Chapter IV - Computation of Total Income
Section 41
Section 41: written down value of a depreciable asset
Section 41 defines "written down value" (WDV) - the figure on which depreciation is computed year after year for a depreciable asset or block of assets - and lays down how it carries over in various corporate reorganisation and succession scenarios.
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This article is for general information. Refer to the Income-tax Act, 2025 as amended by the Finance Act, 2026 and the Taxation and Other Laws (Amendment) Act, 2026 for the official provisions. If you need professional advice for your situation, contact Bizeneed.
Statutory text
Bare law
(1) For the purposes of computation of income under the head “Profits and gains of business or profession”, written down value means— (a) in case the asset is acquired in the tax year, the actual cost to the assessee; (b) in case the asset is acquired before the tax year, actual cost to the assessee less depreciation actually allowed under this Act or under the Income-tax Act, 1961; (c) in case of block of assets, the written down value computed in the following manner: [(A-D) + B-C]-E, where A = the written down value of the block of assets in the immediately preceding tax year; B = actual cost of any asset falling within that block, acquired during the tax year; C = moneys payable together with scrap value, if any, in respect of any asset falling within the block, which is sold, transferred, demolished, destroyed or discarded during the tax year, where “C” shall not exceed (A-D)+B; D = depreciation actually allowed in respect of block of assets in relation to the said immediately preceding tax year; E = in the case of a slump sale, the actual cost of the asset falling within that block as reduced by— (i) depreciation actually allowed in respect of tax year commencing on 1st April, 1986 or any earlier tax year; and (ii) depreciation allowable for tax year commencing on or after 1st April, 1987 under this Act or under the Income-tax Act, 1961, as if such asset was the only asset in the relevant block of asset.
(2) Where any block of asset is transferred by— (a) a holding company to its subsidiary company and the conditions of section 70(1)(c) are satisfied; (b) a subsidiary company to its holding company and the conditions of section 70(1)(d) are satisfied; or (c) amalgamating company to the amalgamated company being an Indian company, then the actual cost of the block of assets, irrespective of anything contained in section 39, in the hands of transferee company or amalgamated company, as the case may be, shall be the same as written down value of the block of assets as in the case of the transferor company or the amalgamating company in the immediately preceding tax year as reduced by depreciation actually allowed in respect of that block of asset in relation to that tax year.
(3) Where any asset, forming part of a block of assets is transferred by a demerged company to a resulting company, the written down value of block of assets of demerged company for the immediately preceding tax year, shall be reduced by the written down value of the assets transferred to the resulting company pursuant to such demerger.
(4) Where any asset, forming part of a block of assets is transferred by a demerged company to a resulting company then the actual cost of the block of assets, irrespective of anything contained in section 39, for resulting company shall be the written down value of the assets transferred from the demerged company immediately before such demerger.
(5) Where any block of assets is transferred by a private company or unlisted public company to a limited liability partnership and the conditions in section 70(1)(ze) are satisfied, then the actual cost of the block of assets, irrespective of anything contained in section 39, in the hands of limited liability partnership shall be written down value in the hands of said company as on the date of conversion of the company into limited liability partnership.
(6) Where any asset forming part of the block of assets is transferred to a company under the scheme of corporatisation of a recognised stock exchange in India approved by the Securities and Exchange Board of India, the written down value of the block of assets in the hands of such company, shall be the written down value of the assets transferred immediately before such transfer.
(7) In a case of succession in business or profession under section 313, where an assessment is made in the hands of successor under section 313(2), the written down value of any asset or block of assets shall be the amount which would have been taken as its written down value, if the assessment had been made directly on the person succeeded to.
(8) For the purposes of this section, any allowance in respect of any depreciation carried forward under section 33(11) shall be deemed to be the depreciation actually allowed.
(9) Where an assessee was not required to compute his total income for the purposes of this Act for any tax year or tax years preceding the tax year under consideration,— (a) the actual cost of an asset shall be adjusted by the amount attributable to the revaluation of such asset, if any, in the books of account; (b) the total amount of depreciation on such asset provided in the books of account of the assessee in respect of such tax year or tax years preceding the tax year under consideration shall be deemed to be the depreciation actually allowed under this Act for the purposes of this clause; and (c) the depreciation actually allowed under clause (b) shall be adjusted by the amount of depreciation attributable to such revaluation of the asset.
(10) For the purposes of this section, where the income of an assessee is derived, in part from agriculture and in part from business chargeable to income-tax under the head “Profits and gains of business or profession”, for computing the written down value of assets acquired before the tax year, the total amount of depreciation shall be computed as if the entire income is derived from the business of the assessee under the head “Profits and gains of business or profession” and the depreciation so computed shall be deemed to be the depreciation actually allowed under this Act or under the Income-tax Act, 1961.
(11) For the purposes of this section, the term “sold” shall have the meaning assigned to it in section 38(6)(a).
Introduction
Written-down value is the running tax value used for depreciation. It changes as assets enter or leave a block and may carry through specified reorganisations without a fresh market-value reset.
Key takeaways
Block WDV
Written-down value of a depreciable block begins with the prescribed opening value, adds the actual cost of assets acquired and reduces it for assets sold or otherwise disposed of during the year.
Continuity rules
Specific amalgamation, demerger and succession rules preserve or apportion written-down value rather than automatically resetting it to a transfer price.
The basic WDV formula
Section 41(1) defines written down value as: the actual cost to the assessee, for an asset acquired in the tax year itself; the actual cost less depreciation actually allowed, for an asset acquired in an earlier year; and for a block of assets, a formula that starts with the previous year's WDV, adds the actual cost of assets acquired during the year, and subtracts the moneys payable (plus scrap value) for assets sold, transferred, demolished, destroyed or discarded during the year (capped so it cannot exceed the opening WDV plus additions).
Carry-over of WDV in corporate reorganisations
The section sets out how WDV is inherited by the transferee in several reorganisation scenarios:
- Holding company to subsidiary, or subsidiary to holding company (conditions in Section 70(1)(c)/(d) met), or amalgamating to amalgamated Indian company: the transferee's actual cost is the transferor's WDV in the immediately preceding tax year, reduced by depreciation actually allowed for that year (Section 41(2)).
- Demerged company to resulting company: the demerged company's WDV for the preceding year is reduced by the WDV of assets transferred to the resulting company (Section 41(3)); the resulting company's actual cost is the WDV of those transferred assets immediately before the demerger (Section 41(4)).
- Private/unlisted public company converting to an LLP (conditions in Section 70(1)(ze) met): the LLP's actual cost is the company's WDV as on the date of conversion (Section 41(5)).
- Assets transferred under a stock-exchange corporatisation scheme approved by SEBI: the transferee company's WDV is the WDV of the assets immediately before the transfer (Section 41(6)).
- Succession in business under Section 313, where assessment is made on the successor: WDV is what it would have been had the assessment been made directly on the person succeeded to (Section 41(7)).
Other adjustments
Depreciation carried forward as unabsorbed depreciation under Section 33(11) is deemed to be "depreciation actually allowed" for WDV purposes (Section 41(8)).
Where an assessee was not required to compute total income for earlier years, the actual cost is adjusted for any revaluation reflected in the books, and the depreciation provided in the books for those years is deemed to be "depreciation actually allowed", itself adjusted for the revaluation impact (Section 41(9)).
Where income is derived partly from agriculture and partly from business, WDV for assets acquired before the tax year is computed as if the entire income were business income (Section 41(10)).
Step-by-step flow for applying Section 41
- 1
Is the computation for a single asset or for a block of assets?
- Single asset: WDV is actual cost (if acquired this year) or actual cost less depreciation actually allowed (if acquired earlier).
- Block of assets: Go to the next step.
- 2
Take the opening WDV of the block and subtract last year's depreciation actually allowed
That is the (A - D) part of the formula.
- 3
Add actual cost of assets acquired in the year (B)
Use actual cost as computed under Section 39.
- 4
Subtract moneys payable plus scrap value for assets sold, discarded, demolished or destroyed (C)
C cannot exceed (A - D) + B. In a slump sale, also reduce E as defined in the section.
- 5
Was the block received in an amalgamation, demerger or qualifying holding-subsidiary transfer?
Sections 41(2) and (3) carry over the transferor's WDV instead of the normal Section 39 cost.
Practical checklist
Do
- Reconcile each block's opening WDV to the preceding return.
- Add qualifying actual cost and subtract disposal proceeds as Section 41 directs.
- For a reorganisation, trace the predecessor block and statutory apportionment rule.
Avoid
- Do not use the company's book net value as tax WDV without reconciliation.
- Do not reset WDV to a transfer price merely because legal ownership changed.
Illustrative example
Worked example: one year's block movement
Hypothetical facts (illustration only, not a real taxpayer): A firm's furniture block had a WDV of ₹5 lakh for the immediately preceding tax year, on which depreciation of ₹50,000 was actually allowed. This year it buys new furniture for ₹1 lakh and sells old furniture for ₹30,000.
A - D
₹5,00,000 - ₹50,000 = ₹4,50,000.
Add B
₹4,50,000 + ₹1,00,000 = ₹5,50,000.
Less C
₹5,50,000 - ₹30,000 = ₹5,20,000. C (₹30,000) does not exceed (A - D) + B, so the cap does not bite.
Outcome
- The WDV of the block for this year is ₹5,20,000, on which depreciation is computed under Section 33.
- Where sales would exceed the block value, the gain-related provisions on depreciable assets must also be checked.
Glossary
- Written-down value
- A tax asset or block value after the Act's cost, depreciation and disposal adjustments.
- Block of assets
- A grouped class of assets carrying the same prescribed depreciation rate.
Frequently asked questions
What is "written down value" under Section 41?
It is the value on which depreciation is calculated - for a newly acquired asset, its actual cost; for an asset acquired earlier, its actual cost minus depreciation already allowed; and for a block of assets, the opening WDV plus additions minus disposals during the year, as defined by the formula in Section 41(1)(c).
Does WDV carry over unchanged in an amalgamation?
Yes - under Section 41(2), where a block of assets is transferred to an amalgamated Indian company, the transferee's actual cost is the amalgamating company's WDV for the preceding year, reduced by the depreciation actually allowed for that year - so depreciation continues seamlessly rather than resetting.
How does unabsorbed depreciation affect WDV?
Section 41(8) deems depreciation carried forward and treated as unabsorbed under Section 33(11) to be "depreciation actually allowed" for the purpose of computing WDV in later years.
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Get your written down value computation checked by our tax audit teamLast updated 10 October 2026