Section 54GB of Income Tax Act "Capital gain on transfer of residential property not to be charged in certain cases"
54GB. (1) Where,-
(i) the 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 eligible assessee (herein
referred to as the assessee); and
(ii) the assessee, before the due date of furnishing of
return of income under sub-section (1) of section 139,
utilises the net consideration for subscription in the
equity shares of an eligible company (herein-referred to as
the company); and
(iii) the company has, within one year from the date of
subscription in equity shares by the assessee, utilised this
amount for purchase of new asset,
then, instead of the capital gain being charged to
income-tax as the income of the previous year in which the
transfer takes place, it shall be dealt with in accordance
with the following provisions of this section, that is to
say,-
(a) if the amount of the net consideration is greater than
the cost of the new asset, then, so much of the capital gain
as it bears to the whole of the capital gain the same
proportion as the cost of the new asset bears to the net
consideration, shall not be charged under section 45 as the
income of the previous year; or
(b) if the amount of the net consideration is equal to or
less than the cost of the new asset, the capital gain shall
not be charged under section 45 as the income of the
previous year.
(2) 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 any such bank or institution as may be
specified and shall be utilised in accordance with any
scheme which the Central Government may, by notification in
the Official Gazette, frame in this behalf and the return
furnished by the assessee shall be accompanied by proof of
such deposit having been made.
(3) For the purposes of sub-section (1), the amount, if any,
already utilised by the company for the purchase of the new
asset together with the amount deposited under sub-section
(2) shall be deemed to be the cost of the new asset:
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.
(4) If the equity shares of the company or the new asset
acquired by the company are sold or otherwise transferred
within a period of five 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:
4[Provided that in case of a new asset, being computer or
computer software, acquired by an eligible start-up referred
to in the proviso to clause (d) of sub-section (6), the
provisions of this sub-section shall have effect as if for
the words "five years", the words "three years" had been
substituted.]
(5) 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,
the provisions of this sub-section shall have the effect as
if for the figures, letters and words "31st day of March,
2017", the figures, letters and words "31st day of March,
5[2021]" had been substituted.
(6) For the purposes of this section,-
(a) "eligible assessee" means an individual or a Hindu
undivided family;
(b) "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
6[twenty-five] per cent share capital or more than
6[twenty-five] per cent 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 (27 of 2006) or is an eligible start-up;
(ba) "eligible start-up" and "eligible business" shall have
the meanings respectively assigned to them in Explanation
below sub-section (4) of section 80-IAC;
(c) "net consideration" shall have the meaning assigned to
it in the Explanation to section 54F;
(d) "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.