Section 41 of the Income-tax Act, 2025 defines written down value: actual cost for an asset acquired in the year, cost less depreciation actually allowed for earlier assets, and for a block, the formula [(A−D)+B−C]−E.
What section 41 does
Section 41 supplies the figure that section 33 depreciates. It is drawn from section 43 of the Income-tax Act, 1961, and it is the section to cite whenever a depreciation computation is questioned.
There are three definitions in sub-section (1). For an asset acquired in the tax year, written down value is the actual cost. For an asset acquired earlier, it is actual cost less depreciation actually allowed under this Act or the 1961 Act. For a block of assets, it is the formula [(A−D)+B−C]−E.
The formula rewards careful reading. A is the opening written down value of the block, D the depreciation actually allowed on it in the preceding year, B the actual cost of assets added during the year, C the moneys payable plus scrap value on assets sold, transferred, demolished, destroyed or discarded — capped so that C cannot exceed (A−D)+B — and E the slump sale adjustment.
The Income-tax Act, 2025 takes effect from 1 April 2026 and applies from tax year 2026-27. The Income-tax Act, 1961 continues to govern every year up to 31 March 2026, including assessments, appeals and penalties for those years, because of the repeal and savings provision in section 536. Figures quoted here are the amounts written into the Act as enacted (with the Gazette corrigenda of 3 September 2025); the annual Finance Act can change rates and thresholds.
Old Act and new Act, side by side
The table below shows what the Income-tax Act, 1961 did and where the same ground is covered in the Income-tax Act, 2025.
| Income-tax Act, 1961 | What it did | Income-tax Act, 2025 |
|---|---|---|
| 43(6)(a) | Actual cost for an asset acquired in the year | 41(1)(a) |
| 43(6)(b) | Cost less depreciation actually allowed | 41(1)(b) |
| 43(6)(c) | Block of assets formula | 41(1)(c) |
| 43(6)(c)(i)(C) | Slump sale reduction | 41(1)(c) — item E |
| 43(1), Explanation 2 / 7 | Group and amalgamation transfers at written down value | 41(2) |
| 43 | Actual cost | 39 |
| 32 | Depreciation | 33 |
Section 41 sub-section by sub-section
Read this alongside the bare text — each heading below is a sub-section of the section as enacted.
Sub-section (1)(a) and (b) — individual assets
For an asset acquired in the tax year, written down value is the actual cost to the assessee. For an asset acquired before the tax year, it is the actual cost less depreciation actually allowed under this Act or under the Income-tax Act, 1961 — the express reference to the old Act is what carries historical depreciation across the transition.
Sub-section (1)(c) — the block formula
For a block of assets, written down value is [(A−D)+B−C]−E, where: A is the written down value of the block in the immediately preceding tax year; B is the actual cost of assets acquired during the year falling within the block; C is moneys payable together with scrap value for assets in the block sold, transferred, demolished, destroyed or discarded during the year; D is the depreciation actually allowed on the block in the immediately preceding year; and E is the slump sale adjustment.
The cap on C, and why it matters
C shall not exceed (A−D)+B. The written down value of a block can therefore fall to nil but never go negative. Where realisations exceed that figure, the excess is not carried as a negative balance — it surfaces as a balancing charge under section 38(1)(b) instead.
Item E — the slump sale reduction
In a slump sale, E is the actual cost of the asset in the block as reduced by (i) depreciation actually allowed for the tax year commencing 1 April 1986 or earlier, and (ii) depreciation allowable for years from 1 April 1987 under this Act or the 1961 Act, as if the asset were the only asset in the block. Note the shift from allowed to allowable in the second limb.
Sub-section (2) — group transfers keep the transferor's written down value
Where a block of assets is transferred (a) by a holding company to its subsidiary satisfying section 70(1)(c); (b) by a subsidiary to its holding company satisfying section 70(1)(d); or (c) by an amalgamating company to an amalgamated Indian company, then irrespective of section 39, the actual cost in the transferee's hands is the same as the written down value in the transferor's hands in the immediately preceding year. Group reorganisation cannot be used to step up a depreciation base.
Worked example
A block of plant and machinery for tax year 2026-27, at a prescribed rate of 15%.
| Element | Description | Amount |
|---|---|---|
| A | Written down value of the block in 2025-26 | ₹2,40,00,000 |
| D | Depreciation actually allowed on the block in 2025-26 | ₹36,00,000 |
| B | Actual cost of machines added during 2026-27 | ₹90,00,000 |
| C | Moneys payable plus scrap on a machine sold during 2026-27 | ₹28,00,000 |
| E | Slump sale adjustment | Nil |
| Written down value under section 41(1)(c) | [(₹2,40,00,000 − ₹36,00,000) + ₹90,00,000] − ₹28,00,000 | ₹2,66,00,000 |
| Depreciation for 2026-27 under section 33 | 15% × ₹2,66,00,000 | ₹39,90,000 |
Now suppose the machine had realised ₹3,20,00,000 instead of ₹28,00,000. Because C cannot exceed (A−D)+B = ₹2,94,00,000, the written down value would be nil rather than negative, and the excess would be taxed as a balancing charge under section 38(1)(b).
If this block had been received from a wholly owned subsidiary in a section 70(1)(d) transfer, sub-section (2) would fix the actual cost in the transferee's hands at the transferor's written down value — not at the consideration paid.
Compliance checklist and due dates
- Apply the formula in order: reduce the opening figure by prior-year depreciation actually allowed before adding acquisitions.
- Cap C at (A−D)+B; a block's written down value never goes negative.
- Where realisations exceed the block, recognise a balancing charge under section 38(1)(b).
- For a slump sale, compute item E on the as-if-only-asset basis, using allowable depreciation for years from 1 April 1987.
- On a group or amalgamation transfer meeting section 70(1)(c) or (d) or clause (2)(c), carry the transferor's written down value across, not the price paid.
- Include depreciation allowed under the Income-tax Act, 1961 when computing written down value for assets held across the transition.
Common mistakes
- Adding acquisitions before deducting prior-year depreciation, which inflates the block.
- Allowing a block to go negative instead of recognising a balancing charge.
- Stepping up the depreciation base on an intra-group transfer; sub-section (2) prevents it.
- Using depreciation allowable where the section says allowed, or the reverse, in the slump sale computation.
- Ignoring depreciation allowed under the 1961 Act for assets acquired before the transition.
This is an explanatory guide, not tax advice, and it does not reproduce the section in full. Read the bare text of the section before you rely on it, and check for later amendments, the Income-tax Rules made under the new Act, and CBDT circulars and notifications.