation on it?

Sujana (92 Points)
Replied 17 April 2023

Is the sale of building when allowed as deductions income from business Statement then does it falls under block of asset do we allow depreciation on it?

Sujana (92 Points)
Replied 17 April 2023

Half of repairs were on Let out building so what is the treatment of this adjustment.What type of repairs it would be Capital or general repairs?

Sujana (92 Points)
Replied 17 April 2023

Depreciation on assets at the residence of employees

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Aarika (Finance Professional) (2260 Points)
Replied 12 May 2023

Capital repairs refer to the repairs that enhance the value or prolong the useful life of an asset. They typically involve significant investments and result in a substantial improvement to the asset. Examples of capital repairs include replacing a roof, repairing a foundation, adding a new room, or installing new windows.

On the other hand, general repairs are necessary to maintain the asset in good working condition. They are typically smaller in scale and focused on keeping the asset functional and aesthetically appealing. Examples of general repairs include painting the exterior of a building, fixing a broken window, or replacing a leaky faucet.