(i) Eligible assessee. An individual or HUF
(a) he residential property must be a house or plot of land;
(b) Such residential property must be a long term capital asset;
(c) Such residential property must have been transferred on or after 1-4-20 12 but on or before 31-3-2017;
(d) There must be long term capital gain on such transfer;
(e) The assessee (Individual or HUF) utilises the net consideration of residential property in the equity shares of an eligible company before the due date of furnishing of return of income u/s 139(1);
(f) The eligible company is to utilise the amount for purchase of new asset within one ‘ear from the date of subscription in equity shares by the assessee;
(g) The amount of net consideration, which has been received by the company for issue of shares to the assessee, to the extent it is not utilised by the company for the purchase of the new asset before the due date of furnishing of the return of income by the assessee u/s 139 (1), shall be deposited by the company, before the said due date in an account in any such bank or institution as may be specified shall be utilised in accordance with any scheme which the Central Government may, by notification in the official Gazette, frame in this behalf and the return furnished by the assessee shall be accompanied by proof of such deposit having been made.
(iii) Amount of exemption
- If net consideration > cost of new asset, then
(b) If net consideration < cost of new asset, then
Amount of exemption = whole amount of LTCG (i.e. 100%)
(iv) Forfeiture of exemption
(a) If the assessee (Individual/HUF) sells or otherwise transfers the equity shares of the eligible company within 5 years from the date of acquisition.
In such a case, the old exempted capital gain u/s 54GB shall be deemed to be the long term capital gain of the previous year in which such shares are sold or other wise transferred.
(b) If the eligible company sells or otherwise transfers the new asset within 5 years from the date of acquisition.
In such a case, the old exempted capital gain u/s 54 GB shall be deemed to be the long term capital gain of the previous year in which such new asset is sold or otherwise transferred.
(c) If the amount deposited in specWed bank/Institution is not utilised fully or partly by the eligible company for purchasing the new asset within one year from the date of subscription in shares by the assessee.
In such a case, capital gain proportionate to unutilised amount shall be deemed to be the long term capital gain of the previous year in which the period of one year from the date of subscription in shares by the assessee expires and the company shall be entitled to withdraw such amount in accordance with the scheme.
MEANING OF CERTAIN TERMS USED IN SECTION 54 GB
1. Meaning of ‘Eligible Company
“Eligible Company” means a company which fulfils the following conditions, namely :
- it is a company incorporated in India during the period from the 1st day of April of tile previous year relevant to the assessment year in which the capital gain arises to tile due date of furnishing of return of income under sub-section (1) af section 139 by the assessee;
- it is engaged in the business of manufacture f all article or a thing;
- it is a company ill winch the assessee has more than fifty per cent share capital or more than fifty per cent voting rights after tile subscription in shares by the assessee; and
(iv) it is a company which quahjIes to be a small or medium enterprise under the Micro, Small and Medium Enterprises Act. 2006 (27 of 2006.);
2. Meaning of net Consideration
“Vet consideration” shall have tile meaning assigned to it in the Explanation to section 54F ;
3. Meaning of New Asset’
“New asset” means new plant and machinery but does not include
(i) any machimiemy or plant which, before its installation by tue assessee, was used either within or outside India by any other person;
(ii) any machinery or plant installed in aiiv o/7ice premises or any residential accommodation, including accommodation in the miature of a guest-house;
‘iii) any office appliances including computers or computer sflware;
(iv) any vehicle; or
(v) any machinery or plant, the whole of tile actual cost of which is allowed as a deduction (whether by way of depreciation or otherwise) in computing the income chargeable under the head “Profits and gains of business or profession” of any previous year.
Investment of compensation received [Section 54H]
In case there is transfer of asset due to compulsory acquisition under any law and the amount of compensation awarded for such acquisition is not received by the assessee on the date of such transfer, the period or period available for depositing or investing the amount under any of the section 54, 54B, 54D, 54EA, 54EB, 54EC and 54F, in relation to such compensation shall be reckoned from the date of receipt of such compensation.
Receipt of enhanced compensation
Enhanced compensation is taxable in the year in which such compensation is received and if the assesse wants to avail exemption u/s 54 54B, 54D, 54EC, 54F, etc. the time limits shall be determined from the date and year of receipt of enhanced compensation.