Section 85 — Capital gains not to be charged on investment in certain bonds
Old Act equivalent: Section 54EC of IT Act 1961 Sub-part: E.—Capital gains
Statutory Text
(1) Where an assessee has— (a) long-term capital gains arising from the transfer of land or building, or both, (original asset); and (b) within six months after the date of such transfer, invested whole or part of the capital gains in a long-term specified asset (new asset), then, the capital gains shall be dealt with as follows:— (i) if the capital gains exceed the investment in the new asset, the amount of capital gains as exceeds such investment shall be charged under section 67; or (ii) if the capital gains are equal to or less than the investment in the new asset, the whole of such capital gains shall not be charged under section 67. (2) For the purposes of sub-section (1), investment made in the long-term specified asset from capital gain arising from transfer of one or more original asset shall not exceed fifty lakh rupees,— (a) during any tax year; or (b) in the year of transfer of the original asset or assets and in the subsequent tax year. (3) If the new asset is transferred or converted (otherwise than by transfer) into money within five years of its acquisition, the capital gains not charged under section 67 as per sub-section (1), shall be deemed to be income chargeable as long-term capital gains in the tax year of its transfer or conversion. (4) Any loan or advance taken on the security of the new asset shall be deemed to have converted the new asset into money on the date of such loan or advance. (5) Where the investment in the new asset has been taken into account for sub-section (1), no deduction under section 123 for any tax year shall be allowed for such investment. (6) For the purposes of sub-section (1), “long-term specified asset” means any bond, redeemable after five years and issued on after the 1st April 2018, by the National Highways Authority of India constituted under section 3 of the National Highways Authority of India Act, 1988 (68 of 1988) or by the Rural Electrification Corpora- tion Limited, a company formed and registered under the Companies Act, 2013 (18 of 2013) or any other bond as may be notified by the Central Government for the purposes of this section. Capital gains on transfer of certain capital assets not to be charged in case of investment in residential house.
Sub-sections
Sub-section (1)
Where an assessee has— (a) long-term capital gains arising from the transfer of land or building, or both, (original asset); and (b) within six months after the date of such transfer, invested whole or part of the capital gains in a long-term specified asset (new asset), then, the capital gains shall be dealt with as follows:— (i) if the capital gains exceed the investment in the new asset, the amount of capital gains as exceeds such investment shall be charged under section 67; or (ii) if the capital gains are equal to or less than the investment in the new asset, the whole of such capital gains shall not be charged under section 67.
Sub-section (2)
For the purposes of sub-section (1), investment made in the long-term specified asset from capital gain arising from transfer of one or more original asset shall not exceed fifty lakh rupees,— (a) during any tax year; or (b) in the year of transfer of the original asset or assets and in the subsequent tax year.
Sub-section (3)
If the new asset is transferred or converted (otherwise than by transfer) into money within five years of its acquisition, the capital gains not charged under section 67 as per sub-section (1), shall be deemed to be income chargeable as long-term capital gains in the tax year of its transfer or conversion.
Sub-section (4)
Any loan or advance taken on the security of the new asset shall be deemed to have converted the new asset into money on the date of such loan or advance.
Sub-section (5)
Where the investment in the new asset has been taken into account for sub-section (1), no deduction under section 123 for any tax year shall be allowed for such investment.
Sub-section (6)
For the purposes of sub-section (1), “long-term specified asset” means any bond, redeemable after five years and issued on after the 1st April 2018, by the National Highways Authority of India constituted under section 3 of the National Highways Authority of India Act, 1988 (68 of 1988) or by the Rural Electrification Corpora- tion Limited, a company formed and registered under the Companies Act, 2013 (18 of 2013) or any other bond as may be notified by the Central Government for the purposes of this section. Capital gains on transfer of certain capital assets not to be charged in case of investment in residential house.
Provisos
None.
Explanations
None.
Tables
None.
Key Structure
- Applies to: Any assessee having long-term capital gains from transfer of land or building or both.
- Asset type: Long-term capital gains arising from transfer of land or building or both (original asset); reinvestment in long-term specified asset being bonds redeemable after five years issued by NHAI, REC Limited, or other notified bodies.
- Conditions: Investment of whole or part of capital gains in a long-term specified asset within six months after the date of transfer.
- Time limits: Investment within six months after date of transfer; lock-in period of five years during which the new asset must not be transferred or converted into money.
- Monetary limits: Investment counted for exemption cannot exceed fifty lakh rupees during any tax year, or across the year of transfer and the subsequent tax year.
- Exceptions: Loan or advance taken on the security of the new asset is treated as conversion into money on the date of such loan or advance; no deduction under section 123 is allowed for the same investment; if new asset is transferred or converted into money within five years, the exempted capital gains become chargeable as long-term capital gains in that tax year.
Cross-References
- s067-charging — capital gains exceeding the investment charged under section 67; deemed income on early transfer also charged under section 67.
- s123 — no deduction allowed under section 123 where investment already counted for exemption under this section.
Amendment Notes
None noted from the extracted pages.