Section 54ED-Capital Gain on Transfer of Certain Listed Securities or Unit not be Charged in Some

The Income Tax Act, of 1961 is the main statute of Income Tax in India. It provides for levy, administration, collection, and recovery of Income Tax.

(1) Before 1 April 2006, if the capital gain arises out from the transfer of a long-term asset which is being listed securities or units and the assessee invested the whole or any part of the capital gain in acquiring equity shares forming part of an eligible issue of capital within the six months of such transfer, then the said capital will be dealt in accordance with the following provisions.

(a) if the cost of the specified equity shares is almost as same as the capital gain arising from the transfer of the original asset, the whole of such capital gain will not be charged under section 45. (b) if the cost of the specified equity shares is less than the capital gain arising from the transfer of the original asset, so much of the capital gain bears to the whole of the capital gain the same proportion as the cost of the specified equity shares acquired bears to the whole of the capital gain shall not be charged under section 45.

What is the eligible issue of capital?

It means the issue of shares that satisfy the following conditions:

(a) the issue is made by a public company formed and registered in India; (b) the shares forming part of the issue are offered for subscription to the public; “listed securities” shall have the same meaning as in clause (a) of the Explanation to sub-section (1) of section 112; “unit” shall have the meaning assigned to it in clause (b) of the Explanation to section 115AB.

(2) If the specified equity shares are sold or transferred within a period of one year from the date of their acquisition, the amount of capital gain arising from the transfer of the original asset not charged under section 45 on the basis of the cost of such specified equity shares as provided in clause (a) or, as the case may be, clause (b), of sub-section (1) will be deemed to be the income chargeable under the head “Capital gains” relating to long-term capital assets of the previous year in which such equity shares are sold or otherwise transferred. (3) Where the cost of the specified equity shares has been taken into account for the purposes of clause (a) or clause (b) of sub-section (1),- (a) a deduction from the amount of income tax with reference to such cost will not be allowed under section 88 for any assessment year ending before 1 April 2006. (b) a deduction from the income with reference to such cost will not be allowed under section 80C for any assessment year beginning on or after the 1 April 2006.