What Is Section 54D Capital Gains Exemption?
Section 54D provides relief in specified cases involving compulsory acquisition of land or building forming part of an industrial undertaking and investment in another qualifying land or building.
Quick Answer
Section 54D can apply when land or building of an industrial undertaking is compulsorily acquired and the taxpayer acquires another qualifying land or building for the industrial undertaking within the prescribed period.
When Can Section 54D Apply?
The provision is linked to compulsory acquisition of land or building forming part of an industrial undertaking. The statutory conditions regarding use and replacement asset must be satisfied.
What Is the Replacement Asset?
The replacement must be land or building acquired for the purpose of shifting or re-establishing the industrial undertaking, within the period specified by the provision.
How Is the Exemption Calculated?
Relief is generally connected with the amount of capital gain and the amount invested in the qualifying replacement asset. The exact computation should follow the applicable statutory provision.
Why Are Records Important?
Compulsory-acquisition notices, compensation statements, original asset records and purchase documents for the replacement asset establish the facts supporting the exemption.
Practical Checklist
- Keep compulsory-acquisition documentation.
- Document the industrial use of the original asset.
- Retain the replacement property's purchase records.
- Track the prescribed investment period.
Related Capital Gains Questions
- What Is Capital Gain in Income Tax?
- What Is Short-Term and Long-Term Capital Gain?
- What Is Cost of Acquisition for Capital Gains?
- Which ITR Form Should I Use for Capital Gains?
