Section 54GB of Income Tax Act provides exemption for capital gain on transfer of house property. Section 54GB lays down certain conditions in order to claim this exemption. The exemption under section 54GB is not available to Companies or Firms. In this topic, certain issues like Specified Asset meaning under Section 54GB, Exemption limit under Section 54GB and Conditions regarding purchase and deposit under Section 54GB will be covered in detail.
Who can claim exemption under Section 54GB
An individual or a Hindu undivided family
Which specified asset is eligible : Section 54GB Income Tax Act
On transfer of a long term residential property (a house or a plot of land) if transfer takes place during April 1, 2012 and March 31, 2017. (in case of eligible start up, residential property can be transferred up to March 31, 2019.
What is the time-limit for acquiring the new asset : Section 54GB Income Tax Act
Equity shares in an “eligible company” should be acquired on or before the due date of furnishing of return of income under section 139(1). The “eligible company” should utilize this amount for the purchase of a “new asset” within one year from the date of subscription in equity shares. For bank deposit,
How much is exempt : Section 54GB Income Tax Act
Investment in “new asset” by the eligible company ÷ net sale consideration × capital gain. Exemption cannot exceed capital gain,
It is possible to revoke the exemption : Section 54GB Income Tax Act
In the following cases, exemption will be taken back and the amount of exemption (or proportionate exemption) given earlier under section 54 GB will become long-term capital gain of the assessee (i.e. transferor of residential property). It shall be taxable in the year in which the assessee or the eligible company commits the following defaults-
- If the equity shares in the eligible company are sold or otherwise transferred by the assessee within 5 years from the date of acquisition.
- If the “new asset” is sold or otherwise transferred by the eligible company within 5 years from the date of acquisition.
- If the deposit account is not utilized fully or partly by the eligible company for purchasing the new asset within 1 year from the date of subscription in equity shares (by the assessee).
What is new asset : Section 54GB Income Tax Act
it means new plant and machinery. However, it does not include the following: (a) any plant or machinery which is used in India or outside India by any person before its installation by the eligible company; (b) any plant or machinery which is installed in office premises/ residential accommodation/guest house; (c) any office appliance; (d) computers/computer software.
However, w.e.f. AY 2017-18 in the case of an eligible start up , being technology driven start up so certified by the InterMinisterial Board of Certifiaction notified by the Cental Govt., the new asset shall include computer and computer software. (e) any vehicle; and (f)any plant or machinery which is allowed 100 percent deduction(by depreciation or otherwise) in any previous year.
Eligible Start Up : Section 54GB Income Tax Act
What is “eligible start-up” or “eligible business ““eligible business” means a business which involves innovation, development, deployment, or commercialisation of new products, processes or service driven by technology or intellectual property. “eligible start-up” means a company engaged in eligible business an satisfies the following conditions:
- It is incorporated during April 1, 2016 and March 31, 2019
- The total Turnover of its business does not exceed Rs 25 crore in any of the previous years during April 1, 2016 and March 31, 2021.
- It holds the certificate of eligible business from the Inter-Ministerial Board of Certification as notified by the Central Govt.