Income-tax Act, 2025 · Part E — Capital gains

Section 87Exemption of capital gains on transfer of assets in cases of shifting of industrial undertaking from urban area

Income-tax Act, 2025 (30 of 2025)

(1)

If the assessee has—

(a)capital gains arising from the transfer of capital asset, being machinery or plant or building or land or any rights in building or land used for the business of an industrial undertaking situated in an urban area, effected in the case of shifting of an industrial undertaking situated in an urban area (original asset) to any area [other than an urban area (new area)]; and

(b)within one year before or three years after the date of such transfer,—

(i)purchased new machinery or plant for business of the industrial undertaking in the new area;

(ii)acquired building or land or constructed building for his business in the said area;

(iii)shifted the original asset and transferred the establishment of such undertaking to such area; and

(iv)incurred expenses on such other purpose as specified in a scheme notified by the Central Government for this section, then, instead of the capital gains being charged to income-tax as income of the tax year in which the transfer took place, it shall be dealt with as follows:—

(A)if the cost and expenses incurred on all or any of the purposes mentioned in sub-clauses (i) to (iv) referred to as “new asset”,—

(I)is less than the capital gains, the difference shall be charged under section 67 as the income of the tax year; or

(II)is equal to or more than the capital gain, no capital gain shall be charged under section 67; and

(B)for computing any capital gain arising from transfer of the new asset within three years of its being purchased, acquired, constructed or transferred, the cost shall be nil in case of sub-clause (A)(II) or shall be reduced by the amount of the capital gain in case of sub-clause (A)(I).

(2)

If the capital gain is not used by the assessee for the new asset within one year before the date of transfer of the original asset, or 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(1); 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 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 the new asset within the period specified in sub-section (1), then,—

(a)the unutilised amount shall be charged under section 67 as the income of the tax year in which the period of three years from the date of the transfer of the original asset expires; and

(b)the assessee shall be entitled to withdraw such unutilised amount in accordance with the scheme referred to in sub-section (2).

(5)

For the purposes of this section, the expression “urban area” means any area within the limits of a municipal corporation or municipality, declared to be an urban area by the Central Government for the purposes of this section, having regard to—

(a)the population;

(b)concentration of industries; and

(c)need for proper planning of the area and other relevant factors.

This section refers to

§ 263 Return of income.

§ 67 Capital gains

Referenced by

§ 108(2)

§ 263 Return of income.

§ 67(1)

§ 88(1)

§ 88(5)