Section 54H : Extension of time limit for acquiring new asset or depositing or investing amount of capital gain, in case of compulsory acquisition. - Income Tax - Ready Reckoner - Income Tax

Section 54H : Extension of time limit for acquiring new asset or depositing or investing amount of capital gain, in case of compulsory acquisition There may be a time lag between the previous year in which the asset is compulsorily acquired and the previous year in which the compensation is actually received. As per section 54H , the period for acquiring the new asset by the assessee referred to in sections 54 , 54B , 54D , 54EC and 54F (i.e. six months, one year before or two/three years after the date of transfer of the asset) shall be reckoned from the date of receipt of such compensation and not from the date on which the asset was originally transferred. Therefore, in the case of transfer by way of compulsory acquisition by the government, the period of one year before or two years or three years for acquiring the new asset shall commence from the date of receipt of the compensation and not from the date of acquisition. Similarly, deposit under the Capital Gains Accounts Scheme may be made in the previous year in which the compensation is received or till the due date of filling the return of income of the previous year in which the compensation is received. Time Limit Such deposit on CGAS should be made before filling the return of income or on or before the due date of filling the return of income, whichever is earlier. In such cases, the amount already utilized for purchases or construction of new assets plus the amount deposited under the CGAS on or before due date u/s 139(1) would be deemed to be cost of new assets. However, for the purpose of sections 54 and 54F, the amount so deemed to be the cost of the new assets cannot exceeds ₹10 crore. Proof of such deposit should be attached with the return. the deposit can be withdrawn for utilization for the specified purpose in accordance with the scheme. Consequences if the amount deposit in CGAS is not utilized within the stipulated time of 2 year / 3 years If the amount is not utilized for the specified purpose within the stipulated period then unutilized amount shall be charged as capital gain of the previous year in which the specified period expire. in the case of section 54F and 54G, proportionate amount will be taxable. In case of compulsory acquisition of the original asset, where the compensation is not received on the date of transfer, the period available for acquiring a new asset or making investment in CGAS under section 54, 54B, 54EC, and 54F would be considered from the date of receipt of such compensation and not from the date of the transfer. Taxability of unutilised deposit under the CGAS,1988 in the hands of the legal heirs of the assessee - in the event of death of an individual before the stipulated period, the unutilized is not chargeable to tax in the hands of the legal heirs of the deceased individual. such unutilized amount is not income but is a part of the estate devolving upon them. [ circular No. 743 dated 06.05.1996 ] IMPORTANT NOTE:- The extension of time as per section 54H is not available for section 54G / 54GA .