Section 54H of the Income Tax Act, 1961, provides an extension of the reinvestment period for claiming capital gains exemptions under Sections 54, 54B, 54D, 54EC, 54F, and 54GB when the original asset is compulsorily acquired by the government. This provision ensures taxpayers don’t lose exemptions due to delays in receiving compensation.
1. Key Provisions
✅ Applicable to: Assets compulsorily acquired under laws like the Land Acquisition Act, 2013, or other government orders.
✅ Extended Deadlines:
- Purchase/Construction Period: The 2/3-year reinvestment windowstarts from the date of compensation receipt (not the acquisition date).
- Section 54EC Bonds: The 6-month investment periodbegins from the date of compensation receipt.
✅ Covered Exemptions:
- Section 54(Residential property)
- Section 54B(Agricultural land)
- Section 54D(Industrial land/building)
- Section 54EC(Bonds)
- Section 54F(Any asset → Residential house)
- Section 54GB(Investment in SME)
2. Example Scenarios
(A) Residential Property (Section 54)
- Property acquired by govt. on 1st Jan 2023.
- Compensation received on 1st July 2024.
- New Deadline: Can buy a house by 1st July 2026(2 years from compensation).
(B) Agricultural Land (Section 54B)
- Land acquired on 1st March 2022.
- Compensation received on 1st Dec 2024.
- New Deadline: Can buy new agricultural land by 1st Dec 2026(2 years from compensation).
(C) 54EC Bonds
- Land acquired on 1st April 2023.
- Compensation received on 1st Oct 2024.
- New Deadline: Must invest in bonds by 1st April 2025(6 months from compensation).
3. Compliance & Proof Required
✔ Government Acquisition Order: Must be submitted as proof.
✔ Compensation Receipt: Bank statements or official documents showing payment date.
✔ ITR Disclosure: Mention the exemption claim under “Capital Gains”.
