SECTION – 54GA CAPITAL GAINS ON TRANSFER OF ASSET FROM URBAN AREA TO SPECIAL ECONOMIC ZONE
What is the nature of Capital Asset?
Section 54GA covers the transfer of industrial undertaking from Urban areas to Special Economic Zones
For the purpose of this section, industrial undertakings mean land, building, plant or machinery or right in land or building used for the purpose of business.
Here “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.
Who can claim exemption under this section?
- The benefit of section 54G is available to all the assessee.
What is the amount of exemption that can be claimed under this section?
|Scenarios||Amount of Exemption||Cost of New Asset if sold within Lock-in Period*|
|Capital Gains < Amount Reinvested||Full amount of Capital Gains shall be exempt||Cost shall be reduced by the amount of capital gains for which exemption was claimed earlier.|
|Capital Gains > Amount Reinvested||Difference between Capital Gains and amount reinvested shall be taxable under head Income from Capital Gains||Cost of the new asset shall be NIL|
*Lock-in period for New Property: The said property cannot be transferred for a period of 3 years after acquisition, transfer, construction or purchased.
What are conditions to be fulfilled for claiming exemption?
- Purchased machinery or plant for the purposes of business of the industrial undertaking in the Special Economic Zone;
- Acquired building or land or constructed building for the purposes of his business in the Special Economic Zone;
- Shifted the original asset and transferred the establishment of such undertaking to the Special Economic Zone;
- Incurred expenses on such other purposes as may be specified in a scheme framed by the Central Government.
- The transfer, purchase, acquisition or construction of new asset should be made one year before or three year after the date of such transfer.
What if the capital gain amount is not used in the year of sale before filing return?
- Such amount should be deposited with the CGAS account.
What if the deposited amount is not utilized within the period given time period?
- If the deposited amount is not utilized within the period of 3 years from the date of original transfer, such amount will be taxable as capital gain in the PY in which the 3 years’ time period expires.
Disclaimer: The above-mentioned cases are illustrative and not exhaustive. This article is only for discussing general issues and hereby we do not express any opinion or give any consultation in what so ever manner understood. The cases may differ from assessee to assessee. We recommend you to take expert advice depending upon your particular case.