Capital gains | Income-tax law | Updated 25 October 2026
Section 50A of the Income-tax Act: Cost of Acquisition of Depreciable Assets
Section 50A of the Income-tax Act, 1961 provides a special cost-of-acquisition rule where an assessee has obtained depreciation under section 32(1)(i). Instead of using the original purchase price, the capital gains calculation uses the asset's adjusted written down value (WDV).
What does Section 50A mean?
The provision modifies the normal rules for determining the cost of acquisition under Section 48 (mode of computation) and Section 49 (special modes of acquisition). It is relevant where depreciation was allowed under Section 32(1)(i), notably the straight-line method available to qualifying power-generation or power-distribution undertakings.
Written down value (WDV) means the value determined under Section 43(6) of the 1961 Act, after statutory adjustments including allowable depreciation. The adjusted WDV is treated as the cost of acquisition for this special computation. It is not automatically the original invoice price or the asset's current market value.
Section 50A: statutory rule explained
Where depreciation under Section 32(1)(i) has been obtained for a capital asset in any previous year, Sections 48 and 49 operate with the modification that the asset's adjusted written down value, as defined in Section 43(6), is taken as its cost of acquisition.
This is a plain-language restatement of the provision, not a substitute for the enacted statutory text. Section 50A was inserted by the Finance (No. 2) Act, 1998, with effect from 1 April 1998. For the official wording, see the Income-tax Act, 1961 (official consolidated text).
How is capital gain calculated under Section 50A?
Capital gain = Full value of consideration - eligible transfer expenses - adjusted WDV treated as cost of acquisition.
The final calculation is subject to all applicable capital gains provisions, valuation rules and deductions. The figure used for adjusted WDV must be calculated under the relevant depreciation rules.
Example: sale of a depreciable power-sector asset
| Particulars | Illustrative amount |
|---|---|
| Original cost of asset | Rs. 20,00,000 |
| Depreciation already allowed and adjustments (net) | Rs. 8,00,000 |
| Adjusted written down value | Rs. 12,00,000 |
| Sale consideration | Rs. 15,00,000 |
| Eligible transfer expenses | Rs. 50,000 |
| Illustrative capital gain | Rs. 2,50,000 |
Here, Rs. 12,00,000 is used as the cost of acquisition rather than the Rs. 20,00,000 original cost. This example assumes no other special valuation or computation adjustment and does not determine the applicable tax rate or holding-period classification.
Difference between Section 50 and Section 50A
| Provision | Broad purpose | Key computation concept |
|---|---|---|
| Section 50 | Capital gains for depreciable assets forming part of a block of assets | Block-level WDV and deemed short-term capital gains under specified conditions |
| Section 50A | Cost of acquisition of an asset for which Section 32(1)(i) depreciation was obtained | Adjusted WDV of the relevant asset substitutes for cost of acquisition |
Do not assume the special deemed short-term treatment in Section 50 automatically follows from Section 50A. Determine the relevant depreciation method and the applicable charging and computation provisions first.
Section 75 of the Income-tax Act, 2025
For tax years beginning on or after 1 April 2026, Section 75 sets out the corresponding rule: where depreciation has been obtained under the provision referred to in Section 75, the asset's adjusted WDV, defined in Section 41, is taken as cost of acquisition for applying Sections 72 and 73. Section 72 concerns capital gains computation; Section 73 deals with cost in specified acquisition cases.
The section references and exact depreciation cross-reference should be checked against the latest amended official Act before filing or advising on a transaction. Read the official Income-tax Act, 2025 (PDF).
Practical checklist
- Confirm whether depreciation was claimed under Section 32(1)(i), rather than the usual block method.
- Reconcile the asset's opening cost, depreciation allowed and statutory WDV adjustments.
- Keep invoices, depreciation schedules, asset registers and sale agreements.
- Apply the law for the correct tax year and check whether any other special computation provision overrides the ordinary formula.
Official statutory references
- Income Tax Department: Section 50A, Income-tax Act, 1961
- Income Tax Department: Income-tax Act, 1961, amended by Finance (No. 2) Act, 2024
- Income Tax Department: Income-tax Act, 2025
- Income Tax Department: Depreciation and WDV guidance
Frequently asked questions
What is Section 50A of the Income-tax Act, 1961?
It requires adjusted written down value, rather than original purchase price, to be treated as cost of acquisition where depreciation under section 32(1)(i) was obtained.
What is the corresponding provision from 1 April 2026?
Section 75 of the Income-tax Act, 2025 corresponds to former section 50A; read it with sections 72, 73 and 41 of that Act.
Does Section 50A apply to every depreciable business asset?
No. It addresses assets for which depreciation under section 32(1)(i) was obtained. The separate block-of-assets capital gains rules under section 50 may instead apply to ordinary depreciable blocks.
Can the original cost be used after depreciation has been claimed?
Not where section 50A applies: the adjusted written down value is substituted as the cost of acquisition for the capital gains computation.
This article is general information. Computation and tax treatment depend on the applicable law, facts, depreciation history and transaction date.