Section 67 — Capital Gains Charge | ITA 2025

Section 67 — CHARGING SECTION — CAPITAL GAINS

Section 67 is the charging provision for the head 'Capital Gains' — the substantive equivalent of 1961 s. 45 in its entirety (clauses 1, 1A, 1B, 2, 3, 4, 4A, 5, 5A, 5B, 6 collapsed into 18 numbered sub-sections). It is the LONGEST charging section in the 2025 Act because it collapses six decades of accretive amendments to 1961 s. 45 into a single linear flow. The charge attaches in the YEAR OF TRANSFER under sub-s. (1), but seven 'deemed-transfer' carve-outs (sub-ss. 2-4 insurance; 5-8 ULIP; 9 conversion to stock; 10 firm/AOP/BOI capital contribution; 11 firm/AOP/BOI reconstitution; 12-13 compulsory acquisition; 14-16 JDA; 17-18 UTI repurchase) modify the year-of-charge or quantum-of-charge under specific fact patterns. The opening words 'save as otherwise provided in sections 82, 83, 84, 85, 86, 87, 88 and 89' carve out the rollover-reinvestment regime. Practitioner-grade rule: every CG event must be tested for the right sub-section AND the rollover exemptions before computing tax.

Statutory text — Income-tax Act, 2025

Marginal note — Capital gains

(1) Any profits or gains arising from the transfer of a capital asset effected in a tax year shall, save as otherwise provided in sections 82, 83, 84, 85, 86, 87, 88 and 89, be chargeable to income-tax under the head “Capital gains” and shall be deemed to be the income of the tax year in which the transfer took place.

(2) Irrespective of anything contained in sub-section (1), if a person receives during any tax year any money or other assets under an insurance from an insurer on account of damage to, or destruction of, any capital asset, as a result of circumstances mentioned in sub-section (3), then,—

(a) any profits or gains arising from receipt of such money or other assets shall be chargeable to income-tax under the head “Capital gains” and shall be deemed to be the income of such person of the tax year in which such money or other asset was received; and

(b) for the purposes of section 72, the value of any money or the fair market value of other assets on the date of such receipt shall be deemed to be the full value of the consideration received or accruing as a result of the transfer of such capital asset.

(3) The following shall be the circumstances referred to in sub-section (2):—

(a) flood, typhoon, hurricane, cyclone, earthquake or any other convulsion of nature; or

(b) riot or civil disturbance; or

(c) accidental fire or explosion; or

(d) action by an enemy or action taken in combating an enemy (whether with or without a declaration of war).

(4) In sub-section (2), “insurer” shall have the same meaning as assigned to it in section 2(9) of the Insurance Act, 1938 (4 of 1938).

(5) Irrespective of anything contained in sub-section (1), if any profits or gains aris- es to a person from receipt of any amount, including a bonus, under a unit linked insurance policy to which the exemption specified at Schedule II (Table: Sl. No. 2) does not apply, then,—

(a) such profits and gains shall be chargeable to income-tax under the head “Capital gains” and shall be deemed to be the income of such person in the tax year in which such amount was received; and

(b) the income taxable shall be calculated in such manner, as may be pre- scribed.

(6) Irrespective of anything contained in sub-section (1), if the profits or gains arising from the transfer by way of conversion of a capital asset into, or its treatment by the owner as, stock-in-trade of a business carried on by him, then,—

(a) such profits and gains shall be chargeable to income-tax as his income in the tax year in which such stock-in-trade is sold or otherwise transferred by him; and

(b) for the purposes of section 72, the fair market value of the asset on the date of such conversion or treatment shall be deemed to be the full value of the consideration received or accruing as a result of the transfer of such capital asset.

(7) If any person, at any time during the tax year, had any beneficial interest in any securities and any profits or gains arise from transfer made by the depository or participant of such beneficial interest in respect of securities, then,—

(a) such profits and gains shall be chargeable to income-tax as the income of the beneficial owner of the tax year in which such transfer took place;

(b) such profits and gains shall not be regarded as income of the depository who is deemed to be the registered owner of securities by virtue of section 10(1) of the Depositories Act, 1996 (22 of 1996); and

(c) for the purposes of section 72 and section 2(101)(b), the cost of acquisition and the period of holding of any securities shall be determined on the basis of the first-in-first-out method.

(8) In sub-section (7), “beneficial owner”, “depository”and “security” shall have the same meanings as respectively assigned to them in section 2(1)(a), (e) and (l) of the Depositories Act, 1996 (22 of 1996).

(9) If any profits or gains arise from the transfer of a capital asset by a person, to a firm or other association of persons or body of individuals (not being a company or co-operative society) in which he is or becomes a partner or member, by way of capital contribution or otherwise, then,—

(a) such profits and gains shall be chargeable to tax as his income of the tax year of such transfer; and

(b) for the purposes of section 72 the amount recorded in the books of account of the firm, association or body as the value of the capital asset shall be deemed to be the full value of the consideration received or accruing as a result of the transfer of such capital asset.

(10) Irrespective of anything contained in sub-section (1), if a specified person receives during the tax year, any money or capital asset, or both, from a specified entity in connection with the reconstitution of such specified entity, then,—

(a) any profits or gains arising from such receipt shall be deemed as income of the specified entity of the tax year of such receipt by the specified person and chargeable to income-tax under the head “Capital gains”; and

(b) such profits or gains shall be determined irrespective of anything to the contrary contained in this Act as follows:— A = B + C – D, where, A = income chargeable to income-tax under this sub-section as income of the specified entity under the head “Capital gains”; B = value of any money received by the specified person from the specified entity on the date of such receipt; C = amount of fair market value of the capital asset received by the specified person from the specified entity on the date of such receipt; and D = amount of balance in the capital account (represented in any manner) of the specified person in the books of account of the specified entity at the time of its reconstitution;

(c) for the purposes of clause (b),—

(i) if the value of “A” as computed is negative, such value shall be deemed to be zero;

(ii) the balance in the capital account of the specified person in the books of account of the specified entity shall be calculated without considering any increase in the capital account of the specified person due to revaluation of any asset or due to self-generated goodwill or any other self-generated asset; and

(d) the provisions of this sub-section shall operate in addition to the pro- visions of section 8 and the taxation under the said section shall be worked out independently, when a capital asset is received by a specified person from a specified entity in connection with the reconstitution of such specified entity.

(11) In sub-section (10),—

(a) “reconstitution of the specified entity”, “specified entity” and “specified person” shall have the meanings respectively assigned to them in section 8;

(b) “self-generated goodwill” and “self-generated asset” mean goodwill or asset, as the case may be, which has been acquired without incurring any cost for purchase or which has been generated during the course of the business or profession.

(12) Irrespective of anything contained in sub-section (1), if the capital gain arises from the transfer of a capital asset by way of compulsory acquisition under any law, or a transfer the consideration for which was determined or approved by the Central Government or the Reserve Bank of India, and the compensation or the con- sideration for such transfer is enhanced or further enhanced by any court, tribunal or other authority, the capital gain shall be dealt with in the following manner:—

(a) the capital gains computed with reference to the compensation awarded in the first instance or as the case may be, consideration determined or approved by the Central Government or the Reserve Bank of India in the first instance, shall be chargeable as income under the head “Capital gains” of the tax year in which such compensation or part thereof, or such consideration or part thereof, was first received;

(b) the amount by which the compensation or consideration is enhanced or further enhanced by the court, tribunal or other authority shall be deemed to be income chargeable under the head “Capital gains” of the tax year in which such amount is received;

(c) any compensation as referred to in clause (b) received in pursuance of an interim order of a court, tribunal or other authority shall be deemed as income chargeable under the head “Capital gains” of the tax year in which the final order of such court, tribunal or other authority is made; and

(d) the capital gain assessed for any tax year under clause (a) or (b) shall be recomputed where the compensation or consideration referred to in clauses (a) to (c) is reduced by any court, tribunal or other authority, and such reduced value shall be taken to be the full value of the consideration.

(13) In relation to the amount referred to in sub-section (12)(b) and (c),—

(a) the cost of acquisition and the cost of improvement shall be taken as nil; and

(b) in a case, where the enhanced compensation or consideration is received by any other person due to the death of the person who made the trans- fer, or for any other reason, such amount shall be deemed as the income chargeable to tax under the head “Capital gains” in the hands of such other person.

(14) Irrespective of anything contained in sub-section (1), if the capital gains arises to a person (being an individual or a Hindu undivided family), from the transfer of a capital asset, being land or building or both, under a specified agreement, then,—

(a) such capital gains shall be chargeable to income-tax for the tax year in which the certificate of completion for the whole or part of the project is issued by the competent authority; and

(b) for the purposes of section 72, the stamp duty value, on the date of issue of the said certificate, of the share of such person, being land or building or both, in the project, as increased by any consideration received in cash or by a cheque or draft or by any other mode shall be deemed to be the full value of the consideration received or accruing as a result of the transfer of such capital asset.

(15) In sub-section (14),—

(a) “competent authority” means the authority empowered to approve the building plan under any law;

(b) “specified agreement” means a registered agreement in which a person owning land or building, or both, agrees to allow another person to develop a real estate project on such land or building, or both, in consideration of a share, being land or building or both, in such project, whether with or without payment of part of the consideration in cash.

(16) The provisions of sub-section (14) shall not apply, if the person transfers his share in the project on or before the date of issue of the certificate of completion, and then,—

(a) the capital gains shall be deemed to be the income of the tax year of such transfer; and

(b) the provisions of this Act, other than sub-section (14), shall apply for the purpose of determination of full value of consideration.

(17) Irrespective of anything contained in sub-section (1), the difference between the repurchase price of the units referred to in section 80CCB(2) of the Income-tax Act, 1961 (43 of 1961) and the capital value of such units shall be deemed to be the capital gains arising to the assessee in the tax year in which—

(a) such repurchase takes place; or

(b) the plan referred to in that section is terminated.

(18) For the purposes of sub-section (17), “capital value of such units” means any amount invested by the assessee in the units referred to in section 80CCB(2) of the Income-tax Act, 1961 (43 of 1961).

Corresponding provision — 1961 regime

INCOME-TAX ACT, 2025	INCOME-TAX ACT, 1961
INCOME-TAX ACT, 2025 — s. 67	INCOME-TAX ACT, 1961 — s. 45
s. 67(1) — main charge ('save as otherwise...')	1961 s. 45(1)
s. 67(2)-(4) — Insurance receipts on destruction (deemed transfer; FMV-on-receipt-date as FVOC)	1961 s. 45(1A) [FA 1999]
s. 67(5) — ULIP redemption deemed CG (where Sch. II Sl. 2 exemption inapplicable)	1961 s. 45(1B) [FA 2021]
s. 67(6) — Conversion of capital asset to stock-in-trade	1961 s. 45(2)
s. 67(7)-(8) — Beneficial-owner / depository transfer (FIFO method)	1961 s. 45(2A)
s. 67(9) — Transfer to firm/AOP/BOI as capital contribution (recorded-book-value FVOC)	1961 s. 45(3)
s. 67(10)-(11) — Specified-entity reconstitution: A=B+C-D formula	1961 s. 9B / 45(4)/(4A) [FA 2021]
s. 67(12)-(13) — Compulsory acquisition (year-of-receipt charge; enhanced-comp NIL cost)	1961 s. 45(5)
s. 67(14)-(16) — JDA-mode for individual / HUF (year-of-CC charge)	1961 s. 45(5A) [FA 2017]
s. 67(17)-(18) — UTI / MF unit repurchase (legacy 1961 s. 80CCB)	1961 s. 45(6)

STATUTORY ARCHITECTURE — THE CHARGE-AND-DEFLECTION FRAMEWORK

The architecture is best understood as 'one charge plus seven deflections'. Sub-s. (1) is the SOLE general charge: profits/gains arising from TRANSFER of a CAPITAL ASSET in a tax year are chargeable as 'Capital gains' in that year. Sub-ss. (2)-(18) are 'deflections' — they either (a) deem a NON-TRANSFER event to be a transfer (insurance recovery, conversion to stock, ULIP redemption, firm-distribution) and prescribe the year-of-charge; or (b) modify the YEAR-OF-CHARGE for a real transfer (compulsory acquisition: year-of-receipt; JDA: year-of-CC); or (c) modify the QUANTUM (s. 67(11) A=B+C-D formula). The opening words of EACH deflection sub-section start with 'Irrespective of anything contained in sub-section (1)' — making the deflections override the general charge whenever their fact-pattern applies. Practitioner rule: identify the right sub-section FIRST; then walk through s. 72 (mode of computation) using the FVOC and cost determined by that sub-section.

SUB-SECTION (1) — THE GENERAL CHARGE

Three elements: (a) PROFITS OR GAINS; (b) ARISING FROM TRANSFER; (c) OF A CAPITAL ASSET. All three must coexist. The 'transfer' definition is in s. 2 [definition section] — sale, exchange, relinquishment, extinguishment of rights, compulsory acquisition, conversion to stock-in-trade (deemed), maturity of zero-coupon bond. 'Capital asset' is defined in s. 2 — wide definition excluding stock-in-trade, agricultural land outside specified urban limits, and specified personal effects. The charge is in the year of transfer (accrual basis) unless a deflection sub-section prescribes a different year. The phrase 'save as otherwise provided in sections 82-89' preserves the rollover-reinvestment regime — these sections create a partial or full exclusion from the s. 67(1) charge subject to investment in specified avenues (residential house under s. 82-83; agricultural land u/s 84; bonds u/s 85; CG accounts scheme; etc.). Rollover is not a deduction from CG — it is a true exclusion from the charging net; failure to comply with conditions claws back via s. 71 / specific reversal rules.

SUB-SECTIONS (2)-(4) — INSURANCE RECOVERY ON DESTRUCTION (1961 s. 45(1A))

Where an asset is DESTROYED (not merely transferred) due to specified circumstances, traditional CG mechanics fail because there is no 'transfer' and no consideration. Sub-ss. (2)-(4) deem the insurance recovery to be the CG event. Sub-s. (3) lists the four covered circumstances: (a) flood, typhoon, hurricane, cyclone, earthquake or other CONVULSION OF NATURE; (b) RIOT or civil disturbance; (c) ACCIDENTAL FIRE OR EXPLOSION; (d) ENEMY ACTION (with or without declaration of war). Mechanics: insurance proceeds (money or other assets) received in tax year T → CG arises in T at the receiver's level → for s. 72 purposes, the value of money OR FMV of other assets received on the date of receipt = FULL VALUE OF CONSIDERATION. Sub-s. (4) defines 'insurer' per s. 2(9) Insurance Act 1938. Practitioner application: factory fire, flood-destroyed plant, riot-burned showroom — track receipt-date and fair-value of replacement asset received from insurer. CG = FVOC (insurance proceeds / FMV of replacement) MINUS [cost of acquisition + cost of improvement (s. 90)] of destroyed asset. Replacement-asset rollover (s. 33 depreciable replacement; s. 85 1961 s. 54E equivalent) interaction must be checked.

SUB-SECTION (5) — ULIP REDEMPTION (1961 s. 45(1B), FA 2021)

FA 2021 brought 'high-premium ULIPs' into the CG net to plug the regulatory arbitrage where ULIPs (essentially mutual-fund-with-life-cover) were tax-favoured under 1961 s. 10(10D) while comparable equity MFs faced LTCG. Schedule II Table Sl. No. 2 of the 2025 Act preserves the standard ULIP exemption EXCEPT where ANNUAL PREMIUM exceeds INR 2.5 lakhs (or aggregate of multiple policies exceeds INR 2.5 lakhs) for policies issued on or after 1-Feb-2021. For NON-EXEMPT ULIPs, the gain on redemption / surrender / maturity is deemed CG under s. 67(5), chargeable in year of receipt. The manner of computation is 'as may be prescribed' — Rules will specify FIFO methodology and cost-of-acquisition aggregation. Treatment is similar to equity-oriented mutual fund — STCG / LTCG with FA 2024 12.5% flat (no indexation) for LTCG. Practitioner alert: clients holding multiple ULIPs from same / different insurers must compute aggregate annual premium across ALL issued post 1-Feb-2021 to test the INR 2.5 lakhs cap; one breach contaminates the whole policy stack going forward.

SUB-SECTION (6) — CONVERSION OF CAPITAL ASSET TO STOCK-IN-TRADE (1961 s. 45(2))

When the OWNER converts a capital asset (e.g., investment property) into stock-in-trade of his business (e.g., starts dealing in real estate), or treats it as such, the conversion is a deemed transfer. Year of charge: NOT the year of conversion, but the YEAR THE STOCK IS ACTUALLY SOLD. FVOC for the deemed-transfer leg: FMV ON THE DATE OF CONVERSION. Effect: at sale, two profit components arise — (a) CG on the conversion-leg [FMV-on-conversion MINUS cost-of-acquisition], chargeable as Capital Gains in year of sale; AND (b) PGBP on the trading-leg [actual sale price MINUS FMV-on-conversion], chargeable as PGBP in year of sale. The bifurcation is intentional — long-term holder concessional rate (LTCG @ 12.5%) is preserved for the appreciation till conversion; only post-conversion mark-up is taxed at full slab rates as PGBP. Documentation: contemporaneous valuation report (registered valuer / CA-certified) on conversion-date FMV is critical. Sundaram Finance Ltd (Mad HC) and Bombay Burmah Trading Corp (SC) are the leading cases. Reverse direction (stock-to-capital-asset) is NOT covered here — handled by judicial gloss / s. 28(via) [now in 2025 Act PGBP equivalent].

SUB-SECTIONS (7)-(8) — BENEFICIAL-OWNER / DEPOSITORY TRANSFERS (1961 s. 45(2A))

Demat-account architecture: securities are held by depository (NSDL/CDSL); the registered owner (depository) is NOT the BENEFICIAL OWNER (the investor). Sub-s. (7) ensures that the CG arising from transfer of beneficial interest is taxed in the BENEFICIAL OWNER's hands, NOT in the depository's. Three rules: (a) profits/gains chargeable as income of BENEFICIAL OWNER in year of transfer; (b) NOT regarded as income of depository (despite depository being deemed registered owner per s. 10(1) Depositories Act 1996); (c) FOR S. 72 PURPOSES — cost of acquisition AND period of holding determined on FIFO METHOD. Sub-s. (8): definitions — 'beneficial owner', 'depository', 'security' have the same meaning as in s. 2(1)(a)/(e)/(l) of the Depositories Act 1996. Practitioner application: this is the foundational provision for taxing demat-equity / debt / units across all stock-exchanges. FIFO methodology means the FIRST securities purchased are deemed FIRST sold — important for LTCG-vs-STCG character determination and indexation start-date. Stockbrokers' contract notes / DP statements must support FIFO trail.

SUB-SECTION (9) — CAPITAL CONTRIBUTION TO FIRM/AOP/BOI (1961 s. 45(3))

When a person introduces a capital asset as capital contribution into a firm / AOP / BOI (NOT a company / co-op society) in which he is or becomes a partner / member, this is a deemed transfer. Year of charge: year of transfer (i.e., year of capital contribution). FVOC: AMOUNT RECORDED IN THE BOOKS OF ACCOUNT of the firm/AOP/BOI — NOT the FMV on the date of transfer. This is the famous 'book-value FVOC' rule from Sunil Siddharthbhai (SC, 1985, 156 ITR 509) — affirmed by 1961 s. 45(3) insertion in FA 1987. Practitioner application: a partner can introduce property at REVERSE HISTORICAL COST in books to MINIMIZE CG; conversely, can introduce at high book-value to step up the firm's cost basis for subsequent sale. Anti-abuse: AO's GAAR enquiry under s. 96 / 97 of this Act / 1961 s. 92BA related-party-TP. NB: corresponding conversion-on-distribution (firm dissolving and giving back asset to partner) is now covered by sub-ss. (10)-(11) post FA 2021.

SUB-SECTIONS (10)-(11) — FIRM/AOP/BOI RECONSTITUTION (FA 2021 — 1961 s. 9B / 45(4)/(4A))

FA 2021 introduced ONE OF THE MOST CONSEQUENTIAL changes to firm taxation: reconstitution-of-firm distributions (retiring partner, change in PSR, new partner admission) are now chargeable to CG in the FIRM's hands using a specific A=B+C-D formula. This codifies and overrides Sunil Siddharthbhai (which had favoured pre-2021 firms by rendering retirement distributions tax-free) and Bilakhia Holdings (Bom HC, 2014). Mechanics under sub-s. (10): Where a SPECIFIED PERSON receives during a tax year ANY MONEY OR CAPITAL ASSET (or both) from a SPECIFIED ENTITY in connection with RECONSTITUTION of that entity, then: (a) profits/gains deemed income of the SPECIFIED ENTITY (i.e., chargeable in the firm/AOP/BOI's hands, NOT the receiver-partner's) of the year of receipt; (b) Quantum: A = B + C − D, where: B = MONEY received by specified person from specified entity on date of receipt; C = FMV of capital asset received from specified entity on date of receipt; D = BALANCE in capital account (in any manner represented) of specified person in books of specified entity at TIME OF RECONSTITUTION; (c)(i) If A is NEGATIVE → deemed ZERO (no negative CG in firm's hands); (c)(ii) Capital-account balance D is calculated WITHOUT considering increase due to revaluation / self-generated goodwill / self-generated asset (anti-abuse — prevents inflating capital account through revaluation to neutralise B+C); (d) Sub-s. (10) operates IN ADDITION TO s. 8 (specified-entity charge equivalent of 1961 s. 9B) — taxation under that section worked out independently. Sub-s. (11): definitions. 'Reconstitution', 'specified entity', 'specified person' have meanings in s. 8; 'self-generated goodwill' and 'self-generated asset' = goodwill/asset acquired without cost or generated during business/profession. Worked example: A, B, C are partners in firm with capital accounts INR 50L, 30L, 20L respectively (no revaluation). C retires; receives INR 80L cash from firm. B (money) = INR 80L; C (FMV asset received) = NIL; D (capital balance) = INR 20L. A = 80 + 0 − 20 = INR 60L deemed CG in FIRM's hands (LTCG / STCG character based on firm's holding period of monetised assets). NB: the firm gets a one-time charge here, which is independent of, but coordinated with, s. 8 (capital-asset distribution rules — 1961 s. 9B equivalent). Practitioner alert: this is the single biggest change in partnership-tax-planning post 2021. Pre-FA 2021 retirement-distribution structures (Mansukh Dyeing route) are now DEAD. New strategies: (a) capital-account inflation through genuine asset revaluation (now blocked by sub-s. 11 anti-abuse); (b) staggered retirement over multiple years (still works but only delays charge); (c) firm-to-LLP conversion under s. 70(1)(ze) (still tax-neutral subject to seven conditions).

SUB-SECTIONS (12)-(13) — COMPULSORY ACQUISITION (1961 s. 45(5))

Compulsory acquisition under any law (most commonly Land Acquisition Act 1894 / Right to Fair Compensation and Transparency in Land Acquisition Rehabilitation and Resettlement Act 2013 / state-level acquisitions for SEZ/highway/airport/defence) gives rise to multi-stage compensation: (a) initial compensation at award; (b) enhanced compensation by reference court / High Court; (c) further enhancement by Supreme Court. Each stage triggers a separate CG event. Sub-s. (12) prescribes the manner: (a) CG computed with reference to INITIAL compensation chargeable in year of FIRST RECEIPT of compensation (or part thereof); (b) ENHANCED compensation chargeable in year of receipt; (c) interim-order compensation deemed received in year of FINAL ORDER (prevents premature charge on contingent receipts); (d) RECOMPUTATION provision — if compensation is REDUCED on later appeal, the CG is recomputed with reduced FVOC. Sub-s. (13) is the cost-rule for ENHANCED COMPENSATION: (a) Cost of acquisition AND cost of improvement = NIL (the original cost was already absorbed in the year-of-first-receipt charge); (b) If enhanced compensation is received by ANY OTHER PERSON (typically heirs after transferor's death), CG taxable in that other person's hands. Year-of-receipt rule: codified post Sterling Investment Corporation (Bom HC) and CIT v. Hindustan Housing & Land Development Trust (SC, 1986) which had held that enhanced-comp gives rise to CG only when received and not when accrued. Interest on compensation: post FA 2010 amendment to 1961 s. 45(5)(b) and s. 56(2)(viii) — interest on enhanced compensation is taxable as INCOME FROM OTHER SOURCES under 2025 Act s. 92(2)(g) [previously CG character per Ghanshyam (HUF) (SC, 2009) but legislatively reversed]. 50% deduction allowed under s. 93 [equivalent of 1961 s. 57(iv)].

SUB-SECTIONS (14)-(16) — JDA-MODE FOR INDIVIDUAL / HUF (FA 2017, 1961 s. 45(5A))

FA 2017 introduced a special year-of-charge regime for INDIVIDUAL OR HUF land-owners entering joint development agreements (JDAs) with builders. Pre-FA 2017, the CG was chargeable in the YEAR OF JDA-EXECUTION (year of permitting possession to builder per 1961 s. 53A TPA), even though the land-owner had not received any monetisable consideration — creating cash-flow distress. Sub-s. (14) defers the charge to year-of-completion-certificate. Conditions (sub-s. 14): (a) Person must be INDIVIDUAL or HUF (companies / firms / LLPs not eligible — they continue with year-of-execution charge under sub-s. 1); (b) Asset = LAND or BUILDING (or both); (c) Transfer under a SPECIFIED AGREEMENT (defined in sub-s. 15 — registered agreement allowing developer to develop in consideration of share in project, with or without partial cash consideration). Mechanics: (i) CG chargeable in tax year in which COMPLETION CERTIFICATE for whole/part of project is issued by competent authority; (ii) FVOC for s. 72 = SDV on date of CC of land-owner's share + cash/cheque/draft consideration received. Sub-s. (15) definitions: (a) 'competent authority' = authority empowered to approve building plan under any law (typically Municipal Corporation / Town Planning Authority / RERA). (b) 'specified agreement' = REGISTERED agreement allowing development in consideration of share (with or without partial cash). Sub-s. (16) — ANTI-ABUSE: if landowner TRANSFERS HIS SHARE IN THE PROJECT BEFORE CC issuance, then sub-s. (14) does NOT apply, and CG is charged in year-of-such-pre-CC-transfer at conventional FVOC. This prevents indefinite deferral by perpetual sub-development arrangements. Practitioner relevance: Indian metro real-estate is dominated by JDA model — every individual/HUF owner of land entering JDA must structure agreement to maximise sub-s. (14) deferral; pay-out during construction phase (cash component) is taxable in that year, not deferred. Common trap: landowner sells flat-allocation in pre-launch BEFORE CC — triggers full CG at pre-launch sale price.

SUB-SECTIONS (17)-(18) — UTI / MF UNITS REPURCHASE (1961 s. 45(6))

Legacy provision dealing with unit-linked-insurance-plan-style schemes notified under 1961 s. 80CCB (US-64 / UTI Capital Gains Growth Plan / Mutual Fund 1992 type). When such units are repurchased OR plan terminated, the difference between repurchase price and capital value (i.e., original investment) is deemed CG. Sub-s. (17) prescribes year-of-charge: tax year in which (a) repurchase takes place; or (b) plan is terminated. Sub-s. (18) defines 'capital value' as amount invested by assessee in such units. Practitioner relevance: largely historical — most 1961 s. 80CCB schemes have been wound up. Marginal residual cases for very old portfolios.

INTERACTION WITH ROLLOVER EXEMPTIONS (ss. 82-89)

The opening words of sub-s. (1) — 'save as otherwise provided in sections 82, 83, 84, 85, 86, 87, 88 and 89' — preserve the rollover regime. Each rollover targets specific asset types: s. 82-83 — Residential house exemption (1961 s. 54 / 54F); s. 84 — Agricultural land (1961 s. 54B); s. 85 — Industrial undertaking shifting / land&building of factory (1961 s. 54D); s. 86 — Specified bonds NHAI / REC / PFC etc. up to INR 50 lakh (1961 s. 54EC); s. 87 — Listed equity / equity-fund LTCG (1961 s. 54EE never operationalised; new regime?); s. 88 — Various; s. 89 — Reference to Valuation Officer (procedural). All deemed-transfer sub-sections of s. 67 (insurance recovery, conversion to stock, firm reconstitution, compulsory acquisition, JDA, UTI repurchase) are subject to rollover availability — the LTCG character carries through, and reinvestment can be made in qualifying avenues. Common practitioner planning: for compulsory-acquisition CG, deploy in s. 86 bonds within 6 months; for JDA CG, deploy in s. 82-83 residential house within 1 year before / 2 years after CC date.

CASE LAW — LEADING DECISIONS

(i) CIT v. B.C. Srinivasa Setty (SC, 1981, 128 ITR 294) — capital-gains charge fails where machinery section cannot apply. Foundational. (ii) Sunil Siddharthbhai v. CIT (SC, 1985, 156 ITR 509) — capital contribution to firm is transfer for CG; book-value is FVOC. Codified in s. 67(9). (iii) CIT v. R.M. Amin (SC, 1977, 106 ITR 368) — distribution of assets on liquidation is not 'transfer' by company. (iv) Bombay Burmah Trading Corp v. CIT (SC, 1963, 50 ITR 25) — conversion of investment to stock — Sundaram Finance line. (v) CIT v. Hindustan Housing & Land Development Trust (SC, 1986, 161 ITR 524) — enhanced compensation taxable on receipt, not accrual. Codified in s. 67(12)(b). (vi) Ghanshyam (HUF) v. CIT (SC, 2009, 315 ITR 1) — interest on enhanced compensation as compensation-character CG; overruled by FA 2010 to make it IFOS. (vii) Mansukh Dyeing Industries v. ITO (Bom HC pre-FA 2021) — pre-2021 retirement payouts to partners not chargeable; now overruled by s. 67(10)-(11). (viii) Bilakhia Holdings P. Ltd v. CIT (Bom HC, 2014) — pre-2021 firm-asset distribution issues. (ix) Sundaram Finance Ltd v. ACIT (Mad HC) — s. 45(2) FMV-on-conversion as cost-base going forward. (x) DLF Universal Ltd v. DCIT (Del HC) — JDA pre-FA 2017 — year-of-execution charge clarified. (xi) Chaturbhuj Dwarkadas Kapadia v. CIT (Bom HC, 2003, 260 ITR 491) — JDA-CG accrued on giving possession (53A TPA); legislatively addressed by FA 2017.

PLANNING NOTES (TEN AREAS)

(i) INSURANCE RECOVERY — for factory fire / flood / cyclone destruction, plan immediate replacement asset acquisition to claim s. 33 depreciation continuity (block-of-asset) or s. 85 rollover; document insurance survey report contemporaneously. (ii) ULIP REDEMPTION — for clients holding multiple post-1-Feb-2021 ULIPs, calculate aggregate annual premium across all policies; one breach contaminates entire stack. Consider surrendering excess policies before maturity. (iii) CONVERSION CAPITAL TO STOCK — once-only event; obtain registered-valuer FMV report on conversion-date; document business-rationale in board minutes; preserve LTCG character on pre-conversion appreciation. (iv) DEMAT TRANSFERS — maintain DP-statement-based FIFO trail; reconcile broker contract notes; identify LTCG-eligible holdings for grandfathering relief under s. 90(7). (v) FIRM CAPITAL CONTRIBUTION — strategic use of book-value FVOC under sub-s. (9) to optimise CG; pair with s. 70(1)(zd) firm-to-company succession to embed cost step-up. (vi) FIRM RECONSTITUTION (sub-s. 10-11) — pre-FA 2021 retirement structures dead; new strategies: (a) staggered retirement (delay only); (b) genuine asset sale before retirement (clean CG event); (c) LLP conversion under s. 70(1)(ze) preserves tax-neutrality. (vii) COMPULSORY ACQUISITION — plan rollover into s. 86 bonds (50L cap) within 6 months of EACH compensation receipt (initial AND each enhancement); track interim-order vs final-order distinction for year-of-charge. (viii) JDA INDIVIDUAL/HUF — structure agreement to maximise sub-s. (14) deferral to CC year; pre-CC sub-sale of allotted flats triggers immediate CG under sub-s. (16) — avoid pre-launch sales by individual landowner. Pair with s. 82-83 residential house rollover within 1-year-before/2-years-after CC. (ix) DOCUMENTATION CHECKLIST — for every CG event: (a) date of transfer; (b) sub-section invoked; (c) FVOC determination; (d) cost u/s 90; (e) period of holding; (f) LTCG/STCG character; (g) rollover plan if applicable. Lock down in working papers. (x) RECOMPUTATION EVENTS — for compulsory acquisition reduction on appeal, file s. 87/88 rectification application within prescribed window; for JDA pre-CC transfer, recompute CG for transfer-year as if sub-s. (14) never applied.

CROSS-REFERENCES

Sub-section (1) — main charge.
Section 70 — Transactions not regarded as transfer (deflections from charge).
Sections 82-89 — Rollover / reinvestment exemptions (preserved by opening words of sub-s. 1).
Section 72 — Mode of computation of capital gains.
Section 73 — Cost in special modes.
Section 8 — Specified-entity provisions (interaction with sub-ss. 10-11).
Section 33 / 39 — Depreciation continuity for replacement asset (read with sub-s. 2-4 insurance).
Section 90 — Cost definitions.
Section 92(2)(g) — Interest on enhanced compensation IFOS chargeability.
Section 93 — 50% deduction on interest on compensation.
Section 196 — STCG rate.
Sections 197 / 198 — LTCG rates (interaction with FA 2024 12.5% flat / 20% indexed choice for land/building).
Schedule II Table Sl. No. 2 — ULIP exemption (read with sub-s. 5).
Insurance Act 1938 s. 2(9) — 'insurer' definition (sub-s. 4).
Depositories Act 1996 ss. 2(1)(a)/(e)/(l) and s. 10(1) — definitions (sub-s. 8).
Land Acquisition Act 1894 / RFCTLARR Act 2013 — primary statutes for sub-ss. 12-13 compulsory acquisition.
RERA 2016 — competent-authority CC framework (sub-s. 15(a)).
Transfer of Property Act 1882 s. 53A — possession-as-transfer rule (legacy basis for pre-FA 2017 JDA charge).

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