Income-tax Act, 2025

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

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

87. (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 .... To read the full section download the app from Google Play store