Section 54D of ITA, 1961 : Section 54D: Capital Gain On Compulsory Acquisition Of Lands And Buildings Not To Be Charged In Certain Cases

Explanation using Example

Let's consider Mr. Sharma owns an industrial unit with land and a building that he uses for his manufacturing business. The government decides to build a highway and compulsorily acquires Mr. Sharma's land and building. He receives a compensation of ₹1 crore, which results in a capital gain of ₹60 lakhs after considering the indexed cost of acquisition.

Mr. Sharma decides to reinvest the entire compensation amount into purchasing a new piece of land and constructing a new building for relocating his industrial unit. He completes this purchase and construction within 3 years of the compulsory acquisition and spends ₹80 lakhs on it.

According to Section 54D:

• If the capital gain (₹60 lakhs) is less than the c...

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