Article explains Important terms for Section 54GB, Conditions to be satisfied to claim section 54GB exemption, Amount of exemption available under section 54GB, Withdrawal of exemption under section 54GB and Capital Gain Deposit Account Scheme.
The provisions of section 54GB of the Income Tax Act exempts the capital gain arising from transfer of a long term capital assets being a ‘residential property’, if the amount is invested in subscription of the equity shares of the eligible company. The present article highlights the said exemption provisions of section 54GB.
Before going through the provisions of section 54GB, it is important to understand the following terms –
♣ ‘Eligible company’ –
The company that satisfies the following conditions is termed as ‘eligible company’ –
♣ ‘Net Consideration’ –
Full value of consideration (-) any expenditure exclusively incurred on account of transfer.
♣ ‘New Asset’ –
The claimant is required to satisfy following conditions in order to claim exemption under section 54GB of the Income Tax Act –
1. The capital gain has arisen on transfer of a long term capital asset. The long term capital asset should be a residential property (being a house or a plot of land).
2. Only individual or a Hindu Undivided Family (HUF) are eligible for exemption under section 54GB.
3. The claimant is required to utilize the net consideration before the due date of furnishing the income tax return. The said net consideration is to be utilized for subscription in the equity shares of an eligible company.
4. The company should utilize the amount for purchasing the new asset. The amount should be utilized within a period of one year from the date of subscription.
The amount of exemption available under section 54GB is tabulated hereunder –
|Particulars||Amount of exemption|
|Amount of net consideration is equal to or less than the cost of new asset||Entire capital gain would be exempt|
|Amount of net consideration is greater than the cost of new asset||Proportionate capital gain would be exempt in following manner –
(investment in new asset * capital gain)/ net consideration.
The equity shares of the company and the new assets acquired by the company cannot be transferred for a period of five years from the date of acquisition. However, in case the of transfer, the exemption allowed under section 54GB would be withdrawn.
The amount of exemption claimed under section 54GB would be taxable in the previous year in which the equity shares of the company or the new assets.
In order to claim exemption under section 54GB, the claimant is required to re-invest the amount within a period of one year from the date of transfer. However, if the amount is not invested within the due date of filing of the income tax return, then, the claimant is required to deposit the amount into the ‘Capital Gain Deposit Account Scheme’.
The amount so deposited in to the account needs to be utilized for subscription in equity shares within the prescribed time. However, if the amount is not utilized within the given period, the unutilized amount would be taxable in the previous year in which the time period expires.
|1||Exemption under section 54GB of Income Tax Act 1961|
|2||Section 54GA Exemption under Income Tax Act, 1961|
|3||Capital gain exemption under section 54G of Income Tax Act, 1961|
|4||Section 54F Capital Gain Tax Exemption|
|5||Section 54EE Tax Exemption on long term capital gain|
|6||Section 54EC Exemption available on investment in certain specified bonds|
|7||Section 54D Exemption from capital gain on compulsory acquisition of land or buildings forming part of industrial undertaking|
|8||Exemption from capital gain on transfer of agricultural land – Section 54B|
|9||Exemption available under section 54 of Income Tax Act|