Capital gain Tax Relief in relocation of industrial undertakings from urban areas to non-urban in Clause 87 of Income Tax Bill, 2025 vs. Section 54G of Income Tax Act, 1961

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..... lause is designed to incentivize the relocation of industrial units to less congested areas, thereby promoting balanced regional development and decongesting urban centers. It echoes the existing Section 54G of the Income-tax Act, 1961, which provides similar relief but under different terms and conditions. The analysis herein will explore the legislative intent, key provisions, and practical implications of Clause 87, and compare it with the existing framework u/s 54G. Objective and Purpose The primary objective of Clause 87 is to facilitate the relocation of industrial undertakings from urban areas to non-urban areas by providing tax exemptions on capital gains. This move aligns with broader policy goals of reducing urban congestion, pr .....

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..... 3. Capital Gain Computation: If the cost of new assets is less than the capital gains, the difference is charged as income. If the cost equals or exceeds the capital gain, no tax is levied. For new assets transferred within three years, the cost is adjusted by the capital gain amount. 4. Deposit Requirement: Unutilized capital gains must be deposited in a specified bank or institution before filing the income return, with proof submitted alongside the return. Unused deposits after three years are taxed as income. 5. Definition of Urban Area: The term "urban area" is defined as areas within municipal limits declared by the central government, considering population, industrial concentration, and planning needs. Section 54G of the Inc .....

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..... educe urban congestion and stimulate economic activity in non-urban regions, contributing to regional development. 4. Banking and Institutional Roles: - The requirement to deposit unutilized capital gains in specified banks or institutions underscores the role of financial entities in facilitating compliance. Comparative Analysis While Clause 87 and Section 54G share core objectives and mechanisms, some distinctions merit attention: 1. Legislative Context: - Clause 87 is part of a broader legislative reform in the Income Tax Bill, 2025, potentially reflecting updated policy priorities. Section 54G, rooted in the 1961 Act, may not fully align with contemporary economic conditions. 2. Scheme Specifications: - The schemes s .....

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