Section 86 — Capital gains on transfer of certain capital assets not to be charged in case of investment in residential house
Old Act equivalent: Section 54F of IT Act 1961 Sub-part: E.—Capital gains
Statutory Text
(1) If an individual or a Hindu undivided family has— (a) capital gains arising from the transfer of any long-term capital asset, not being a residential house (original asset); and (b) within one year before, or two years after, the date of such transfer, purchased, or has within three years after that date constructed, one residential house in India (new asset), then, the capital gains shall be dealt with as follows:— (i) if the net consideration is more than the cost of the new asset, so much of the capital gains as bears to the whole of the capital gains, the same proportion as the cost of the new asset bears to the net consideration, shall not be charged under section 67; or (ii) if the net consideration is equal to or less than the cost of the new asset, no capital gains shall be charged under section 67. (2) If the net consideration referred to in sub-section (1) is not utilised by the assessee to purchase the new asset within one year before the date of transfer of the original asset, or is not utilised for the purchase or construction of the new asset before filing the return of income under section 263, then,— (a) the unutilised amount shall be deposited in a specified bank or institution and utilised as per the scheme notified by the Central Government; (b) such deposit shall be made before the filing of the return and not later than the due date applicable in the case of the assessee for filing the return of income under section 263; and (c) the proof of deposit shall be submitted along with such return. (3) For the purposes of sub-section (1), the amount already utilised for purchasing or constructing the new asset together with the deposited amount under sub-section (2) shall, subject to sub-section (8), be deemed to be the cost of the new asset. (4) If the amount deposited under sub-section (2) is not wholly or partly utilised for purchasing or constructing the new asset within the period specified in sub-section (1), then,— (a) the amount determined as per the following formula shall be charged under section 67 as income of the tax year in which three years from the date of the transfer of the original asset expires:— X – Y, where,— X = the capital gains not charged under section 67 as per sub-section (1).
Sub-sections
Sub-section (1)
If an individual or a Hindu undivided family has— (a) capital gains arising from the transfer of any long-term capital asset, not being a residential house (original asset); and (b) within one year before, or two years after, the date of such transfer, purchased, or has within three years after that date constructed, one residential house in India (new asset), then, the capital gains shall be dealt with as follows:— (i) if the net consideration is more than the cost of the new asset, so much of the capital gains as bears to the whole of the capital gains, the same proportion as the cost of the new asset bears to the net consideration, shall not be charged under section 67; or (ii) if the net consideration is equal to or less than the cost of the new asset, no capital gains shall be charged under section 67.
Sub-section (2)
If the net consideration referred to in sub-section (1) is not utilised by the assessee to purchase the new asset within one year before the date of transfer of the original asset, or is not utilised for the purchase or construction of the new asset before filing the return of income under section 263, then,— (a) the unutilised amount shall be deposited in a specified bank or institution and utilised as per the scheme notified by the Central Government; (b) such deposit shall be made before the filing of the return and not later than the due date applicable in the case of the assessee for filing the return of income under section 263; and (c) the proof of deposit shall be submitted along with such return.
Sub-section (3)
For the purposes of sub-section (1), the amount already utilised for purchasing or constructing the new asset together with the deposited amount under sub-section (2) shall, subject to sub-section (8), be deemed to be the cost of the new asset.
Sub-section (4)
If the amount deposited under sub-section (2) is not wholly or partly utilised for purchasing or constructing the new asset within the period specified in sub-section
Sub-section (1)
, then,— (a) the amount determined as per the following formula shall be charged under section 67 as income of the tax year in which three years from the date of the transfer of the original asset expires:— X – Y, where,— X = the capital gains not charged under section 67 as per sub-section (1).
Provisos
None.
Explanations
None.
Tables
None.
Key Structure
- Applies to: Individual or Hindu undivided family.
- Asset type: Any long-term capital asset other than a residential house (original asset), with investment in one residential house in India (new asset).
- Conditions: Purchase of residential house within one year before or two years after transfer, or construction within three years after transfer; proportional exemption based on the ratio of cost of new asset to net consideration.
- Time limits: Purchase: one year before or two years after transfer; construction: three years after transfer; deposit of unutilised net consideration before filing return under section 263 and not later than the due date under section 263.
- Monetary limits: Cap of ten crore rupees for cost of new asset and for net consideration counted for the deposit rule (per sub-section (8) reference).
- Exceptions: Does not apply if the assessee owns more than one other residential house on date of transfer; exemption withdrawn if new asset is transferred within three years; if deposited amount is not fully utilised within the specified period, the shortfall is charged under section 67 as income of the tax year in which three years from the date of transfer expires.
Cross-References
- s067-charging — capital gains or unutilised amounts charged under section 67.
- s263 — return filing timeline governs the deposit requirement under sub-section (2).
Amendment Notes
None noted from the extracted pages.