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TMI BlogExtension of Time for Reinvesting Capital Gain, original asset is compulsorily acquired, and compensation is delay Clause 89 of the Income Tax Bill, 2025 vs. Section 54H of the Income-tax Act, 1961X X X X Extracts X X X X X X X X Extracts X X X X ..... uisition. These provisions are significant as they provide relief to taxpayers who face delays in receiving compensation when their property is compulsorily acquired under law. This commentary aims to provide a detailed analysis of both Clause 89 and Section 54H, comparing their provisions, objectives, and practical implications. Objective and Purpose The primary objective of both Clause 89 and Section 54H is to extend the time available to taxpayers for reinvesting capital gains in cases where the original asset is compulsorily acquired, and compensation is delayed. This extension is crucial as it allows taxpayers to retain eligibility for capital gains tax exemptions under specific sections of the Income-tax Act. The legislative intent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pulsory acquisition where compensation is delayed. The section applies to transfers u/ss 54, 54B, 54D, 54EC, and 54F. Key aspects of Section 54H include: - Compulsory Acquisition:- Like Clause 89, Section 54H addresses scenarios where the original asset is compulsorily acquired, highlighting the need for legislative intervention in such cases. - Date of Compensation Receipt:- The extension of time is linked to the date of receipt of compensation, aligning with the principle that taxpayers should not be disadvantaged by delays in compensation. - Historical Context:- The section includes a proviso for cases where compensation was received before April 1, 1991, allowing extensions up to December 31, 1991, reflecting historical legislat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , aligning their financial decisions with the actual receipt of compensation. - Compliance Requirements: :- Taxpayers must be aware of the specific conditions and timelines under these provisions to ensure compliance and retain eligibility for exemptions. - Financial Planning: :-The extension of time allows for better financial planning, particularly in cases where large sums are involved, and immediate reinvestment is not feasible. - Regulatory Clarity: :- Clear guidelines on the extension of time help reduce disputes and litigation, providing certainty to both taxpayers and tax authorities. Conclusion Clause 89 of the Income Tax Bill, 2025, and Section 54H of the Income-tax Act, 1961, play crucial roles in addressing the cha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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