The document provides details about various exemptions available under the Indian Income Tax Act for capital gains. It discusses sections 54, 54B, 54D, 54EC, 54EE, 54F, 54G, 54GA and 54GB which provide exemption from capital gains tax if the amount of capital gains is invested in specified assets within prescribed time limits. Key conditions, timelines and consequences of not meeting the conditions are explained for each section. The document also covers capital gains tax rates and provisions for non-residents.

1. Understanding Income-tax –
Capital Gains – Final Part
CA. Divakar Vijayasarathy

2. Credits and Acknowledgments
V Thirumal
CA Jugal Gala

3. Legends used in the Presentation
BBDT Buy-back Distribution Tax
COA Cost of Acqusition
FII Foreign Institutional Investors
FY Financial Year
GDR Global Depository Receipts
HUF Hindu Undivided Family
IFSC International Financial Services Centre
IFHP Income from house property
LTCG Long-term Capital Gains
PY Previous Year
RBI Reserve Bank of India
RDB Rupee Denominated Bond
SEZ Special Economic Zone
STCG Short-term Capital Gains
TT Telegraphic Transfer

4. Presentation Schema
Exemptions based on
Investments
Exemptions for Specified
Organisations
Exemptions for Specified
Funds and Trust
Exemptions for Specified
Shares and Securities
Miscellaneous
Exemptions
Capital Gains for Non
Residents

5. Sections Covered
Sec Description
Exemptions based on Investments
54 Gains from Residential House Property invested in Residential House Property
54B Agricultural Land
54D Land or Building for Industrial Undertaking
54EC Investment in Certain Bonds
54EE Investment in Units of Specified Fund
54F Gains from any asset and Investment in Residential House
54GA Shifting of Industrial Undertaking from Urban Area
54GB Transfer of Residential Property and Investment in business
Income based Exemptions
10
Exemptions for Specified Organisations
Exemptions for Specified Funds and Trust
Exemptions for Shares and Securities
Miscellaneous Exemptions
Capital Gains for Non-residents
48 Computation of Capital Gains
47 Exempted Transfers
111A, 112, 112A Rates of Tax

6. Exemptions Based on Investments

7. Comparative Analysis for Exemption under Sec 54, 54B and 54D
Particulars Sec 54 Sec 54B Sec 54D
Assessee Individual/HUF Individual/HUF Any person
Nature of Capital Asset Long-term Short-term/long term Short-term/long term
Eligible asset Residential House property the income of which is
chargeable under the head "Income from house
property"
Urban agricultural land
used for agricultural
purposes by the individual
or his parents or HUF for 2
years prior to transfer
Land or building forming part of
an industrial undertaking used
for business purposes for 2 years
prior to compulsory acquisition
by Government
Asset to be Acquired Only 1 Residential house property situated in India.
Vide Finance Act, 2019, assessee shall have an
option to invest in 2 residential houses situated in
India if the capital gain does not exceed 2 crores.
This option can be availed only once in a lifetime.
Agricultural land (rural or
urban)
Land or building for shifting or
re-establishing the said
undertaking or setting up
another industrial undertaking
Time limit for
acquiring a new asset
Purchase: 1 year prior or 2 years from the date of
transfer
Construction: 3 years from the date of transfer
2 years from the date of
transfer
3 years from the date of transfer
Amount exempt Investment or Amount of capital gains whichever is less
Holding period for the
new asset
3 years from the date of acquisition

8. Contd.
Consequence if new asset is
transferred within holding
period
Such asset shall be a short term capital asset and its cost of acquisition shall be reduced by the
exemption allowed earlier under this Sec i.e. it would be considered as nil.
Benefit under Sec 54H Available for all 3 Secs
Scheme of Deposit Available for all 3 Secs
Return Filing Mandatory if before claiming exemption under above Sec, the total income is more than the basic
exemption limit (Amendment of Union Budget 2019)
Sec 54 applies to transfer of a residential property, the income of which is chargeable to Income from house
property (IFHP). Therefore, residential properties, which are not chargeable to Income from house property,
shall not be eligible for exemption under Sec 54
Sec 54D exemption shall be allowed only if the new asset is purchased or constructed for the
purpose of specified activities mentioned. Thus, if the purpose of purchase or construction
differs from activities mentioned above, exemption under Sec 54D shall not be allowed

9. Scheme of Deposit and Benefit under Sec 54H
shall be reckoned from the date of receipt of compensation and not from the date of transfer of asset
the time period for investing the consideration in Capital Gains Deposit Scheme
the amount of compensation is not received by the assessee from the authority till the date of transfer,
Where any asset is compulsorily acquired and
This is due to the fact that where an asset is compulsorily acquired; it takes considerable time for the assessee to receive the compensation
from the authorities and the chargeability provisions relating to capital gains triggers from the time of compulsory acquisition
Benefit under Sec 54H
If the Assessee is not able to invest the amount in new residential house property/specified assets within the due date for filing
return of income,
he may invest the amount in a Capital Gains Deposit Scheme, before the due date of filing of return of income, which he may
use for the purpose of making the investment in the new specified assets.
If the amount is not Deposited on or before the due date of filing return, assessee shall not be eligible to claim the exemption.
In case the entire amount is not utilised from the scheme or utilised partially for the specified investments mentioned above,
the unutilised amount shall be charged to tax as capital gains (nature same like the erstwhile exemption) in the year in which
the time period of 2 or 3 years, specified in the above Secs, expires for making the investment in the new specified asset
Capital Gains Deposit Scheme (Scheme of Deposit)

10. Investment in Certain Bonds - Sec 54EC
Particulars Description
Assessee Any assessee
Eligible capital asset Any long term capital asset being land or building or both
Asset to be Acquired Bonds of National Highway Authority of India (NHAI) or Rural Electrification Corporation Ltd (RECL)
or any other bonds notified by Central Government, redeemable after 5 years
Time limit for acquiring a new asset Within 6 months from the date of transfer
Amount exempt Investment or Capital gains whichever is less
Monetary Limit for Exemption Maximum Rs 50 lakhs
Holding period for the new asset 5 years from the date of acquisition
Note: No loan must be taken against the security of bonds or bonds should not be converted for
the period of 5 years, else the exemption provided shall be withdrawn
Consequence if new asset is
transferred within holding period
Exempted capital gains shall be withdrawn and charged to taxation as income in the year of
transfer as LTCG. However where the original asset is a depreciable asset under Sec 50, exemption
shall be withdrawn as STCG.
Non-allowability of deduction Once the investment in bonds are eligible for exemption under this Sec, no deduction under Sec
80C shall be allowed for the said investment made
Capital Gains Deposit Scheme Not available
Return Filing Mandatory if before claiming exemption under above Sec, the total income is more than the basic
exemption limit (Amendment of Union Budget 2019)

11. Investment in Units of Specified Fund - Sec 54EE
Particulars Description
Assessee Any assessee
Eligible capital asset Any long term capital asset
Asset to be acquired Units of fund as notified by Central Government in this behalf before 01.04.2019
Time limit for acquiring a new asset Within 6 months from the date of transfer
Amount exempt Investment or Capital gains whichever is less
Monetary Limit for Exemption Maximum Rs 50 lakhs
Holding period for the new asset 3 years from the date of acquisition
Note: No loan must be taken against the security of these units for 3 years, else
the exemption provided shall be withdrawn
Consequence if new asset is
transferred within holding period
Exempted capital gains shall be withdrawn and charged to taxation as income in
the year of transfer as LTCG.
However where the original asset is a depreciable asset under Sec 50, exemption
shall be withdrawn as STCG.
Scheme of Deposit Not available

12. Investment in Residential House - Sec 54F
Particulars Remarks
Applicability Individual or HUF
Assets to be transferred Any long term capital asset other than residential house
New asset in which investment
to be made for exemption
One residential house in India
Time period for making the
investment
For Purchase: 1 year before or two years from the date of transfer
For Construction: 3 years from the date of transfer
Quantum of deduction Capital Gains * Amount Invested/Net Consideration
Net Consideration means full value of consideration less the expenses incurred in relation
to transfer.
Lock-in period The new asset shall not be transferred within a period of 3 years from the date of purchase
or construction.
Benefit of Capital Gains
Deposit Scheme
Available
Return Filing Mandatory if before claiming exemption under above Sec, the total income is more than
the basic exemption limit (Amendment of Union Budget 2019)

13. Contd. Conditions
Assessee shall not own more than 1 residential house property, other than the new property, on the date of transfer
It shall not purchase any residential house, other than the new residential house property, within a period of 1 year
It shall not construct any residential house, other than the new residential house property, within a period of 3 years
The income of the first mentioned residential houses in the above 3 points is chargeable under the head income from house property
Consequences of violation
New asset is sold within a period of 3 years
from the date of purchase or construction
Exemption shall be withdrawn and taxable as LTCG in the year of transfer of new asset.
STCG shall additionally be computed on the transfer of the new asset
Assessee purchases or constructs any
residential house chargeable under IFHP
within 2 or 3 years
Exemption shall be withdrawn and taxable as LTCG in the year of violation
Amount deposited in Capital Gains Deposit
Scheme is not utilised for the purpose of
investment or utilised partially
• Difference between exemption earlier and amount of exemption had
the unutilised amount been utilised for the purpose of purchasing new
residential house,
• Shall be charged to tax as capital gains (nature same like the erstwhile
exemption) in the year in which the allowed time period expires

14. Shifting of Industrial Undertaking from Urban Area — Sec 54G
and 54GA
Particulars 54G 54GA
Assessee Any assessee
Nature of asset Short term/long term
Eligible asset
Machinery or plant or land & building or any rights in
land or building, used in the business of industrial
undertaking, transferred in order to shift an
industrial undertaking from an urban area to an area
other than urban area
Machinery or plant or land & building or any rights in
land or building, used in the business of industrial
undertaking, transferred in order to shift an
industrial undertaking from an urban area to SEZ in
any area
Asset to be acquired
 Purchase of new machinery or plant for business purpose in SEZ where industrial undertaking is shifted
 Purchase of Land and Building for business purpose in SEZ where industrial undertaking is shifted
 Construction of Buildings for business purpose in SEZ where industrial undertaking is shifted
 Payment of expenses as may be specified by Central Government
Time limit for acquiring a
new asset
1 year prior to or 3 years from the date of transfer
Amount exempt Investment or amount of capital gains whichever is less
Holding period for the
new asset
3 years from the date of acquisition

15. Contd.
Consequence if new asset is
transferred within 3 years
Such asset shall be a short term capital asset and its cost of acquisition shall be reduced by the
exemption allowed earlier under this Sec i.e. it shall be considered as nil
Scheme of Deposit under Capital
Gains Deposit Scheme
Available
Consequences if amount not utilised
for the specified investment
Amount not utilised shall be charged to capital gains in the year in which period of 3 years from
the date of transfer of original asset expires
Return Filing
Mandatory if before claiming exemption under above Sec, the total income is more than the
basic exemption limit (Amendment of Union Budget 2019)
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-Sec.
Special Economic Zone Shall mean any specified area notified by Central Government as SEZ, including Free Trade and
Warehousing Zone

16. Transfer of Residential Property and Investment in business -
Sec 54GB
Particulars 54GB
Eligible assessee Individual or HUF
Eligible capital asset Residential property being a house or plot of land
Nature of the capital
asset
Long term capital asset
Eligible investment and
eligible company
Net consideration (full value of consideration less transfer expenses) to be invested in equity shares of an
eligible company.
Eligible company means a company which fulfils all the following conditions, namely:—
• Company incorporated in India during the period from the 1st day of April of the FY of transfer till due
date for filing return of Income
• Engaged in the business of manufacture of an article or a thing or in an eligible business
• Assessee has more than 50% share capital or more than 50% voting rights after the investment under
this Sec (Amendment by Union Budget 2019) and
• Company which qualifies to be a small or medium enterprise under the Micro, Small and Medium
Enterprises Act, 2006 OR It is an eligible start-up.

17. Contd.
Eligible start up and eligible business "Eligible business" means a business carried out by eligible start-up engaged in innovation,
development or improvement of products or processes or services or a scalable business model
with a high potential of employment generation or wealth creation;
"Eligible start-up" means a company or a limited liability partnership engaged in eligible business
which fulfils the following conditions, namely:—
(a)it is incorporated on or after the 1st day of April, 2016 but before the 1st day of April, 2021;
(b)the total turnover of its business does not exceed 25 crore rupees in the FY of transfer; and
(c) it holds a certificate of eligible business from the Inter-Ministerial Board of Certification as
notified in the Official Gazette by the Central Government;
Date within which transfer of the
residential property is to be made
Within 31st March 2017; however, in case of investment in eligible start up, the said date shall
be extended to 31st March 2021 (Amendment by Union Budget 2019)
Time limit for investment by eligible
assessee – Sec 54GB(1)(ii)
On or before the due date for filing return of income of eligible assessee under Sec 139(1).
Amount of exemption Capital gains/Net sale consideration * Amount invested in new asset by eligible company.
Net Consideration means full value of consideration less the expenses incurred to effect the
transfer.

18. End Use of Amount Invested by the Eligible Assessee
It shall be noted that cost of new asset shall be the amount utilised for
purchase of new asset + amount invested in Capital Gains Deposit Scheme
The company should, within one year from the date of subscription in
equity shares by the assessee, utilise the amount for purchase of new asset
“New asset” means new plant and machinery but does not include —
Any used machinery or plant
Any machinery or plant installed in any office premises or any residential accommodation
Any office appliances including computers or computer software
Any vehicle or
Any machinery or plant, cost of which is allowed as a deduction (whether by way of
depreciation or otherwise) in computing PGBP of any FY
For an eligible start up being a technology driven start-up, the new asset shall include computers or computer software

19. Other Conditions
Holding period for the new
asset & equity shares
The eligible assessee shall hold equity shares for a minimum period of 5 years.
The eligible company shall be required to hold the “new asset” for a minimum period of 5 years from the
date of its acquisition except for computer or computer software held by technology driven start-up
(Amendment by Union Budget 2019)
Consequence if new asset
or equity shares is
transferred within the lock-
in period
For the assessee – exempted LTCG shall be chargeable to tax in the year of transfer/violation
For the eligible company – capital gains on transfer of depreciable assets under Sec 50 shall be levied in
the year of transfer.
Benefit under Sec 54H Not applicable
Scheme of Deposit - Sec
54GB(2)
Available to the eligible company and not to the eligible assessee.
However, the due date of return filing of income to be considered for investing in Capital Gains Deposit
Scheme would be that of eligible assessee claiming exemption and not of eligible company.
Consequences if amount
not utilised or utilised
partially
• Difference between exemption earlier and
• Amount of exemption had the unutilised amount been utilised for purchasing new asset,
• Shall be charged to tax as capital gains (nature same like the erstwhile exemption) in the year in which
the time period to make investment expires
Return Filing Mandatory if before claiming exemption under this Sec, the total income is more than the basic exemption
limit (Amendment of Union Budget 2019)

20. Income Based Exemptions

21. Specified Organisations
Section Exemption
10(20) Capital gains income of Local Authority (Panchayat, Municipality, Municipal Committee, District Board or
Cantonment Board)
10(23BBB) Capital gains from investments made by European Economic Community out of its own funds under European
Community International Institutional Partners (ECIIP) Scheme
10(23BBC) Any income, including capital gains, of the South Asian Association for Regional Cooperation (SAARC) Fund for
Regional Projects
10(23BBE) Any income, including capital gains, of the Insurance Regulatory and Development Authority (IRDA)
10(23BBG) Any income, including capital gains, of the Central Electricity Regulatory Commission (CERC)
10(26B) Any income, including capital gains, of a corporation established by a Central, State or Provincial Act or of any
other body, institution or association (being a body, institution or association wholly financed by Government)
established for promoting the interests of the members of the Scheduled Castes (SC) or the Scheduled Tribes
(ST) or backward classes
10(26BBB) Any income, including capital gains, of a corporation established by a Central, State or Provincial Act for the
welfare and economic upliftment of ex-servicemen being the citizens of India
10(27) Any income, including capital gains, of a co-operative society formed for promoting the interests of the
members of either the Scheduled Castes or Scheduled Tribes or both

22. Specified Funds and Trust
Section Exemption
10(4D) In the hands of specified fund
• Capital Gains arising out of transfer of bonds or GDR referred in Section 115AC(1), rupee denominated bonds of
Indian Company or derivative or such other securities notified by CG
• on a recognised stock exchange located in any IFSC
• where consideration for such transaction is paid or payable in foreign currency
Specified Fund: Category III Alternate investment fund in IFSC where all units are held by Non-residents
10(23F) and
10(23FA)
LTCG arising from equity shares of venture capital undertaking, in the hands of venture capital fund or venture capital
company
10(23FB) Any income, including capital gains, of a venture capital company or venture capital fund arising from investment in a
venture capital undertaking
10(23FBA) Capital gains income of an investment fund shall be exempt in the hands of the fund and shall be taxable in the hands
of the unit holders of the fund (pass through status)
10(23FD) When unit holder of a business trust receives distributions from the trust, which includes a part of capital gains
earned by the trust, it shall be deemed to be of the same nature and the same proportion in the hands of unit holders
as that of business trust (REITs and InvITs) and shall be exempt from taxation in the hands of unit holders

23. Shares and Securities
Section Exemption
10(33) Income from transfer of units of UTI
10(34A) Income arising on account of buy back of shares of listed as well as
unlisted company (due to the fact that company pays BBDT @ 20% +
surcharge + cess
10(25) Income from capital gains of the provident fund arising from the sale, exchange or transfer of securities which are held
by such provident fund
Capital gains received by following are exempt from taxation:-
• Trustees on behalf of recognised provident fund
• Trustees on behalf of approved superannuation fund
• Trustees on behalf of approved gratuity fund
• Board of Trustees constituted under the Coal Mines Provident Funds and Miscellaneous Provisions Act, 1948, on
behalf of the Deposit-linked Insurance Fund
• Board of Trustees constituted under the Employees' Provident Funds and Miscellaneous Provisions Act, 1952, on
behalf of the Deposit-linked Insurance Fund
10(25A) Any income including capital gains arising in the hands of Employees’ State Insurance Fund
10(47) Any income, including capital gains, of an infrastructure debt fund
Contd.

24. Section Exemption
10(26AAA) • Capital gains arising to a Sikkimese individual from any source in the state of Sikkim
• Shall not apply where assessee is a Sikkimese woman and she marries an individual who is a non-Sikkimese and Such
marriage takes place on or after 01.04.2008
10(37) Capital Gains from compulsory acquisition of Rural agricultural land under any law or through a mode of transfer where
the consideration or compensation is determined by Central Government or RBI
Conditions:
• The assessee is an individual or an HUF
• Land was used for agricultural purposes by such HUF, individual or his parents, for a period of 2 years immediately
prior to the date of transfer
• Such income has arisen or consideration is received on or after 01.04.2004
10(37A) Land Pooling Scheme – Exemption available to Individual or HUF owner of land under the scheme
Capital gains arising from following transfer shall not be chargeable to tax—
• Transfer of capital asset being land or building or both, under land pooling scheme
• Sale of Land Pooling Ownership Certificates received under the scheme in lieu of land or building or both transferred
• Sale of reconstituted plot or land, received in lieu of land or building or both, within 2 years from the end of the FY in
which the possession of such plot or land was handed over
Applicable retrospectively from 01.04.2015
Land Pooling Scheme - An alternative form of arrangement made by the Government of Andhra Pradesh for formation of
new capital city of Amaravati to avoid land-acquisition disputes and lessen the financial burden associated with payment
of compensation under that Act. In Land pooling scheme, the compensation in the form of reconstituted plot or land is
provided to landowners.
Miscellaneous

25. Capital Gains for Non-Residents

26. Capital Gains in case of Non Residents - 1st Proviso to Sec
48 and Rule 115A
Where a non resident transfers shares/debentures of an Indian Company,
bought in foreign currency, capital gains shall be computed as under:
Particulars Conversion Rate
Sale consideration Shall be converted in foreign currency at average Telegraphic Transfer (TT) buying and selling rate on
date of transferExpenses on transfer
Cost of acquisition Shall be converted in foreign currency at average TT buying and selling rate on date of acquisition
Capital gains Capital gains will be computed in foreign currency as the components of computation are stated
in foreign currency. The computed capital gains in foreign currency shall then be re-converted
into rupees at the TT buying rate on the date of transfer
• No indexation benefit shall be available for the above transaction in case of long-term capital assets
• Once the original investment is liquidated by the non-resident investor, the above provision of computation of
capital gains shall apply to all subsequent re-investments made by such non-resident investor in the Indian Company
• The share/debentures may be listed or non-listed
• The transferor should be a non resident at the time of transfer and non-resident includes a foreign company
• This proviso is not applicable to units of UTI and mutual funds
• Long term capital asset being equity share in a company, units of an equity oriented fund or units business trust shall
remain outside the purview of 1st Proviso to Section 48 - 3rd Proviso to Section 48

27. Contd.
Foreign currency means any currency other than Indian currency
Indian currency means currency which is expressed or drawn in Indian rupees but does not
include special bank notes and special one rupee notes issued under Sec 28A
of the Reserve Bank of India Act, 1934
TT buying/selling rate in relation to a foreign currency, means the rate of exchange adopted by the
State Bank of India for buying or selling such currency where such currency is
made available through a telegraphic transfer
In case of non-resident, any gains arising on account of appreciation in value of a
rupee against foreign currency at the time of redemption of rupee denominated bond
of Indian Company held by non-resident, shall be exempt from taxation of capital gains
Treatment of appreciation in rupee at the time of redemption of rupee
denominated bond (RDB) of Indian Company-5th Proviso to Sec 48

28. Exempted Transfers
Transfer of bonds or GDRs referred under Sec 115AC(1)
Sec 47(viia) • Where any capital gains arises on transfer of bonds or Global Depository Receipts (GDRs), referred
under Sec 115AC(1),
• outside India by a non-resident to another non-resident, it shall be exempt from taxation
Sec 47(viiab) • Where a non-resident or a specified fund transfers bonds or GDR referred in Sec 115AC(1), rupee
denominated bond (RDB) of Indian Company or derivative or such other securities notified by
Central Government,
• on a recognised stock exchange located in any International Financial Services Centre (IFSC) and
• where the consideration for such transaction is paid or payable in foreign currency,
• such transaction shall not be regarded as transfer and thus, exempt from taxation
Bonds mentioned under Sec
115AC(1)
 Bonds of an Indian company issued in accordance with such
scheme as the Central Government may specify in this behalf, or
 Bonds of a public sector company sold by Government and
purchased by non-resident in foreign currency
Cost of acquisition – Sec 49(2ABB) - When shares are acquired by non-resident of redemption of GDRs mentioned above, the cost of
acquisition shall be price of such shares prevailing on any recognised stock exchange on the date of request of redemption being made

29. Contd.
Where there is conversion of bonds referred in Sec 115AC(1) into shares or debentures,
it shall be exempt from capital gains
It shall be noted that GDRs are not covered by Sec 47(xa); hence, conversion of GDRs,
referred in Sec 115AC(1), into shares or debentures would attract capital gains tax.
Conversion of bonds specified under Sec 115AC(1) into shares or debentures — Sec 47(xa)
Cost of acquisition - Sec 49(2A) – COA of such converted shares or debentures shall be the cost
of the bonds in respect of which the assessee received such converted shares or debentures
Transfer of rupee denominated bonds — Sec 47(viiaa)
Transfer of rupee denominated bond of an Indian company issued
outside India between two non residents outside India shall be exempt
Transfer of Government securities – Exempted Transfer - Sec 47(viib)
Transfer of government security carrying periodic payment of interest
Taking place through an intermediary dealing in settlement of securities (e.g. broker)
Taking place outside India between two non residents

30. Rates of Tax
Category of Asset Rate of Tax
Long term capital assets
In case of transfer of securities which are subject to
taxation as per 1st proviso to Sec 48
20% without indexation
Unlisted securities or shares of a company in which
public are not substantially interested (which are not
subject to taxation as per 1st proviso to Sec 48)
10% without indexation
Listed securities (other than units) or zero coupon
bonds
10% without indexation
Any other long term capital asset 20% with indexation
Short term capital assets
 equity share in a company or
 a unit of an equity-oriented fund or
 a unit of a business trust
15%
Other short term capital assets Normal slab rates

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