Capital Gains & Asset Depreciation

Proper accounting of capital gains and depreciation schedules.

Proper Accounting of Capital Gains and
Depreciation Schedules

Managing capital gains and asset depreciation effectively helps businesses minimize tax liabilities and improve financial planning. The Union Budget 2025-26 has introduced key reforms that impact tax rates, indexation benefits, and compliance requirements.

Capital Gains Tax for Businesses

Capital gains arise when a business sells assets such as real estate, machinery, shares, or bonds at a price higher than the purchase cost.
Type of Capital Gain Holding Period Tax Rate Relevant Section
Short-Term Capital Gains (STCG) Up to 24 months (real estate)
Up to 36 months (other assets)
Up to 12 months (listed shares & equity MF)		 As per applicable income tax slab Section 111A (for listed securities)
Long-Term Capital Gains (LTCG) More than 24/36 months
More than 12 months (for listed shares & equity MF)		 20% (with indexation benefits) Section 112A (for stocks & equity funds)

Budget 2025-26 Updates on Capital Gains Tax

Increased LTCG Exemption Limit

The exemption limit for LTCG on equity and mutual funds has been raised from ₹1 lakh to ₹1.5 lakh under Section 112A.

Updated Indexation Rules

The base year for indexation has been revised for computing LTCG on immovable property, reducing taxable gains.

Tax Relief for Startups & MSMEs

Startups reinvesting capital gains into approved business activities can now claim higher deductions under Section 54GB.

New LTCG Tax Rates Under Budget 2025-26

Asset Type New Tax Rate (2025-26) Previous Tax Rate Exemption Limit
LTCG on Listed Equity Shares & Mutual Funds 12.5% on gains exceeding ₹1.25 lakh 10% on gains exceeding ₹1 lakh ₹1.25 lakh
LTCG on Immovable Property (Land/Buildings) Option 1: 12.5% (without indexation) Option 2: 20% (with indexation) 20% (with indexation) No Exemption
Pro Tip: If you’ve sold a property, compare both options (12.5% without indexation vs. 20% with indexation) to minimize your tax liability.

2. Asset Depreciation & Business Deductions

Depreciation allows businesses to account for asset wear and tear, reducing taxable profits. Choosing the right depreciation method is crucial for tax optimization.

Asset Category Depreciation Rate (%) Relevant Section
Plant & Machinery 15% Section 32(1)
Computers & IT Equipment 40% Section 32(1)(iia)
Commercial Buildings 10% Section 32
Intangible Assets (Patents, Trademarks, Goodwill) 25% Section 32(1)(ii)

Budget 2025-26 Updates on Depreciation

Higher Depreciation for Green Investments

Businesses investing in solar panels, electric vehicles, and energy-efficient equipment can claim an additional 20% depreciation.

Extended Carry Forward of Unabsorbed Depreciation

Startups can now carry forward unabsorbed depreciation for up to 12 years (instead of 8 years) under Section 72A.

Important Compliance & Record-Keeping

Maintain an Asset Register

Track purchase, sale, and depreciation history for accurate tax filing.

Correct Tax Treatment

Identify STCG vs. LTCG correctly and claim indexation benefits where applicable.

File ITR with New Schedules

Report capital gains under Schedule CG and depreciation under Schedule DPM in your ITR.

How Tax360 Can Help Your Business

Understanding capital gains and depreciation can be complex, but we simplify the process for you:

1. Capital Gains Calculation & Exemptions

  • Accurate STCG and LTCG computation for all asset types.
  • Guidance on tax-saving exemptions like Section 54 (property sales) and indexation benefits.

2. Depreciation Schedules & Compliance

  • Prepare detailed depreciation schedules for assets, ensuring compliance.
  • Optimize deductions under Section 32 & 32(1)(iia).

3. Tax Planning & ITR Filing

  • Minimize tax liabilities with expert planning.
  • Ensure accurate reporting in ITR to avoid penalties.
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