Sec 54D: Capital Gains Exemption on Compulsory Acquisition[New]

Applicability and Eligibility

• Any taxpayer i.e. Individual, HUF, Company, LLP, Firm, etc can claim an exemption under Section 54D of Income Tax Act.
• The asset which is transferred is Long Term Capital Asset or Short Term Capital Asset.
• The land or building which is compulsory acquired that must be used by assessee in the business of industrial undertaking during 2 years prior to date of transfer.

New asset to be Purchased

• New asset which is purchased i.e land or buildings for the purpose of industrial undertaking.
• The asset must be purchased within 3 years from the date of receipt of compensation.
• Amount of exemption is applicable least of the following,

>>>  Amount of capital gain
>>> Cost of new asset purchased
>>> Deposit amount in capital gain account scheme

Tax treatment if New asset transferred

If new asset is transferred within 3 years from date of purchase construction then cost of acquistion of new asset is reduced by exempted capital gain.

Example

Pratyush sold a house property in FY 2021-22 for Rs. 70,00,000. He purchased the property in FY 2016-17 for Rs. 35,00,000. And he purchased a new building  property worth Rs. 40,00,000 in another city. Pratyush will be able to claim a deduction under section 54D as follows: