• Manasa M

Section 54G of The Income Tax Act, 1961

Updated: Oct 14

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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.


According to Section 54G of the Income Tax Act, it talks about the exemption towards the capital gain arising on the transfer of capital assets like plants or machinery or land or building which is forming part of an industrial undertaking situated in an urban area. Such transfer should be on account of the shifting of industrial undertaking from the urban area to a rural area.


In order to claim an exemption under section 54G, the claimant has to satisfy the following conditions-

  • An exemption under section 54G is available to all categories of persons.


  • An exemption under section 54G is available for short-term capital gain as well as a long-term capital gain.


  • Machinery for the business for the purpose of industrial undertaking shifted to a rural area. For purchasing land or building or constructing a building for the business purpose of industrial undertaking shifted in a rural area. Expenditure occurred towards shifting of the old industrial undertaking and establishing the same in the rural area.


  • The claimant is supposed to re-invest the amount in shifting the industrial undertaking from the urban to a rural area. The re-investment has to be done within a period of 1 year before or 3 years after the date of transfer for the purpose specified below –

  1. For purchasing of new plant or machinery for the business purpose of industrial undertaking shifted in a rural area.

  2. For purchasing land or building or constructing a building for the business purpose of industrial undertaking shifted in a rural area.

  3. Expenditure incurred towards shifting the old industrial undertaking and establishing the same in the rural area.

  4. Incurring any other expenditure as specified by the Government.

Therefore, if the claimant satisfies all the above conditions, then he is able to get the exemption of capital gains on transfer of assets in cases of shifting of industrial undertaking from urban area.

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