Section 54GA of the Income Tax Act, 1961, provides tax exemption on capital gains when a business relocates its industrial undertaking from an urban area to a Special Economic Zone (SEZ).
1. Key Features
✅ Applicable to: Businesses shifting plant, machinery, land, or building from an urban area to an SEZ.
✅ Exemption: Full capital gains tax relief if proceeds are reinvested in:
- New land, building, plant, or machineryin the SEZ.
- Infrastructure developmentwithin the SEZ.
✅ Time Limit: Reinvestment must be made 1 year before or 3 years after the transfer.
2. Eligibility Conditions
✔ Asset Type: Industrial assets (factory, warehouse, etc.).
✔ Transfer Reason: Must be solely for shifting to an SEZ.
✔ SEZ Approval: The new unit must be notified as an SEZ by the government.
✔ Lock-in Period: New assets cannot be sold/transferred for 3 years.
3. Example
- Sale of Urban Factory (LTCG): ₹5 Crore
- Investment in SEZ Unit: ₹4.5 Crore
- Exemption: ₹4.5 Crore (remaining ₹50L taxable).
4. Comparison with Section 54G
| ASPECT | SECTION 54GA (SEZ SHIFT) | SECTION 54G (RURAL SHIFT) |
| Location | Special Economic Zone (SEZ) | Rural/non-urban area |
| Tax Benefit | 100% exemption | Proportional exemption |
| Approval | SEZ registration required | No special approval needed |
5. Compliance & Documents
✔ Proof of SEZ approval.
✔ Reinvestment evidence (sale/purchase deeds, bank statements).
✔ Disclosure in ITR-3/ITR-4.
