TaxTMI 
TaxTMI 
Comparison of Section 86 "Capital gains on transfer of certain capital assets not to be charged in case of investment in residential house." between the Income-Tax Act, 2025 (as passed) and the Income-Tax Bill, 2025 (as originally introduced)
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....f non-residential long-term capital assets where proceeds are applied to purchase or construct one residential house in India within prescribed time windows. It matters to individual and HUF taxpayers who invest sale proceeds into residential property. Effective date or decision date: Not stated in the document. Background & Scope Statutory hooks: Clause 86 of the Income Tax Bill, 2025 (Old Version) is a provision dealing with taxation of long-term capital gains (LTCG) and provides conditions under which such gains are not charged u/s 67 (as referenced in the text). The provision targets individuals and Hindu undivided families (HUFs) who transfer long-term capital assets that are not residential houses and invest the sale proceeds in one....
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....rs after for purchase; three years after for construction) are integral to qualify. The clause contemplates deposit of unutilised amounts into a specified bank/institution under a Central Government notified scheme where the proceeds are not immediately applied; such deposits are treated as part of the cost of the new asset for the purpose of computing exemption. The clause also contains anti-abuse measures by disallowing the benefit where the assessee owns more than one residential house (other than the new asset) on date of transfer or acquires/constructs another residential house in specified post-transfer time (with the result that the exemption will not apply where income from such other house is chargeable under "Income from house pro....
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....ing into account cost exceeding INR 10 crore for purposes of sub-section (1); clause (9) excludes amounts in excess of INR 10 crore of net consideration for purposes of sub-section (2). Illustrations * Example 1 (proportionate exemption): Not stated in the document. * Example 2 (deposit and recapture): Not stated in the document. * Example 3 (cap application): Not stated in the document. Interplay Interaction with other provisions: the clause expressly refers to section 67 for the charging of capital gains and to filing due date provisions (sub-section references). It also contemplates a scheme notified by the Central Government for deposit and utilisation but does not itself specify that scheme. No further rules, notifications, or....
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....aid section" (less specific in the present text). The Act language is clearer and may shift the applicable due date reference; practical consequences depend on the meaning of the referenced section(s), but the Act's phrasing appears to impose deposit strictly before filing and ties proof submission to that return. * Ownership/purchase timing that disqualifies exemption: In Document 1 (Act), sub-section (5)(ii) disqualifies benefit if the assessee "purchases any residential house, other than the new asset, within one year of transfer of the original asset." In Document 2 (Bill) that disqualifying period in sub-section (5)(ii) is "within two years of transfer of the original asset." * Practical impact: The Bill allowed a longer grace ....
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.... attach proof with the return; failure to deposit or to meet the timing could trigger full or partial taxation (recapture) u/s 67. * Record-keeping/evidence: The clause requires proof of deposit to be submitted with the return; consequently, taxpayers should retain authenticated deposit receipts, bank/institutional acknowledgements, evidence of purchase/construction dates, and documentation showing computation of net consideration and cost of new asset. Records supporting the nature of other properties and rent/income chargeability under "Income from house property" will be material where clause (5) is relevant. Key Takeaways * Clause 86 provides a limited, conditional exemption from LTCG for individuals/HUFs reinvesting sale proceeds ....