The taxable share is not the WDV reduction
For tax year 2026–27, section 41(10) of the Income-tax Act, 2025 addresses an assessee whose income is derived partly from agriculture and partly from business chargeable under profits and gains of business or profession. For WDV of assets acquired before the tax year, depreciation is computed as though the entire income arose from business. That full amount is deemed depreciation actually allowed under the 2025 Act or the 1961 Act. Reducing WDV only by the amount reflected in the taxable share can therefore overstate the remaining basis. Income-tax Act, 2025, section 41(10), as amended by Finance Act, 2026.
Keep two connected calculations
Maintain the full depreciation working and the separate computation allocating composite income to its taxable and agricultural components. Section 41(10) addresses the WDV history; it does not prescribe a universal taxable-income percentage for every crop or enterprise. Establish the applicable allocation rule independently. The fractions used below are expressly assumed allocations, not statements of statutory plantation percentages. Income-tax Act, 2025, section 41(10), as amended by Finance Act, 2026.
The asset and activity perimeter matters
Confirm that the income is genuinely mixed agricultural-business income and that the asset was acquired before the relevant tax year. Do not apply the subsection merely because a taxpayer happens to own farmland alongside an unrelated business. Pure agricultural activity, a newly acquired asset, changes in use, block movements and disposals require their own applicable treatment. A label in an asset register does not establish the legal connection. Income-tax Act, 2025, section 41(10), as amended by Finance Act, 2026.
Rebuild opening history before calculating the current claim
Trace original cost, full eligible depreciation for each relevant earlier year, and subsequent events affecting the asset or block. The subsection expressly refers to depreciation under both enactments, so do not discard the 1961 Act history when entering tax year 2026–27. Where old files retain only the taxable component, reconstruct the full allowance from the underlying computation and filed evidence; do not estimate a convenient opening WDV. Income-tax Act, 2025, section 41(10), as amended by Finance Act, 2026.
Use the reconciliation once
A correction to an overstated opening WDV is not an extra current deduction. Conversely, keeping the full deemed reduction in the asset schedule does not authorise a second add-back of the agricultural share elsewhere without a legal basis. Reconcile the asset schedule to the composite-income computation and identify what each number represents. Preserve an explanation where the ledger depreciation differs from tax depreciation. Income-tax Act, 2025, section 41(10), as amended by Finance Act, 2026.
Period and illustration limits
The 2025 Act commenced on 1 April 2026. This section reference is for tax year 2026–27 and is not a replacement section number for an AY 2026–27 return relating to FY 2025–26. All example allowances are assumed independently established full eligible depreciation amounts. The examples isolate the WDV effect and do not prescribe depreciation rates, income-allocation rules, tax liability or treatment of sales and additions. Income-tax Act, 2025, section 41(10), as amended by Finance Act, 2026.
Applicable primary references
Income-tax Act, 2025, section 41(10), as amended by Finance Act, 2026
Six worked illustrations
All facts and amounts below are fictional. Assumptions describe the model, not additional statutory rules.
Illustrative example 1: One earlier allowance
An asset's relevant cost is ₹100 lakh. Verified full prior depreciation is ₹15 lakh; only ₹6 lakh was reflected in the assumed taxable component. With no other WDV movements, opening WDV is ₹85 lakh. Deducting only ₹6 lakh would show ₹94 lakh and overstate basis by ₹9 lakh.
Illustrative example 2: Two-year evidence trail
Relevant cost is ₹200 lakh and independently established full prior allowances are ₹20 lakh and ₹18 lakh. Cumulative deemed depreciation is ₹38 lakh and the isolated opening WDV is ₹162 lakh. A file retaining taxable components of ₹8 lakh and ₹7.2 lakh would show ₹184.8 lakh if used incorrectly, an overstatement of ₹22.8 lakh.
Illustrative example 3: Different allocations, same full allowance
Two otherwise identical model assets each have cost ₹100 lakh and full prior depreciation ₹10 lakh. The assumed taxable components are ₹4 lakh for A and ₹6 lakh for B. Both WDV workings reduce basis to ₹90 lakh. Using the taxable components instead would produce ₹96 lakh and ₹94 lakh, neither representing the full deemed reduction.
Illustrative example 4: Correct a migrated opening balance
A migrated schedule records cost ₹150 lakh and prior taxable-component depreciation ₹12 lakh, giving ₹138 lakh. Source evidence establishes full prior depreciation of ₹30 lakh. Correct opening WDV is ₹120 lakh and the migration difference is ₹18 lakh. It is a correction of the basis history, not a new ₹18 lakh expense claim.
Illustrative example 5: Separate old and new acquisitions
At the opening of the model year, an earlier asset has cost ₹80 lakh and full prior depreciation ₹8 lakh, leaving ₹72 lakh. A separate asset costing ₹50 lakh is acquired during the year. The earlier-asset working is ₹72 lakh; the new asset's ₹50 lakh is tracked separately for its applicable current-year rules. The ₹122 lakh control sum is not a statement that both assets form one statutory block or qualify for an identical current allowance.
Illustrative example 6: Bridge a closing balance to the next opening
Assume the applicable full tax-depreciation computation establishes an allowance of ₹12 lakh against a verified ₹120 lakh opening basis, with no other movements. The isolated closing basis is ₹108 lakh. If the assumed taxable component of that allowance is ₹4.8 lakh, subtracting only it would show ₹115.2 lakh and overstate the next opening by ₹7.2 lakh. The current allowance itself must be supported independently.
Ten-step verification table
| Step | Action | Evidence |
|---|---|---|
| 1 | Identify the tax period | 2025 Act applicability and earlier enactment history. |
| 2 | Establish mixed income | Activity evidence and the separately verified allocation rule. |
| 3 | Identify relevant assets | Acquisition dates and use in the composite activity. |
| 4 | Trace the original basis | Cost and earlier tax asset records. |
| 5 | Reconstruct full prior allowances | Year-wise eligible depreciation before income allocation. |
| 6 | Separate taxable components | Composite-income workings without substituting them for full allowances. |
| 7 | Check other movements | Additions, disposals and applicable block adjustments separately. |
| 8 | Reconcile opening and closing WDV | Full deemed reductions and supported carry-forward amounts. |
| 9 | Explain book-to-tax differences | Ledger, computation and migration reconciliation. |
| 10 | Approve the history | Evidence-linked sign-off without a duplicate current deduction. |
Sixteen practitioner FAQs
1. What does section 41(10) address?
The WDV computation where income is derived partly from agriculture and partly from taxable business.
2. Is the taxable share the only depreciation deducted from WDV?
No. The subsection uses full depreciation computed as though the entire income arose from business.
3. Does it state one universal agricultural allocation percentage?
No. Verify the separately applicable income-allocation rule.
4. Are the illustration fractions statutory rates?
No. They are assumed taxable components used to expose a reconciliation error.
5. Which assets does the subsection expressly refer to?
Assets acquired before the tax year in the specified mixed-income situation.
6. Does ownership of farmland alone establish applicability?
No. Establish the actual mixed agricultural-business income facts.
7. Can pure agricultural income automatically be brought within this rule?
Do not extend the provision beyond its stated mixed-income scope.
8. Must earlier 1961 Act depreciation be retained?
Yes. The subsection expressly recognises the earlier enactment's depreciation history.
9. Can a taxable-component ledger prove full depreciation by itself?
It may be incomplete. Obtain the underlying full allowance computation.
10. Is an opening-WDV correction a fresh deduction?
No. Correct the basis history and separately determine the current allowance.
11. Do additions and disposals disappear from the working?
No. Apply their governing rules separately rather than treating the isolated examples as a complete block computation.
12. Can two activities with different taxable fractions have the same WDV reduction?
Yes, where their independently established full allowances are the same.
13. Does the rule equalise accounting depreciation and tax depreciation?
No. Reconcile those distinct measures.
14. Does the article prescribe plantation-specific tax percentages?
No. Those must be researched for the actual activity and period.
15. Why preserve acquisition dates?
They establish whether the asset belongs in the subsection's before-the-tax-year population.
16. Can this new section number be mechanically used for FY 2025–26?
No. Determine the applicable enactment for the earlier period separately.
Conclusion
Reconcile tax WDV for mixed agricultural-business income using full deemed depreciation under section 41(10), rather than only the taxable-income component.