Eligibility comes before the opening-balance calculation
For tax year 2026–27, section 41(9) of the Income-tax Act, 2025 deals with an assessee who was not required to compute total income for purposes of the Act for a preceding tax year or years. It adjusts actual cost for book revaluation, treats the relevant book depreciation as depreciation actually allowed for that clause, and adjusts that depreciation for the revaluation component. A taxpayer who merely failed to file a required return cannot assume that the statutory condition is satisfied. Income-tax Act, 2025, section 41(9), as amended by Finance Act, 2026.
Do not substitute a new valuation for cost history
The provision requires an adjustment to actual cost for the amount attributable to revaluation in the books. Identify the underlying historical cost, each revaluation movement and the amount carried in the accounting register. A current gross book figure can include an uplift that is not the starting tax cost. The illustrations isolate upward revaluation and remove that uplift from the model basis; they do not decide every possible downward-revaluation or transition fact pattern. Income-tax Act, 2025, section 41(9), as amended by Finance Act, 2026.
Separate total book depreciation from its revaluation component
Under clause (b), the relevant prior book depreciation is deemed actually allowed for purposes of the clause. Clause (c) then requires adjustment for depreciation attributable to the revaluation. Reconcile both the gross asset and the accumulated depreciation. Removing an uplift from the asset while leaving the uplift-related depreciation in the reduction would distort the resulting basis. Income-tax Act, 2025, section 41(9), as amended by Finance Act, 2026.
Confirm what the prior period actually was
Retain the legal reason why the assessee was not required to compute total income and the periods to which that conclusion applies. A nil taxable result, no tax payable, an unfiled return and a genuine absence of a computation requirement are different facts. New registration or a change in accounting software does not by itself establish the condition. Where the legal status is uncertain, resolve it before adopting a deemed-depreciation working. Income-tax Act, 2025, section 41(9), as amended by Finance Act, 2026.
Maintain an asset-wise bridge
For each asset, retain original records, relevant book depreciation, revaluation increments and depreciation attributable to those increments. Reconcile migrated gross and net book values to that evidence. Then apply other relevant WDV, block, addition and disposal provisions separately. The isolated arithmetic below assumes eligibility has already been established and that there are no other basis movements. Income-tax Act, 2025, section 41(9), as amended by Finance Act, 2026.
Use the correct enactment and avoid a duplicate deduction
This article uses the 2025 Act, effective from 1 April 2026, for tax year 2026–27. It does not mechanically substitute a new section number into an AY 2026–27 return for FY 2025–26. Correcting an opening basis is not a fresh depreciation claim or an automatic current-year expense. Determine the current allowance independently after the supported opening position is established. Income-tax Act, 2025, section 41(9), as amended by Finance Act, 2026.
Applicable primary references
Income-tax Act, 2025, section 41(9), 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: No revaluation in the relevant history
Assume section 41(9)'s condition is established. Historical cost is ₹100 lakh and relevant prior book depreciation ₹25 lakh. With no revaluation or other movements, the isolated basis is ₹75 lakh. Starting at ₹100 lakh merely because no earlier tax deduction was separately claimed would omit the clause's deemed reduction of ₹25 lakh.
Illustrative example 2: Adjust both sides of an upward revaluation
The accounting register has gross value ₹150 lakh, comprising original cost ₹100 lakh and uplift ₹50 lakh. Prior book depreciation is ₹40 lakh, including ₹10 lakh attributable to the uplift. The model adjusts gross value to ₹100 lakh and depreciation to ₹30 lakh, leaving ₹70 lakh. Unadjusted net book value is ₹110 lakh; the difference is ₹40 lakh.
Illustrative example 3: Two prior periods
Original cost is ₹200 lakh. Relevant book depreciation in two established non-computation periods is ₹20 lakh and ₹18 lakh, with no revaluation. Total deemed depreciation is ₹38 lakh and the isolated basis ₹162 lakh. Keeping only the latest ₹18 lakh reduction would show ₹182 lakh and overstate this model basis by ₹20 lakh.
Illustrative example 4: Remove a duplicated revaluation reduction
Gross book value is ₹120 lakh, including uplift ₹20 lakh. Accumulated book depreciation is ₹30 lakh, including uplift-related depreciation ₹5 lakh. Adjusted depreciation is ₹25 lakh and basis ₹75 lakh. Deducting the full ₹30 lakh after already removing the uplift would instead show ₹70 lakh, understating the model basis by ₹5 lakh.
Illustrative example 5: Reconcile two separate assets
Asset A has historical cost ₹80 lakh and relevant depreciation ₹12 lakh, with no revaluation. Asset B has gross book value ₹90 lakh including uplift ₹30 lakh, and depreciation ₹18 lakh including uplift depreciation ₹6 lakh. A's basis is ₹68 lakh; B's is ₹48 lakh. Their ₹116 lakh control sum does not establish that both belong to the same tax block or use the same current depreciation rate.
Illustrative example 6: Find a migration difference
A migrated file shows unadjusted net book value ₹144 lakh from gross ₹180 lakh less depreciation ₹36 lakh. Evidence identifies a ₹60 lakh uplift within gross value and ₹12 lakh uplift depreciation. Adjusted gross value is ₹120 lakh, adjusted depreciation ₹24 lakh and model basis ₹96 lakh. The ₹48 lakh migration difference must be explained; it is not a current expense to deduct again.
Ten-step verification table
| Step | Action | Evidence |
|---|---|---|
| 1 | Identify the applicable year | Tax-year and enactment applicability note. |
| 2 | Establish the statutory condition | Legal evidence of no prior total-income computation requirement. |
| 3 | Identify relevant prior periods | Period-wise scope rather than a generic opening balance. |
| 4 | Trace asset identity and historical cost | Original documents and asset-register links. |
| 5 | Reconcile gross book values | Historical cost and separate revaluation movements. |
| 6 | Total relevant book depreciation | Prior-period ledger and schedule evidence. |
| 7 | Identify revaluation depreciation | Calculation attributable to each revaluation movement. |
| 8 | Build the adjusted basis bridge | Gross and depreciation adjustments without duplication. |
| 9 | Review other WDV movements | Applicable block, addition, disposal and transition analysis. |
| 10 | Approve the opening position | Evidence-linked reconciliation and separate current-allowance computation. |
Sixteen practitioner FAQs
1. What triggers section 41(9)?
The assessee must satisfy the stated absence of a prior total-income computation requirement.
2. Is a missed required return enough?
No. Non-compliance does not itself establish that there was no requirement.
3. Does nil tax payable establish eligibility?
No. Verify the legal requirement separately from the tax result.
4. Does a new accounting file establish eligibility?
No. Software migration is not the statutory condition.
5. What happens to relevant prior book depreciation?
Clause (b) treats it as depreciation actually allowed for purposes of that clause, subject to the required adjustment.
6. Why separate revaluation depreciation?
Clause (c) requires adjustment for depreciation attributable to revaluation.
7. Can current gross book value always be adopted as tax cost?
No. Identify and adjust revaluation effects as required.
8. Are the examples valuations of actual companies?
No. All amounts and eligibility conclusions are fictional assumptions.
9. Do the examples cover every downward revaluation?
No. They isolate upward revaluation and the stated adjustments.
10. Must each prior period be supported?
Yes. Preserve the relevant requirement analysis and accounting history.
11. Can a basis correction become a second expense deduction?
No. Determine any current deduction under its own applicable rule.
12. Is book net value always the resulting WDV?
No. The statutory adjustments can produce a different amount.
13. Does the control total prove a single tax block?
No. Classify the assets and apply the block rules independently.
14. What if revaluation depreciation cannot be identified?
Resolve the evidence and calculation gap before adopting a supported basis.
15. Does this article set a current depreciation rate?
No. Current eligibility and rates require separate verification.
16. Can the new section number be used mechanically for FY 2025–26?
No. Establish the enactment applicable to that earlier period.
Conclusion
Apply section 41(9) only where its prior-period condition is met, reconciling book depreciation and revaluation effects before establishing the tax WDV history.