TaxTMI 
TaxTMI 
Comparison of Section 87 "Exemption of capital gains on transfer of assets in cases of shifting of industrial undertaking from urban area." between the Income-Tax Act, 2025 (as passed) and the Income-Tax Bill, 2025 (as originally introduced)
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....an industrial undertaking from an urban area to a non-urban area. It sets out the conditions under which capital gains may be not charged or deferred, the treatment where the gains are reinvested in "new assets", and the time limits and deposit mechanism for unutilised gains. The provision principally affects taxpayers operating industrial undertakings, and the Revenue in administering exemptions. Effective date or enactment date: Not stated in the document. Background & Scope Statutory hook: Clause 87, Income Tax Bill, 2025 (Old Version). Context: a targeted capital gains exemption aimed at encouraging shifting of industrial undertakings from urban to non-urban areas by providing tax relief where capital gains are reinvested in specified....
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.... * (i) purchased new machinery or plant for the industrial undertaking in the new area; * (ii) acquired building or land or constructed building for business in the new area; * (iii) shifted the original asset and transferred its establishment to the new area; * (iv) incurred expenses on other purposes as specified in a Central Government notified scheme for this section. Interpretation Legislative intent as indicated by the text: to incentivise relocation of industrial activity from urban to non-urban areas by deferring or exempting capital gains tax where gains are applied to capital expenditure in the relocated undertaking. The clause uses reinvestment and deposit mechanisms to tie tax relief to actual deployment of gains into p....
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....et) in an urban area realising capital gains of Rs. 100 lakh. Within the three-year window the assessee purchases new machinery in the non-urban new area costing Rs. 120 lakh. Result under Clause 87(1)(A)(II): no capital gain charged u/s 67; for subsequent disposal of new machinery within three years, its cost shall be nil. * Example 2: Same facts but new machinery purchase costs Rs. 70 lakh. Result under Clause 87(1)(A)(I): Rs. 30 lakh (100-70) will be charged as income u/s 67 in the tax year of transfer; cost of the new asset for computing later capital gains will be reduced by Rs. 30 lakh. * Example 3: Assessee fails to apply the capital gain proceeds to any qualifying new asset within the relevant window but deposits the unutilised ....
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....ctical impact: these are drafting variations in cross-referencing the return-filing due date; effect on interpretation depends on which section is intended, but the Bill text as provided does not clarify any substantive change in timing beyond referencing the due date for filing the return. (If further clarity is required on the intended section reference, the documents do not state one unequivocally.) * Minor phrasing and typographical differences: Document 2 contains phrases such as "cost and expenses incurred in on all or any" and refers to "clause (a)" and "clause (b)" in sub-clause (B) whereas Document 1 uses sub-clause lettering (A)(I)/(II). * Practical impact: primarily drafting clarity and possible ambiguity in cross-references;....
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....Record-keeping/evidence points suggested by the text: contemporaneous purchase deeds, invoices for machinery/plant, building acquisition/ construction contracts, evidence of transfer and shifting of establishment, bank deposit evidence where required by sub-section (2), and documentation conforming to the Central Government's notified scheme. The clause requires proof of deposit to be submitted with the return. Key Takeaways * Clause 87 provides a reinvestment-linked exemption for capital gains arising from transfers connected with shifting industrial undertakings from urban to non-urban areas. * The exemption is conditional on purchase/acquisition/construction/transfer or specified expenses within one year before or three years af....