Capital Gain On Compulsory Acquisition Of Land And Building Forming Part Of Industrial Undertaking – Sec. 54D

Capital Gain On Compulsory Acquisition Of Land And Building Forming Part Of Industrial Undertaking – Sec. 54D

NATURECompulsory acquisition under any law, of land and building forming part of industrial undertaking
AVAILABLE TOAny assessee including companies, which own industrial undertakings.
PERIOD HELD BEFORE TRANSFERMore than 2 years (Thus can be Long Term or Short Term)
AMOUNT EXEMPTION OFIf capital gain < amount invested = full amount

If capital gain > amount invested = difference is taxable’

In other words, capital gains shall be exempt to the extent it is invested in the purchase/construction of new land/building for the industrial undertaking.

CONDITIONS
  • Land or building forming part of industrial undertaking is transferred and Assessee has purchased/ constructed land or building within period of three years from date of compulsory acquisition.
  • Newly acquired land and building to be used for industrial purposes i.e. shifting or reestablishing of the said undertaking or setting up of another industrial undertaking.
  • Should not be transferred for 3 years from the date of acquisition.
IF AMOUNT NOT UTILIZED TILL FILING OF RETURN U/S 139(1)The assessee should deposit the amount in Nationalized bank under the Capital Gains Deposit A/c scheme.
IF DEPOSIT NOT UTILISEDUnutilized amount taxable as CG (LT or ST) in the previous year in which three years from the date of transfer of original asset expires.
CONSEQUECES OF TRANSFER OF NEW ASSET BEFORE 3YEARSThe cost of new asset shall be reduced by the amount of capital gains exempted earlier. Therefore amount of Capital gains exempted along with Capital gains on sale of new property chargeable to tax in the year of sale of house property as STCG.

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