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EXEMPTION U/S 54G & 54GA

EXEMPTION U/S 54G & 54GA OF INCOME TAX

SECTION-54G

All the assessee can claim the benefits of exemption u/s 54G, the assessee can claim deduction as mentioned below:

Conditions for claiming exemption under Section 54G.

A.	Assessee	All the assessee can claim benefit of deduction u/s 54G.
B.	Transferred Asset	Transfer of plant or machinery or land or building for shifting industrial undertaking from urban area to rural area.
C.	Tyoe of Capital Gain	Asset can be long term as well as short term so both Short Term Capital Gain as well as Long Term Capital Gain is covered.
D.	Asset to be Acquired	Purchase/ construction of new plant & machinery, land or building in such rural area, or, Shifting original assets to that area or, Incurring notified expense.
E.	Time limit for Purchase or reconstruction	Purchase: The specified assets shall be purchase 1 year before or 3 years after the date of transfer.
F.	Deposit Scheme	Capital Gain Account Scheme (Note 1).
G.	Amount of exemption	Capital Gain Cost of New Asset/ Deposit Amount (whichever is lower) Note: If cost of new asset exceeds Rs. 10 crores, then the amount exceeding Rs. 10 crores shall not be taken into account for the purpose of exemption (w.e.f. A.Y 24-25).
H.	Lockin Period	If New Asset is transferred within 3 years from date of purchase or construction the exemption claimed earlier shall be withdrawn & Cost of Acquisition of new asset reduced by exempted capital gain while calculating capital gain on new asset.
I.	Case Laws Fibre Boards (P) ltd. 2015	Advance given for purchase of land, building, plant & machinery amount to utilization of capital gain for purchase and acquisition of new assets, for claim of exemption u/s 54G.

SECTION-54GA

All the assessee can claim the benefits of exemption u/s 54GA, the assessee can claim deduction as mentioned below:

A.	Assessee	All the assessee can claim benefit of deduction u/s 54GA.
B.	Transferred Asset	Transfer of plant or machinery or land or building for shifting industrial undertaking from urban area to rural area.
C.	Type of Capital Gain	Asset can be long term as well as short term so both Short Term Capital Gain as well as Long Term Capital Gain is covered.
D.	Asset to be Acquired	Purchase/ construction of new as well as old plant & machinery, land or building in such rural area, or, Shifting original assets to that area or, Incurring notified expense.
E.	Time limit for Purchase or reconstruction	Purchase: The specified assets shall be purchase 1 year before or 3 years after the date of transfer.
F.	Deposit Scheme	Capital Gain Account Scheme (Note 1).
G.	Amount of exemption	Capital Gain Cost of New Asset/ Deposit Amount (whichever is lower) Note: If cost of new asset exceeds Rs. 10 crores, then the amount exceeding Rs. 10 crores shall not be taken into account for the purpose of exemption (w.e.f. A.Y 24-25).
H.	Lockin Period	If New Asset is transferred within 3 years from date of purchase or construction the exemption claimed earlier shall be withdrawn & Cost of Acquisition of new asset reduced by exempted capital gain while calculating capital gain on new asset.
I.	Case Laws Fibre Boards (P) ltd. 2015	Advance given for purchase of land, building, plant & machinery amount to utilization of capital gain for purchase and acquisition of new assets, for claim of exemption u/s 54G.

NOTE 1: CAPITAL GAIN ACCOUNT SCHEME

	Amount: If investment u/s 54G & 54GA is not made before the date of filing of return, then the amount of capital gain has to be deposited under Capital Gain Account Scheme. The amount so deposited shall be deemed to cost of new asset.
	Time Limit: Such deposit in Capital Gain Account Scheme should be made before due date or actual date of filing the return, whichever is earlier.
	Unutilized Amount: If the amount deposited is not utilized for the specified purpose within the stipulated period, then the unutilized amount shall be charged as Capital Gain of the P.Y in which the specified period expires.
NOTE: CBDT clarifies that in the event of death of an individual before the stipulated period, the unutilized amount is not chargeable to tax in the hands of legal heir of deceased individual.

Example: Gama Ltd. located within the corporation limit decided in December 2024 to shift its industrial undertaking to non-urban areas. The company sold some of the assets and acquired new assets in the process of shifting the relevant details are as under:

Particulars	Land	Building	P&M	Furniture
Sale proceeds	8	18	16	3
Indexed cost of Acquisition	4	10	12	2
Cost of Acquisition	4	4	5	2
Cost of assets purchase in July 2025 for the purpose of business in new place	4	7	17	2

Compute Capital Gains for A.Y 25-26?

Computation of Capital Gain A.Y 25-26

Particulars	Land	Building	P&M	Furniture
Full Value of Consideration	8	18	16	3
Less: Transfer Expenses	-	-	-	-
Net Consideration	8	18	16	3
Less: COI/ ICOI	(4)	(4)	(5)	(2)
Capital Gain	4	14	11	1

54G EXEMPTION

Particulars	LTCG	STCG
Capital Gain for Exemption	4	25
Cost of New Assets	3	25
Taxable Capital Gain	1	Nil

Note 2: The Capital assets refereed in Section 54G are machinery or plant or machinery or land & building or any rights in the building or land. Capital gain arising on transfer of furniture does not qualify for exemption u/s 54G. No exemption is therefore available u/s 54G in respect of investment of Rs. 2 Lakhs in acquiring furniture.

Note 3: In case of Land, Normal Capital gain is calculated but in case of depreciated assets (Building, P&M, Furniture), Section 50 shall apply and as per Section 50 there is always STCG.

Note 4: Total exemption u/s 54G is Rs. 28 lakhs, the exemption should first be exhausted against short term capital gain as the rate of tax in case of short term capital gain is more than in case of long term capital gain.

The Taxable capital gain would be:

Long term capital gain = 1,00,000 taxable @ 12.5% u/s 112.

Short term capital gain = 1,00,000 taxable @ slab rates.

EXEMPTION U/S 54G & 54GA

EXEMPTION U/S 54G & 54GA

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