EXEMPTIONS OF OF CAPITAL GAINS UNDER SECTION 54 TO 54G
Introduction: as per section 45(1) Any profits or gains arising from the transfer of a capital asset effected in the previous year shall, save as otherwise provided in sections 54, 54B, 54D, 54E, 54EA, 54EB, 54F, 54G and 54H, be chargeable to income-tax under the head “Capital gains”, and shall be deemed to be the income of the previous year in which the transfer took place. In other words capital shall not be taxable at all if conditions of section 54, 54B 54D, 54E, 54EA, 54EB, 54F, 54G and 54H satisfied. So to minimize tax liabilities of capital gain one must be aware of the exemptions mentioned in these sections, which are explained hereunder.
Extension of time limit for acquiring new asset or depositing or investing amount of capital gain if compulsory acquisition of capital asset and delay in receiving compensation: Notwithstanding anything contained in sections 54, 54B, 54D 54EC and 54F, where the transfer of the original asset is by way of compulsory acquisition under any law and the amount of compensation awarded for such acquisition is not received by the assessee on the date of such transfer, the period for acquiring the new asset by the assessee referred to in those sections or, as the case may be, the period available to the assessee under those sections for depositing or investing the amount of capital gain in relation to such compensation as is not received on the date of the transfer, shall be reckoned from the date of receipt of such compensation[ section 54H]
| Section
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Particular | Type of assessee entitled for exemption | Conditions for claiming exemption |
| 54 | Long term Capital gain on transfer of residential house property.
Note: long term capital gain of other assets and purchase or construction of residential house is covered under section 54F. |
Individual or HUF. |
Nature of capital assets: long-term capital asset being buildings or lands appurtenant thereto, and being a residential house , the income of which is chargeable under the head “Income from house property Nature of capital gain on transfer: long term capital gain, In other words transfer of assets after 24 months Basis of claiming exemption: The assessee has purchased one residential house in India within 1 year before or 2 years after the date on which transfer took place, or constructed one residential house* in India within a period of 3 year after the date on which transfer took place. * option to purchase or construct two residential houses: from AY 2020-21, where the amount of the capital gain does not exceed ₹ 2 crore, the assessee may, at his option, purchase or construct two residential houses in India, Provided further that where during any AY , the assessee has exercised the option referred to in the first proviso, he shall not be subsequently entitled to exercise the option for the same or any other assessment year. In other words this option can be exercised once a life time unless further change in the tax law provisions. Amount of exemption: (1) Cost of new assets purchased or constructed < amount of capital gain, then capital gain (-) cost of new assets shall be taxable as capital gain u/s 45 and to the extent of investment in new assets shall be exempt. Further if the new assets so acquired transferred within 3 years, the cost of acquisition of new assets shall be nil. (2) Cost of new assets purchased or constructed > amount of capital gain, then entire capital gain shall not be taxed. Further cost of new assets shall be cost of new assets (-) as capital gain claimed exempt. What to do if assets neither purchased nor constructed? The amount of the capital gain which is not appropriated by the assessee towards the purchase of the new asset made within 1 year before the date on which the transfer of the original asset took place, or which is not utilised by him for the purchase or construction of the new asset before the date of furnishing the return of income under section 139(1) , shall be deposited by him before furnishing such return such deposit being made in any case not later than the due date applicable in the case of the assessee for furnishing the return of income under section 139(1) in capital gain scheme which the Central Government may, by notification in the Official Gazette, frame in this behalf and such return shall be accompanied by proof of such deposit; and, for the purposes of sub-section 54(1), the amount, if any, already utilised by the assessee for the purchase or construction of the new asset together with the amount so deposited shall be deemed to be the cost of the new asset : Taxability if new assets purchased transferred within 3 years: Assessee should hold the house property for 3 years from its purchased/construction but if the assessee transferred within a period of 3 years from its purchased/construction then while computing capital the cost of new assets shall be reduced by capital gains exempted earlier. Tax treatment of unutilized amount: Amount deposited in Capital gain scheme account remains unutilized beyond 2 for purchase /3 years for construction. if the amount deposited under capital gain scheme is not utilised wholly or partly for the purchase or construction of the new asset within the period specified in section 54 (1), then,— (i) the amount not so utilised shall be charged under section 45 as the income of the previous year in which the period of 3 years from the date of the transfer of the original asset expires; and (ii) the assessee shall be entitled to withdraw such amount in accordance with the scheme aforesaid.
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| 54B | Capital gain on transfer of land used for agricultural purpose | Individual or HUF. | Nature of capital assets: agricultural land* used by an individual or his parents or by HUF for agriculture purposes during 2 years immediately preceding the date of transfer.
Note: rural agriculture land is not a capital assets as per section 2(14). Nature of capital gain on transfer: long term capital gain because after 2 years land become long term capital asset as per amended definition of short term capital asset u/s 2(42A) Basis of claiming exemption: assessee has, within a period of 2 years after that date, purchased any other land* for being used for agricultural purposes, then, instead of the capital gain being charged to income-tax as income of the previous year in which the transfer took place, it will be exempt. *such purchased land may be rural agriculture land as well. Amount of exemption: (i) if the amount of the capital gain > cost of the land so purchased (new asset), then capital gain (-) cost of the new asset shall be charged to capital under section 45 as the income of the previous year; further for the purpose of computing capital gain on transfer of new asset within a period of 3 years of its purchase , the cost of acquisition of new capital assets shall be nil; or (ii) if the amount of the capital gain is equal to or less than the cost of the new asset, the capital gain shall not be charged on transfer of new assets under section 45; and Further for the purpose of computing any capital gain arising from its transfer of new asset within a period of 3 years of its purchase, the cost shall be reduced, by the amount of the capital gain. The assessee had purchased agriculture land within 2 years after the date of transfer the original agriculture land. Further if the new assets so acquired transferred within 3 years, the cost of acquisition of new assets shall be nil.
Note: restriction on transfer of new assets within 3 years.
Deposit scheme if agriculture land not purchased with Time period of 2 years: The assessee should either purchase the agricultural land and/or deposit the amount under capital gains accounts scheme on or before the due date of furnishing of return of income.
Tax treatment of unutilised amount: Provided that if the amount deposited is not utilised wholly or partly for the purchase of the new asset within the period 2 years then,—
(i) The amount not so utilised shall be charged as capital gain under section 45 as the income of the previous year in which the period of 2 years from the date of the transfer of the original asset expires; and (ii) The assessee shall be entitled to withdraw such amount in accordance with the scheme aforesaid.
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| 54D | Capital gain on compulsory acquisition of land and buildings forming parts of industrial undertaking | Any assessee may be individual, company, firm etc. | Nature of capital assets: The assets transferred is land and building forming part of industrial undertaking belonging to the assessee and used by the assessee for the purpose of business of the industrial undertaking for at least 2 years immediately preceding the date of transfer.
Nature of transfer: compulsory acquisition of such asset. Nature of capital gain on transfer: long term capital asset because land was forming part of industrial undertaking for at least 2 years.
Basis of claiming exemption assessee has within a period of 3 years after that date purchased any other land or building or any right in any other land or building or constructed any other building for the purposes of shifting or re-establishing the said undertaking or setting up another industrial undertaking,
Amount of exemption: (i) if the amount of the capital gain > cost of the land, building or right so purchased or the building so constructed (such land, building or right being hereafter referred to as the new asset), then capital gain (-) cost of the new asset shall be charged as capital gain under section 45 as the income of the previous year; Further for the purpose of computing any capital gain arising from transfer of new asset within a period of 3 years of its purchase or construction, as the case may be, cost of acquisition shall be nil; (ii) if the amount of the capital gain is equal to or less than the cost of the new asset, the capital gain shall not be charged under section 45; and Further for the purpose of computing any capital gain arising from transfer of new asset within a period of 3 years of its purchase or construction, as the case may be, the cost of acquisition of new asset shall be reduced by the amount of the capital gain so claimed as exempt. Note: restriction on transfer of new assets within 3 years of purchase or construction.
Deposit scheme if new asset not purchased or constructed :The assessee should either purchase or construct the land/building and/or deposit the amount under capital gains accounts scheme on or before the due date of furnishing of return of income.
Tax treatment of unutilised amount: Provided that if the amount deposited is not utilised wholly or partly for the purchase or construction of the new asset within the period specified of 3 years then,—
(i) the amount not so utilised shall be charged to capital gain tax under section 45 as the income of the previous year in which the period of 3 years from the date of the transfer of the original asset expires; and (ii) the assessee shall be entitled to withdraw such amount in accordance with the scheme aforesaid.
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| 54EC | Capital Gain on transfer of long term capital assets being Land or building or both | Any assessee | Nature of capital assets: long-term capital asset , being land or building or both( called original asset)
Nature of capital gain on transfer: long term capital gain. Basis of claiming exemption: assessee has, at any time within a period of 6 months after the date of such transfer, invested the whole or any part of capital gains in the long-term specified asset. Meaning of long-term specified asset: means any bond, redeemable after 5 years and issued on or after the 1st day of April, 2018, by the National Highways Authority of India or by the Rural Electrification Corporation Limited, or any other bond notified in the Official Gazette by the Central Government. Note: for bond issued before 1-04-2018 redemption period was 3 years. Amount of exemption: (a) if the cost of the long-term specified asset( new assets) is not less than the capital gain arising from the transfer of the original asset, the whole of such capital gain shall not be charged under section 45; (b) if the cost of the long-term specified asset( new asset) is < the capital gain arising from the transfer of the original asset, Amount exempt = capital gain to the extent of cost of acquisition of the long-term specified asset hall not be charged under section 45 Maximum limit of exemption: Provided that the investment made on or after the 1st day of April, 2007 in the long-term specified asset by an assessee during any financial year does not exceed ₹ 50 lakh. Aggregate limit in more than one AYs.: Provided further that the investment made by an assessee in the long-term specified asset, from capital gains arising from transfer of one or more original assets, during the financial year in which the original asset or assets are transferred and in the subsequent financial year does not exceed ₹ 50 lakh. No deduction under section 80C if exemption of capital gain: The cost of long term specified assets which is considered for the purpose of exemption under this section shall not be eligible for deduction with reference to such cost u/s 80C. Note: no capital gain scheme here. Transfer or conversion of into money of new assets within 5 years: Where the long-term specified asset( new asset) is transferred or converted (otherwise than by transfer) into money at any time within a period of 5 years from the date of its acquisition, the amount of capital gains arising from the transfer of the original asset not charged under section 45 on the basis of the cost of such long-term specified asset shall be deemed to be the income chargeable under the head “Capital gains” relating to long-term capital asset of the previous year in which the long-term specified asset is transferred or converted (otherwise than by transfer) into money. Loan or advance on the security of such specified asset: where the original asset is transferred and the assessee invests the whole or any part of the capital gain received or accrued as a result of transfer of the original asset in any long-term specified asset and such assessee takes any loan or advance on the security of such specified asset, he shall be deemed to have converted (otherwise than by transfer) such specified asset into money on the date on which such loan or advance is taken.
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| 54EE | Capital gain on transfer of any long term capital assets not to be charged if investment in units of a specified fund | Any assessee |
Nature of capital gain on transfer: long term capital gain on transfer of any capital asset. Basis of claiming exemption: assessee has, at any time within a period of 6 months after the date of such transfer, invested the whole or any part of capital gains in the long-term specified asset. Meaning of long-term specified asset: unit or units, issued before the 1st day of April, 2019, of such fund as may be notified by the Central Government in this behalf. Amount of exemption: (a) if the cost of the long-term specified asset( new assets) is not less than the capital gain arising from the transfer of the original asset, the whole of such capital gain shall not be charged under section 45; (b) if the cost of the long-term specified asset( new asset) is < the capital gain arising from the transfer of the original asset, Amount exempt = capital gain to the extent of cost of acquisition of the long-term specified asset hall not be charged under section 45 Maximum limit of exemption: Provided that the investment made on or after the 1st day of April, 2016, in the long-term specified asset by an assessee during any financial year does not exceed ₹ 50 lakh. Provided further that the investment made by an assessee in the long-term specified asset, from capital gains arising from the transfer of one or more original assets, during the financial year in which the original asset or assets are transferred and in the subsequent financial year does not exceed ₹ 50 lakh. Consequence of transfer of new asset within 3 years: Where the long-term specified asset is transferred by the assessee at any time within a period of 3 years from the date of its acquisition, the amount of capital gains arising from the transfer of the original asset not charged under section 45 on the basis of the cost of such long-term specified asset as provided in clause (a) or, as the case may be, clause (b) of sub-section (1) shall be deemed to be the income chargeable under the head “Capital gains” relating to long-term capital asset of the previous year in which the long-term specified asset is transferred. Loan or advance on the security of such specified asset: where the original asset is transferred and the assessee invests the whole or any part of the capital gain received or accrued as a result of transfer of the original asset in any long-term specified asset and such assessee takes any loan or advance on the security of such specified asset, he shall be deemed to have converted (otherwise than by transfer) such specified asset into money on the date on which such loan or advance is taken. |
| 54F | Long term Capital gain from transfer of any capital asset other than residential house.
Note: long term capital gain from transfer of residential house is covered u/s 54 so excluded from here. |
individual or a Hindu undivided family | Nature of capital gain: capital gain arises from the transfer of any long-term capital asset, not being a residential house.
Exemption: assessee has purchased, within a period of 1 year before or 2 years after the date on which the transfer took place or has within a period of 3 years after that date constructed, one residential house in India. Amount of exemption: (a) if the cost of the new asset > net consideration in respect of the original asset transferred , the whole of such capital gain shall not be charged to capital gain under section 45 ; (b) if the cost of the new asset < net consideration in respect of the original asset, Amount of capital gain exempt= capital gain X (cost of the new asset) / net consideration Meaning of “net consideration“, in relation to the transfer of a capital asset, means the full value of the consideration received or accruing as a result of the transfer of the capital asset as reduced by any expenditure incurred wholly and exclusively in connection with such transfer. Deposit in capital gain scheme: The amount of the net consideration which is not appropriated by the assessee towards the purchase of the new asset made within one year before the date on which the transfer of the original asset took place, or which is not utilised by him for the purchase or construction of the new asset before the date of furnishing the return of income under section 139, shall be deposited in capital gain scheme account by him before furnishing such return and such deposit must be made in any case not later than the due date for furnishing the return of income section 139(1) and such return shall be accompanied by proof of such deposit ; and, the amount, if any, already utilised by the assessee for the purchase or construction of the new asset together with the amount so deposited shall be deemed to be the cost of the new asset for claiming exemption u/s 45(1). Consequence of non-utilization of fund of capital gain scheme within 3 years from date of transfer: Provided that if the amount deposited under capital gain scheme is not utilised wholly or partly for the purchase within 2 years or construction of the new asset within 3 years then,— (i) the amount by which— [the amount of capital gain arising from the transfer of the original asset not charged under section 45 on the basis of the cost of the new asset as provided in clause (a) or, as the case may be, clause (b) of sub-section (1), (-) the amount that would not have been so charged had the amount actually utilised by the assessee for the purchase or construction of the new asset within the period specified been the cost of the new asset.] shall be charged to capital under section 45 as income of the previous year in which the period of 3 years from the date of the transfer of the original asset expires; and (ii) the assessee shall be entitled to withdraw the unutilised amount in accordance with the scheme aforesaid. Conditions for claiming exemption is not more than one house except new one: exemption shall not apply a) where the assessee, (i) owns more than one residential house, other than the new asset, on the date of transfer of the original asset; or (ii) purchases any residential house, other than the new asset, within a period of one year after the date of transfer of the original asset; or (iii) constructs any residential house, other than the new asset, within a period of 3 years after the date of transfer of the original asset; and (b) the income from such residential house, other than the one residential house owned on the date of transfer of the original asset, is chargeable under the head “Income from house property”. Restriction on purchase or construction of another residential house property : Where the assessee purchases, within the period of 2 years after the date of the transfer of the original asset, or constructs, within the period of 3 years after date of transfer, any residential house*, the income from which is chargeable under the head “Income from house property”, other than the new asset, Consequence of purchase/construction: amount of capital gain arising from the transfer of the original asset not charged under section 45 on the basis of the cost of such new asset as provided in clause (a), or, as the case may be, clause (b), of sub-section 54F(1), shall be deemed to be income chargeable under the head “Capital gains” relating to long-term capital assets of the previous year in which such residential house is purchased or constructed. *note: no restriction on purchase of plot of land or any commercial premises. Restriction on sale of new assets purchased or constructed: Where the new asset is transferred within a period of 3 years from the date of its purchase or, as the case may be, its construction, the amount of capital gain arising from the transfer of the original asset not charged under section 45 on the basis of the cost of such new asset as provided in clause (a) or, as the case may be, clause (b), of sub-section (1) shall be deemed to be income chargeable under the head “Capital gains” relating to long-term capital assets of the previous year in which such new asset is transferred.] |
| 54G | Capital gain on transfer of assets in cases of shifting of Industrial Undertaking from urban areas to non- urban area. | Any assessee | Nature of capital assets transferred: capital asset (may be long term or short term), being machinery or plant or building or land or any rights in building or land used for the purposes of the business of an industrial undertaking situate in an urban area, effected in the course of, or in consequence of, the shifting of such industrial undertaking (referred to as the original asset) to any area (other than an urban area).
Meaning of urban area: urban area” means any such area within the limits of a municipal corporation or municipality as the Central Government may, having regard to the population, concentration of industries, need for proper planning of the area and other relevant factors, by general or special order, declare to be an urban area74 for the purposes of this sub-section. Exemption for shifting the undertaking from urban to non- urban area. Exemption for purchase of new machinery or plant for the purposes of business/ new machinery or plant for the purposes of business/ exp. for transfer etc. Time limit for purchase etc. to claim exemption: assessee has within a period of 1 year before or 3 years after the date on which the transfer took place,— (a) purchased new machinery or plant for the purposes of business of the industrial undertaking in the area to which the said undertaking is shifted ; (b) acquired building or land or constructed building for the purposes of his business in the said area ; (c) shifted the original asset and transferred the establishment of such undertaking to such area; and (d) incurred expenses on such other purpose as may be specified in a scheme framed by the Central Government for the purposes of this section, Amount of capital gain exempt: (i) if the amount of the capital gain > cost and expenses incurred ; capital gain (-) cost of the new asset shall be charged under section 45 as the income of the previous year ; and Further for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of 3 years of its being purchased, acquired, constructed or transferred, as the case may be, the cost shall be nil ; or (ii) if the amount of the capital gain < the cost of the new asset, the capital gain shall not be charged under section 45 ; and Further for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of 3 years of its being purchased, acquired, constructed or transferred, as the case may be, the cost of new assets shall be cost of new assets (-)amount of capital gain exempt. Deposit into capital gain scheme on before due date of ITR u/s 139(1): The amount of capital gain which is not appropriated by the assessee towards the cost and expenses incurred in relation to all or any of the purposes like purchase, acquisition etc. mentioned in clauses (a) to (d) of sub-section (1) within one year before the date on which the transfer of the original asset took place, or which is not utilised by him for all or any of the purposes aforesaid before the date of furnishing the return of income under section 139, shall be deposited by him before furnishing such return & such deposit being made in any case not later than the due date applicable in the case of the assessee for furnishing the return of income under sub-section (1) of section 139(1) in capital gain scheme account and such return shall be accompanied by proof of such deposit ; and, for the purposes of sub-section 54 G (1), the amount, if any, already utilised by the assessee for all or any of the purposes aforesaid together with the amount, so deposited shall be deemed to be the cost of the new asset for claiming exemption. Consequence of amount not utilized during 3 years: Provided that if the amount deposited under this sub-section is not utilised wholly or partly for all or any of the purposes within 3 years then,— (i) the amount not so utilised shall be charged under section 45 as the income of the previous year in which the period of 3 years from the date of the transfer of the original asset expires ; and (ii) the assessee shall be entitled to withdraw such amount in accordance with the scheme aforesaid. |
| 54GA | Capital gain on transfer of assets in the case of shifting of Industrial undertaking from urban area to any SEZ( special economic zone) | Nature of capital assets: capital asset, being machinery or plant or building or land or any rights in building or land used for the purposes of the business of an industrial undertaking situate in an urban area.
Nature of transfer : transfer of capital assets effected in the course of, or in consequence of the shifting of such industrial undertaking to any Special Economic Zone, whether developed in any urban area or any other area. Exemption for shifting of the industrial undertaking from urban area to any Special Economic Zone, whether developed in any urban area or any other area. Meaning of urban area: urban area” means any such area within the limits of a municipal corporation or municipality as the Central Government may, having regard to the population, concentration of industries, need for proper planning of the area and other relevant factors, by general or special order, declare to be an urban area for the purposes of this sub-section. SEZ : shall have the meaning assigned to it in section 2(za) of the Special Economic Zones Act, 2005 ; Exemption for purchase of new machinery or plant for the purposes of business/ new machinery or plant for the purposes of business/ exp. for transfer etc. Time limit for purchase etc. to claim exemption: assessee has within a period of one year before or 3 years after the date of transfer ,— (a) purchased machinery or plant for the purposes of business of the industrial undertaking in the Special Economic Zone to which the said undertaking is shifted; (b) acquired building or land or constructed building for the purposes of his business in the Special Economic Zone; (c) shifted the original asset and transferred the establishment of such undertaking to the Special Economic Zone; and (d) incurred expenses on such other purposes as may be specified in a scheme framed by the Central Government for the purposes of this section. Amount of exemption: if the amount of the capital gain > cost and expenses incurred in relation to all or any of the purposes mentioned in clauses (a) to (d) (such cost and expenses being hereafter in this section referred to as the new asset), then the capital gain (-) cost of the new asset shall be charged as capital gain under section 45 as the income of the previous year; and Further for the purpose of computing capital gain on new asset arising from its transfer within a period of 3 years of its being purchased, acquired, constructed or transferred, as the case may be, the cost shall be Nil; or (ii) if the amount of the capital gain < cost of the new asset, the capital gain shall not be charged under section 45, and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of 3 years of its being purchased, acquired, constructed or transferred, as the case may be, the cost of new assets shall be cost (-) capital gain claimed exempt. Capital gain deposit scheme: Deposit into capital gain scheme on before due date of ITR u/s 139(1): The amount of capital gain which is not appropriated by the assessee towards the cost and expenses incurred in relation to all or any of the purposes like purchase, acquisition etc. mentioned in clauses (a) to (d) of sub-section (1) within one year before the date on which the transfer of the original asset took place, or which is not utilised by him for all or any of the purposes aforesaid before the date of furnishing the return of income under section 139, shall be deposited by him before furnishing such return & such deposit being made in any case not later than the due date applicable in the case of the assessee for furnishing the return of income under sub-section (1) of section 139(1) in capital gain scheme account and such return shall be accompanied by proof of such deposit ; and, for the purposes of sub-section 54 G (1), the amount, if any, already utilised by the assessee for all or any of the purposes aforesaid together with the amount, so deposited shall be deemed to be the cost of the new asset for claiming exemption. Consequence of amount not utilized during 3 years: Provided that if the amount deposited under this sub-section is not utilised wholly or partly for all or any of the purposes within 3 years then,— (i) the amount not so utilised shall be charged under section 45 as the income of the previous year in which the period of 3 years from the date of the transfer of the original asset expires ; and (ii) the assessee shall be entitled to withdraw such amount in accordance with the scheme aforesaid. |
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| 54GB | Capital gain on transfer of residential property and subscription in the equity shares of an eligible company
Note: The provisions of this section shall not apply to any transfer of residential property made after the 31st day of March, 2017. Provided that in case of an investment in eligible start-up, exemption shall be available if transfer of residential property by “31st day of March 2022. |
individual or a Hindu undivided family | Nature of capital assets: capital gain arises from the transfer of a long-term capital asset, being a residential property (a house or a plot of land), owned by the individual or a Hindu undivided family
Exemption for subscription in shares of eligible company: assessee being individual or HUF , before the due date of furnishing of return of income under section 139(1), utilizes the net consideration for subscription in the equity shares of an eligible company and such eligible company has within 1 year from the date of subscription in equity shares by the assessee, utilised this amount for purchase of new asset; Amount of exemption: (a) if the amount of the net consideration > cost of the new asset, then, exempt amount of capital gain = capital gain X cost of the new asset bears/ net consideration; or (b) if the amount of the net consideration < cost of the new asset, the capital gain shall not be charged under section 45 as the income of the previous year. Deposit in Capital gain scheme account : non utilisation of subscription amount on or before due date u/s 139(1), the amount of the net consideration, which has been received by the company for issue of shares to the assessee, to the extent it is not utilised by the company for the purchase of the new asset before the due date of furnishing of the return of income by the assessee under section 139, shall be deposited by the company, before the said due date in an account in capital gain scheme account and the return furnished by the assessee shall be accompanied by proof of such deposit having been made. Consequence of non-utilization within time period of 1 year: Provided that if the amount so deposited is not utilised, wholly or partly, for the purchase of the new asset within the period specified in sub-section (1), then,— (i) the amount by which— (a) the amount of capital gain arising from the transfer of the residential property not charged under section 45 on the basis of the cost of the new asset as provided in sub-section (1), exceeds— (b) the amount that would not have been so charged had the amount actually utilised for the purchase of the new asset within the period specified in sub-section (1)been the cost of the new asset, shall be charged under section 45 as income of the assessee for the previous year in which the period of one year from the date of the subscription in equity shares by the assessee expires; and (ii) the company shall be entitled to withdraw such amount in accordance with the scheme.
Lock in period on transfer of new equity shares/ new assets acquired by the company: If the equity shares of the company or the new asset acquired by the company are sold or otherwise transferred within a period of *5 years from the date of their acquisition, the amount of capital gain arising from the transfer of the residential property not charged under section 45 as provided in sub-section (1) shall be deemed to be the income of the assessee chargeable under the head “Capital gains” of the previous year in which such equity shares or such new asset are sold or otherwise transferred, in addition to taxability of gains, arising on account of transfer of shares or of the new asset, in the hands of the assessee or the company, as the case may be. Meaning of eligible company” means a company which fulfils the following conditions, namely:— (i) it is a company incorporated in India during the period from the 1st day of April of the previous year relevant to the assessment year in which the capital gain arises to the due date of furnishing of return of income under sub-section (1) of section 139 by the assessee; (ii) it is engaged in the business of manufacture of an article or a thing or in an eligible business]; (iii) it is a company in which the assessee has more than 25% share capital or more than 25% voting rights after the subscription in shares by the assessee; and (iv) it is a company which qualifies to be a small or medium enterprise under the Micro, Small and Medium Enterprises Act, 2006 or is an eligible start-up; eligible start-up” and “eligible business” shall have the meanings respectively assigned to them in Explanation below sub-section (4) of section 80-IAC;] new asset” means new plant and machinery but does not include— (i) any machinery or plant which, before its installation by the assessee, was used either within or outside India by any other person; (ii) any machinery or plant installed in any office premises or any residential accommodation, including accommodation in the nature of a guest-house; (iii) any office appliances including computers or computer software; (iv) any vehicle; or (v) any machinery or plant, the whole of the actual cost of which is allowed as a deduction (whether by way of depreciation or otherwise) in computing the income chargeable under the head “Profits and gains of business or profession” of any previous year:] [Provided that in the case of an eligible start-up, being a technology driven start-up so certified by the Inter-Ministerial Board of Certification notified by the Central Government in the Official Gazette, the new asset shall include computers or computer software.] |
