Capital gains section 54.pptx1111111111111111111111111111

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1. Section 54 & 54 F Sale of Property- Amount taxable - Profit earned by the individual on sale of the property is taxable means the difference between Sale Price and Cost of Acquisition of the property. Profit is taxable as Capital Gain as the property is treated as Capital Asset if used for the residential purposes. The definition of capital asset under section 2(14) of the Income Tax Act includes property of any kind movable or immovable, tangible or intangible held by the assessee for any purpose.  Assets are classified under two categories: ( i ) Long Term and (ii) Short Term. The major benefit of an asset being termed as a long-term capital asset is that the assessee is eligible for the benefit of indexation.

2. Exemption under section 54 Assesses eligible for exemption u/s 54 Individual or HUF selling a residential property if the capital gains are invested in purchase or construction of residential property.  Assesses not eligible for exemption u/s 54 Partnership firms, LLP’s, companies or any other association or body

3. Section 54…. Condition s required for claiming exemption u/s 54: Asset must be classified as a long-term capital asset. The asset under consideration is a Residential House and income from such asset should be chargeable as Income from House Property. The seller should purchase a residential house either 1 year before the date of sale/transfer or 2 years after the date of sale/transfer. In case the seller is constructing a house, the seller has an extended time, ie . the seller will have to construct the residential house within 3 years from the date of sale/transfer. The new residential house should be in India. The seller cannot buy or purchase a residential house abroad and claim the exemption. From 1st April 2023 the capital gains tax exemption under Section 54 to 54F will be restricted to Rs.10 crore . Earlier, there was no threshold. The above conditions are cumulative. Hence, even if one condition is not fulfilled, then the seller cannot avail the benefit of the exemption under Section 54. 

4. Amount of Exemption available under Section 54 of the Income-tax act The amount of exemption under Section 54 of the Income Tax Act for the long-term capital gains will be the lower of Long Term Capital gains arising on transfer of residential house, Or The investment made in purchase or construction of a new residential house property and the balance capital gains (If any) will be taxable.

5. Provisions relating to the transfer of property after claiming benefit under Section 54 If the new house is sold within 3 years from the date of purchase or construction, then the exemption claimed earlier under section 54 shall be indirectly taxable in the year of sale of the new house property.

6. Capital Gains Account Scheme If the asset is sold in the Previous Year, and the seller intends to, but is yet to purchase the new house property as the time limit of 2 years or 3 years has not yet expired, then the assessee is required to deposit the amount of gains in the Capital gains account scheme (in any branch of public sector, bank) before the due date for filing income tax returns.  The amount already incurred towards purchase/construction along with the amount deposited in the capital gains account scheme can be claimed as cost while claiming the deduction. However, if the amount deposited in the Capital Gains Account Scheme is not utilized within the time limit mentioned, then it shall be treated as income of the previous year in which 3 years expire (from the date of transfer of the original asset).

7. Section 54 vs. Section 54F Earning income automatically casts a responsibility on the taxpayers to discharge income tax on such income and so is the case with capital gains too. However, the income tax laws allow taxpayers to claim certain exemptions against capital gains, which will help reduce their tax outgo. Two such very crucial exemptions one can claim are under Sections 54 and 54F . The exemption under Section 54 is available on long-term Capital Gain on sale of a House Property. Exemption under Section 54F is available on long-term Capital Gain on sale of any asset other than a House Property.

8. Common requirements between the two Sections A new residential house property must be purchased or constructed to claim the exemption. The new residential property must be purchased either 1 year before the sale or 2 years after the sale of the property/asset. Alternately, the new residential house property must be constructed within 3 years of the sale of the property/asset. If you are not able to invest the specified amount in the manner stated above before the date of tax filing or 1 year from the date of sale, whichever is earlier, deposit the specified amount in a public sector bank (or other banks as per the Capital Gains Account Scheme, 1988 ). Only one house property can be purchased or constructed. The exemption for 2 properties for capital gains up to Rs 2 crore is only once in a lifetime benefit under Section 54.

9. Section 54 Section 54F To claim full exemption the entire capital gains have to be invested. To claim full exemption the entire sale receipts have to be invested. In case entire capital gains are not invested – the amount not invested is charged to tax as long-term capital gains. In case entire sale receipts are not invested, the exemption is allowed proportionately. This exemption will be reversed if new property is sold within 3 years of purchase and capital gains from the sale of the new property will be taxed as short-term capital gains. This exemption will be reversed If new property is sold within 3 years of its purchase or construction OR if assessee purchase another residential house within 2 years of the sale of the original asset or construct a residential house other than the new house within 3 years of the sale of the original asset. Capital gains from the sale will be taxed as long-term capital gains.

10. Section 54B: Eligibility: Exemption u/s 54B is available on transfer of agricultural land which is used for agricultural purpose. Conditions: To claim the exemption u/s 54B the following conditions should be satisfied: The taxpayer is individual or HUF. He transfers an agricultural land. It may be long term capital asset or short term capital asset. The agricultural land was used by the assesse being an individual or parents or HUF for agricultural purpose for a period of 2 years immediately preceding the date of transfer. The taxpayer/ assesse has purchased another land for agricultural purpose within a period of 2 years from the date of such transfer. In case capital gain arises on compulsory acquisition of agricultural land by the government, the time limit of 2 years shall apply from the date of receipts of compensation. The new land may be situated in an urban area or a rural area.

11. Section 54B…. Amount of exemption: The amount of exemption u/s 54B is equal to- the amount of capital gain generated on transfer of agricultural land or the amount invested in purchasing new agricultural land (including the amount deposited in the capital gain scheme), whichever is lower. Consequences if the new agricultural land is transferred within 3 years: If the new agricultural land is transferred within a period of 3 years from the date of its acquisition, the amount of exemption claimed earlier would be withdrawn.

12. Section 54B…. Scheme of deposit in capital gain account: For claiming the exemption u/s 54B the new agricultural land should be purchased within the time limit of 2 years from the date of transfer of old/ original agricultural land. For the above purpose either the assesse should purchase the new agricultural land before the filling of returnis not utilized for the purchase of new agricultural land till the due date of submission of return of income, then it should be deposited in capital gain scheme account. The amount so deposited will be treated as amount utilized in acquiring the new agricultural land. The assesse is eligible to claim the amount so deposited in capital gain scheme account as exemption u/s 54B . The assesse is required to purchase the new agricultural land of income within due date if the amount nd within 2 year from the date of transfer of original land by withdrawing the amount from capital gain scheme.

13. Section 54B…. Consequences if the deposit amount is not fully utilized : If the amount deposited in capital gain scheme account is not utilized fully for purchase of new agricultural land within the stipulated time period as discussed above, then the amount not so utilized shall be treated as capital gain of the previous year in which the period of two years from the date of transfer of original asset expires. It will be taxable as long term or short term capital gain depending upon the original capital gain.

14. Section 54H:Extention of time limit for acquiring new asset Eligibility: The capital gain should arise by the way of compulsory acquisition of an asset. The capital asset is acquired/ transferred by way of compulsory acquisition under any law. Capital asset is transferred/ acquired and the consideration is approved or determined by the Central Government (not by the State Government) or the Reserve Bank of India.

15. Section 54H…. As per Section 54H the time limit for availing the benefits of exemption u/s 54, 54B, 54D, 54EC and 54F are as under: Initial compensation - capital gain in chargeable to tax in the previous year in which the compensation (or part thereof) is first received. For availing the benefits of exemption u/s 54, 54B, 54D, 54EC and 54F , the new asset should be acquired within time specified for this purpose in the above relevant section. But the specified time limit shall be determined from the date of receipt of compensation not the date of transferred or date of acquisition of original asset. If the initial compensation is received in part than the entire initial compensation is taxable in the year in which a part is first received, but the time limit for acquiring the new asset u/s 54, 54B, 54D, 54EC and 54F shall be determined on the basis of date of receipt of different part of initial compensation.

16. Section 54H…. Enhanced compensation - If any enhanced compensation is received, it is taxable in the year in which such compensation is received and for acquiring the new asset u/s 54, 54B,54D, 54EC and 54F , the time limit shall be determined from the date of receipt of additional compensation.

17. Key points to remember If the cost of the new residential property is lower than the total sale amount, then the exemption is allowed proportionately. For the remaining amount, you can reinvest the money under Section 54EC within 6 months.   The property must only be bought on the name of the seller and not on anybody else’s name. If the builder of the new residential construction fails to hand over the property to the taxpayer within 3 years of purchase, the exemption is still allowed.

18. Section 54EC Capital gain on transfer of long-term capital assets not to be charged on investment in certain bonds [Section 54EC ] Any long-term capital gain, arising to any assessee , from the transfer of any capital asset (see amendment made by the Finance Act, 2018 below) on or after 1.4.2000 shall be exempt to the extent such capital gain is invested within a period of 6 months after the date of such transfer in the long- term specified asset provided such specified asset is not transferred or converted into money within a period of 3 years (see amendment made by the Finance Act, 2018 below) from the date of its acquisition. However, the investment made on or after 1.4.2007 in the long-term specified asset by an assessee during any financial year cannot exceed Rs.50 lakh .

19. In other words, long-term capital gain arising on the transfer of any capital asset is exempt under section 54EC in the following circumstances: (1) The asset transferred is a long-term capital asset being land or building or both and hence, there is a long-term capital gain. (2) Such asset is transferred on or after 1.4.2000. (3) The asset is transferred by any assessee . (4) The assessee has within a period of 6 months after the date of such transfer invested the capital gain in the long-term specified assets. (5) The cost of long-term specified assets which is considered for the purpose of exemption under this section, i.e., 54EC , shall not be eligible for deduction with reference to such cost under section 80C.

20. Quantum of deduction (1) If the amount of capital gain is equal to or less than the cost of the long-term specified assets acquired within 6 months of the date of transfer, the entire capital gain shall be exempt. (2) If the amount of capital gain is greater than the cost of the long-term specified assets, then the cost of the long-term specified assets shall be allowed as exemption. In other words, capital gain shall be exempt to the extent it is invested in the long-term specified assets within a period of 6 months from the date of such transfer.

21. Investment in the long-term specified asset restricted to Rs. 50 lakh   The investment made by an assessee in the long-term specified asset, out of capital gains arising from transfer of one or more original asset, during the financial year in which the original asset or assets are transferred and in the subsequent financial year does not exceed Rs.50,00,000 . Consequences if the long-term specified asset is transferred or converted into money within 3 years: Where the long-term specified asset is transferred or converted (otherwise than by transfer) into money at any time within a period of three years from the date of its acquisition, the amount of capital gain exempt under section 54EC earlier, shall be deemed to be long-term capital gain of the previous year, in which the long-term specified asset is transferred or converted (otherwise than the transfer) into money.

22. Section 54EE Capital gain not to be charged on investment in units of a specified fund Section 54EE of the Income-tax Act states that LTCG shall not be charged on the capital gains from the transfer of a long-term capital asset provided that the whole or a part of the capital gains is invested in ‘long-term specified asset’, that is, a specified government bond within six months from the date of transfer of the capital asset. Clause (a) further notes that if the cost of the long-term specified asset is not less than the capital gains arising from the transfer of the asset, the whole of such gain shall not be charged, and clause (b) states that if the cost of the long-term specified asset is less than capital gains earned, the cost of the capital gains used to acquire the former asset shall not be charged while the rest of the capital gains shall be liable to be charged. Furthermore, the maximum amount that can be invested in a long-term specified asset is fifty lakhs during a financial year and the lock-in period of these assets is five years.

23. The amount of capital gains exempted under Section 54EE is limited to the amount invested in specified bonds. Therefore, if an investor wants to exempt the entirety of his LTCG from taxation, pursuant to Section 54EE , it can only be done if the entire sum is invested into a Government-notified fund. Even under clause (a), if the cost of such fund is more than the capital gains arising from the transfer of the asset, an investor would have to invest the entirety of the capital gains into the asset as any remaining un-invested capital gains amount would be liable to be taxed at the normal rate. Furthermore, if the LTCG earned by an investor from the liquidation of his equity exceed fifty lakhs , which it would for most investors, then he would have to invest a whole fifty lakhs into the notified Government asset and get the rest of the gains taxed in order to make the maximum out of the Section 54EE exemption. This defeats the entire purpose of an exemption policy. Moreover, the lock-in period for investing in government bonds is five years, thus the investors, in order to get their money back, would have to wait for five more years on top of the numerous years they locked in their money in startups . Therefore, the exemption given under Section 54EE does nothing to ensure that the investor circulates his profits/capital gains in the form of investments into other startups as it does not provide room/incentives for the same.

24. Exemption Amount Cost of new asset x Capital Gain / Net consideration (maximum up to capital gain) CGAS* available No Additional Conditions 1. If a new asset is sold within 3 years, the amount earlier exempted under this section will be reduced from its COA to calculate capital gains thereon  2. If a loan is taken on the security of the new specified asset within 3 years, the same will be treated as capital gains  3. Investment in specified units should not exceed Rs.50 lakh during the current and succeeding fiscal year This section has no significance as no long-term specified asset has been notified till date.

25. Section 54GB Relief from long-term capital gains tax on transfer of residential property if invested in a new manufacturing SME company [Section 54GB ] Any capital gain arising to an individual or HUF from the transfer of a long-term capital asset being a residential property (a house or plot of land) shall be exempt proportionate to the net consideration price so invested in the subscription of equity shares of an eligible company before the due date of furnishing the return of income under section 139(1). Essential conditions to be satisfied: The above exemption shall be allowed if the following conditions are satisfied: 1. There should be a long-term gain from the transfer of a residential property (i.e., a house or plot of land). 2 . Such long-term capital gain should arise to an individual or HUF. 3. The amount of net consideration should be utilized by the individual or HUF before the due date of furnishing of return of income under section 139(1), for subscription in equity shares of an eligible company (hereinafter referred to as company). If the full amount of net consideration is not utilized for subscription in equity shares, the exemption shall be allowed proportionate to the amount so invested.

26. 4. The amount of subscription as share capital is to be utilized by the company for the purchase of new asset (eligible plant and machinery) within a period of one year from the date of subscription in the equity shares. 5 . The equity shares of the company or the new asset acquired by the company should not be sold or otherwise transferred by the individual/HUF or the company, as the case may be, within a period of 5 years from the date of their acquisition. In case of eligible start ups, the restriction of transfer shall be reduced from the current five years to three years (for other companies it shall remain 5 years). 6. The exemption will be available in case of any transfer of residential property made on or before 31.3.2022 in case of an investment in eligible start up instead of eligible small or medium enterprise.

27. 3. Consequence if equity shares or new asset is transferred within a period of 5 years from the date of its acquisition: (a) If the equity shares acquired by the individual or HUF are sold or otherwise transferred within a period of 5 years from the date of its acquisition, the capital gain shall arise as under:   ( i ) the capital gain arising from the transfer of equity shares shall be taxable in the previous year in which such shares are transferred, which can be short-term or long- term depending upon the period of holding. And (ii) the amount of capital gain arising from the transfer of residential property not charged under section 45(1) earlier shall be deemed to be the long-term capital gain of the previous year in which such shares are sold or otherwise transferred and hence taxable. (b ) Similarly, if the new asset (eligible plant and machinery) is sold or otherwise transferred ( by the company within a period of 5 years or 3 years, as the case may be, from the date of its acquisition, the capital gain shall arise as under : (1) the capital gain, if any arising from the transfer of such asset will be taxable in the hands of company, which will be short-term as asset is a depreciable asset forming part of block of assets, And ( 2) the amount of capital gain which was exempt under section 45(1) earlier shall be taxable as long-term capital gain in the hands of such individual or HUF in the previous year in which such asset (eligible plant and machinery) is sold or otherwise transferred.

28. 4. Capital gain scheme also applicable: If the amount of net consideration which has been received by the company for the issue of equity shares by the individual or HUF is not utilized by the company for the purchase of a new asset (eligible plant and machinery) before the due date of furnishing the return of income under section 139, the unutilized amount should be deposited before the said due date under a deposit scheme, notified by the Central Government in this behalf and the return furnished by the assessee shall be accompanied by proof of such deposit having been made. The amount so utilized and the amount so deposited in the deposit scheme shall be deemed to be the cost of a new asset (eligible plant and machinery). 5. Consequences if the amount deposited in deposit scheme is not utilized for purchase of new asset: Where the amount so deposited in deposit scheme is not utilized, wholly or partly for the purchase of new asset within a period of one year from the date of subscription in equity shares by the individual or HUF, then the difference between: (a) the exemption allowed under section 54GB earlier; And (b) the exemption that should have been allowed based on the amount actually utilized, in the purchase of new asset (eligible plant and machinery), shall be taxable as long-term capital gain in the hands of individual or HUF in which the period of one year from the date of subscription in equity share by the assessee expires and the company shall be entitled to withdraw such amount in accordance with the scheme.

29. Capital Gain on compulsory acquisition of land and buildings forming part of an industrial undertaking [Section 54D ] Any capital gain (short-term or long-term), arising to an industrial undertaking from the compulsory acquisition under any law, of any land and buildings, which have been used by such assessee , at least for a period of 2 years immediately preceding the date of compulsory acquisition, for the purpose of its business, shall be exempt to the extent such capital gain is invested in the purchase and/or construction of another land/buildings within a period of 3 years after the date of its compulsory acquisition provided the new land or building is not transferred within a period of 3 years from the date of its acquisition. However, if the new land/building is transferred within a period of 3 years from the date of its purchase/construction, for the purpose of computation of capital gain on such transfer, the cost of acquisition of such an asset shall be reduced by the amount of capital gain exempt under section 54D earlier and it will be a short-term capital gain.

30. In other words, capital gain arising from the transfer, by way of compulsory acquisition under any of land or buildings forming part of an industrial undertaking belonging to the assessee are exempt, if the following conditions are satisfied: (1) the transfer is by way of compulsory acquisition of the asset; (2) the asset transferred is land or buildings forming part of an industrial undertaking belonging to the assessee ; (3)such land or buildings were in use by the assessee for the purpose of the business of the industrial undertaking for at least two years immediately preceding the date of transfer, (4) capital gain on compulsory acquisition of land and buildings can be short-term or long-term. However, since building is being used for business, it is a depreciable asset and therefore, capital gain on transfer of such building, even if, it is held for more than 3 years, will be a short-term capital gain. Land is however, not a depreciable asset and as such the period of holding will be important for computing long-term/short-term capital gain; (5) the assessee purchases/constructs other land and buildings within a period of three years after the date of transfer for the purpose of shifting or re-establishing the said industrial undertaking or setting up another industrial undertaking.

31. Quantum of deduction 1. If the amount of capital gain is equal to or less than the cost of the new asset, the entire capital gain shall be exempt. 2. If the amount of capital gain is greater than the cost of the new asset, the cost of the new asset shall be allowed as an exemption .   In other words, capital gain shall be exempt to the extent it is invested in the purchase/construction of new land/building for the industrial undertaking . Scheme of Deposit in Capital Gains Accounts Scheme, 1988 [Notified vide GSR No. 724(E), dated 22.6.1988 ]: The scheme of deposit is applicable in this case also. In other words, the assessee should either purchase new land/building and/or deposit the amount under the Capital Gains Accounts Scheme, on or before the due date of furnishing the return of income specified under section 139(1). The amount so spent/deposited, by the due date of furnishing the return, shall be treated as if it was med for the said purpose . The proof of such deposit shall be attached with the return. In this case, the amount already utilised by the assessee for the purchase/construction of the new land/building, along with the amount so deposited, shall be deemed to be the cost of the new asset and shall be eligible for exemption.

32. Consequences where the new asset is transferred within a period of three years of its purchase or construction : In this case, the capital gain which was exempt under this section earlier, shall be reduced from the cost of the new asset for the purpose of computation of capital gain in respect of the transfer of the new asset. Consequences where the amount deposited in the Capital Gains Accounts Scheme is not utilized for purchase or the construction of land/building for the industrial undertaking within the specific period : The amount not so utilised shall be charged as capital gains of the previous year in which the period of three years from the date of transfer of the original asset expires and it will be short-term or long-term capital gain, depending upon the fact whether the capital gain at the time of the original transfer was a short-term or long-term capital gain. In this case, the assessee shall be eligible to withdraw the amount from the scheme.

33. Capital gain on transfer of assets in cases of shifting of industrial undertakings from urban areas [Section 54G ] Any capital gain, (short-term/long-term), arising to any industrial undertaking from the transfer of asset being machinery or plant or building or land or any rights in building or land effected in the course of or in consequence of shifting from an urban area to any other area, shall be exempt to the extent, such capital gain is invested for the specified purpose within 1 year before or 3 years after the date of its transfer, provided the new asset purchased for the specified purpose is not transferred within a period of 3 years from the date of its acquisition . In other words, the exemption is available to all categories of assessees in respect of capital gain arising on the transfer of fixed assets, other than furniture and fixtures, of industrial undertaking effected to shift it from an urban area . The conditions for claiming exemptions are as under: (1) the transfer is effected in the course of or in consequence of shifting the undertaking from an urban area to any other area. Any other area means an area not declared as an urban area. 'Urban area' means any such area within the limits of a municipal corporation or municipality, as the Central Government may, having regard to the population, concentration of industries, need for proper planning of the area and other relevant factors, by general or special order, declare to be an urban area for the purposes of this sub-section;

34. (2) asset transferred is machinery, plant, building, land or any right in building or land used for the business of industrial undertaking in an urban area; (3) the capital gain arising on the asset transferred may be short-term or long-term capital gain. Normally, it will be short-term capital gain because most of the assets of the industrial undertaking will be depreciable assets; (4) the capital gain is utilised within 1 year before or 3 years after the date of transfer for the specified purpose. Specified purpose includes the following: (a) for purchase of new machinery or plant for the purpose of business of the Industrial . Undertaking in the area to which the said undertaking is shifted; (b) acquisition of building or land or construction of building for tax-payer's business in that other area; (c) expenses on shifting of the old undertaking and its establishment to the other area; or (d ) incurring of expenditure on such other purposes as specified by the Central Government for this purpose.

35. Quantum of deduction 1. If the capital gain, on transfer of the original asset, is equal to or less than the cost and expenses incurred for the above specified purposes, the entire capital gain shall be exempt. 2. If the capital gain on transfer of the original asset is greater than the cost and expenses incurred for the specified purposes then the exemption shall be allowed to the extent of the cost and expenses incurred. In other words, capital gain shall be exempt to the extent it is spent for the specified purpose. Scheme of deposit in Capital Gains Accounts Scheme, 1988 : The amount of capital gain which is not utilised by the assessee towards the cost and expenses specified, before the date of furnishing of the return of income, shall be deposited, before the due date of the furnishing of the return, in a capital gains account scheme. The proof of such deposit shall be attached with the return. In this case the amount already utilised by the assessee for the specified purpose, along with the amount so deposited shall be deemed to the cost/expenditure specified and shall be eligible for exemption.

36. Consequences where the new asset is transferred within a period of 3 years of its purchase or construction: In this case, the capital gain, which was exempt earlier under section 54G , shall be deducted from the cost of acquisition of the new asset for the purpose of computation of capital gain in respect of the transfer of the new asset . (2) Consequences where the amount deposited in the Capital Gains Accounts Scheme is not utilised for the specified purpose within the specified period: The amount not so utilized shall be charged as capital gains, short-term or long-term depending upon the capital gain on the original transfer, of the previous year in which the period of three years from the date of transfer of the original asset expires. In this case, the assessee shall be eligible to withdraw the amount from the scheme.

37. Exemption of capital gain on transfer of assets of shifting of industrial undertaking from urban area to any Special Economic Zone [Section 54GA ] Notwithstanding anything contained in section 54G , where any capital gain, (short-term/long- term), arising from the transfer of a capital asset being machinery or plant or building or land or any rights in building or land used for the purposes of the business of an industrial undertaking situate in an urban area, effected in the course of or in consequence of shifting of such industrial undertaking to any Special Economic Zone whether developed in any urban area or any other area, shall be exempt to the extent, such capital gain is invested for the specified purpose within 1 year before or 3 years after the date of its transfer . In other words, the exemption is available to all categories of assessees in respect of capital gain arising on the transfer of fixed assets other than furniture and fittings of industrial undertaking effected in the course of shifting of such industrial undertaking to any Special Economic Zone.

38. The conditions for claiming exemptions are as under: (1) the transfer is effected in the course of or in consequence of shifting the undertaking from an urban area to any Special Economic Zone. The Special Economic Zone may be developed in any urban area or any other area . (2) asset transferred is machinery, plant, building, land or any right in building or land used for the business of industrial undertaking in an urban area; (3) the capital gain arising on the asset transferred may be short-term or long-term capital gain. Normally, it will be short-term capital gain because most of the assets of the industrial undertaking will be depreciable assets; (4) the capital gain is utilised within 1 year before or 3 years after the date of transfer for the specified purpose.   Specified purpose includes the following : (a) for purchase of new machinery or plant for the purpose of business of the Industrial Undertaking in the Special Economic Zone to which the said undertaking is shifted; (b) acquisition of building or land or construction of building for the purposes of the assessee's business in the Special Economic Zone ; (c) expenses on shifting of the old undertaking and its establishment to the Special Economic Zone; and (d) incurring of expenditure on such other purposes as specified by the Central Government for this purpose.

39. Quantum of deduction 1. If the capital gain, on transfer of the original asset, is equal to or less than the cost and expenses incurred for the above specified purposes, the entire capital gain shall be exempt. 2. If the shall be allowed to the extent of the capital gain on transfer of the original asset is greater than the cost and expenses incurred for the specified purposes then the exemption cost and expenses incurred . In other words, capital gain shall be exempt to the extent it is spent for the specified purpose. Scheme of deposit in Capital Gains Accounts Scheme, 1988 : The amount of capital gain which is not utilised by the assessee towards the cost and expenses specified, before the date of furnishing of the return of income, shall be deposited, before the due date of the furnishing of the return, in a capital gains account scheme. The proof of such deposit shall be attached with the return. In this case the amount already utilised by the assessee for the specified purpose, along with the amount so deposited shall be deemed to be the cost/expenditure specified and shall be eligible for exemption.

40. (1) Consequences where the new asset is transferred within a period of 3 years of its purchase or construction: In this case, the capital gain, which was exempt earlier under section 54GA , shall be deducted from the cost of acquisition of the new asset for the purpose of computation of capital gain in respect of the transfer of the new asset . (2) Consequences where the amount deposited in the Capital Gains Accounts Scheme is not utilised for the specified purpose within the specified period: The amount not so utilised shall be charged as capital gains, short-term or long-term depending upon the capital gain on the original transfer, of the previous year in which the period of 3 years from the date of transfer of the original asset expires. In this case, the assessee shall be eligible to withdraw the amount from the scheme.