Yes, friends, welcome to a new episode of Dharamai, in
which we were discussing about exemptions.
What are the exemptions?
Brother, the long-term capital gain or the short-term
capital gain should not be taxable in your hands.
That is why the government has introduced some exemptions.
If you sell a particular asset and buy a particular asset,
then it becomes exempt.
The more capital gain you have invested in buying a new
asset, the more capital gain you will get exempted.
There were two cases.
One was buying a house by selling it.
The other was buying agricultural land by selling urban
agricultural land.
We discussed these two cases in the last lecture.
And today we will study this topic in a little more detail.
Let's talk about a new exemption, which is Section 54D.
What does this 54D say?
D means Don.
What does Don do?
He compulsorily acquires.
If you are smart, then you must have understood by now that
I am going to talk about the Chakbandi.
For example, the government has to build this highway.
The government has to build this highway.
And this highway has to be built from here to here.
But the problem is that you have a factory here.
This is your factory.
Or you can call it an industrial undertaking.
Sir, what is the matter?
You have made a very nice drawing of a factory.
Earlier you used to build a house and say that this is a
factory.
And you used to tell us that we are not smart.
We don't know.
Friend, I have got my drawing tuition.
My new teacher has told me that the drawing of a factory is
like this.
There will be a chimney on top and smoke will come out of
it.
And this will be its gate.
I have got my drawing tuition for Rs. 300 per month.
Now let's see how much that drawing teacher can teach me.
So the problem is that the government has to build a
highway.
And the highway comes in the middle of your factory.
Or you can say that your factory comes in the middle of the
highway.
And you have to take it till here.
Now what should you do?
You have to build this highway.
Cars will come from here.
For example, this is a car.
This car will come from here.
Okay? Or you can take the road from the middle of your
factory.
You are taking your goods from here.
Your labour, etc.
A man is working on a machine here.
And I take the road from here.
Right? This is what I should do.
A man is crossing the road from here.
A road is going from your factory.
Traffic will keep coming from your factory.
Cars will come.
Cars are coming from here.
A car has entered your factory.
And it will leave from here.
Right? This is what the government should do.
Sir, what does the government say in this case?
The government says,
We will forcefully take over your factory.
We will compulsorily acquire your property.
My dear.
Sir, think of a person who has invested his life's savings
in opening his factory.
He has invested his life's savings in opening his factory.
And his factory is compulsorily acquired.
His factory is compulsorily acquired by the government.
What is the fault of that person in this case?
What is the fault of that person?
He will get money from the government.
That is a different matter.
But when I will receive that money from the government, you
will come to me and say that a long term capital gain tax
should be imposed on him.
Sir, I took some money and opened my factory.
The government came and forcedfully took over it.
Fine, give me the money.
A long term capital gain tax will be imposed on me.
Now what should I do?
Should I go to a new place and open a factory?
Or should I pay the tax?
And you will deduct the tax already.
I will get a deducted amount.
When the tax will be deducted from my hands,
I will have a balanced amount of money.
In this case, the government says,
Don't be angry.
Don't be angry at all.
Don't worry at all.
Do one thing.
Drink some water.
And sit comfortably.
And bring a cold drink for him.
Do you want to drink Thumbs Up?
Should I order Thumbs Up for you?
Yes, I will order Thumbs Up.
And bring a crispy chips for him.
Don't worry.
What will we give you?
Whether it is a short term capital gain tax or a long term
capital gain tax.
Whatever capital gain tax you have, what will you be given?
In that case, you will be given an exemption.
Under 54D.
If you give this exemption, your capital gain tax will be
zero.
Now, we will discuss about how and how to give this
exemption.
First of all, tell me, why did you take both short term and
long term?
Brother, tell me one thing.
The government wants to take out its highway from somewhere.
And your factory is coming in the middle of it.
So, first of all, it will be seen that only if it is long
term, we will do acquisition on it.
If it is short term, we will leave it.
Brother, in the middle of the government's highway, if any
asset comes, if any property comes, we will forcefully take
it.
Whether it is long term or short term.
In both ways, you will get money from the government.
Today or tomorrow.
And you will get capital gain.
Whether it is short term or long term.
Is this point clear, sir?
What is the condition of this?
The condition is that
you will get this exemption only when you take one more…
Okay, you have taken over from here.
Now you want to tell the government that I have taken over
from here.
Now what will I do?
I will go to some other city.
I will go to some other place.
And I will go there and open an industrial unit of mine.
Is it okay, sir?
Open an industrial unit.
But within how much time?
Within three years, open a new industrial unit.
Whatever land and building you have, land and building
which was related to the factory, it has been acquired.
So you go and buy a new land and building.
Within how much time?
Within three years, you go inside and buy it.
As it was in the earlier cases, it will be the same.
Meaning? Meaning that
if you have invested all the capital gain, if you have
invested all the capital gain,
to make a new industrial unit, then it is okay.
All your capital gain will be exempted.
It will be zero.
Assume there is an example of 15 lakhs.
So there was a capital gain of 15 lakhs.
And assume there was a cost of a new undertaking of 40
lakhs.
You have invested 40 lakhs.
How? 25 lakhs from here and there.
And the rest,
15 lakhs for the entire capital gain.
Okay.
15 lakhs for the entire capital gain.
It will be zero.
But assume there is a capital gain of 15 lakhs.
There is a capital gain of 15 lakhs.
And a new undertaking of 10 lakhs has come.
If you go and open it in a place where the work has been
done cheaply, then whatever you have invested in that case,
like 10 lakhs, in that case, it will be exempted.
And the new asset, how long do you have to use it?
Is there any such condition?
You have to use the new asset for 3 years.
If you don't do it, it will be the same.
The exemption amount will be deducted from the cost.
Come, let's read it once.
Let's read it.
These were the basic points that I have explained to you.
Now let's see what are the things in the reading time.
Capital gain on the transfer of
compulsory acquisition of land and building of an
industrial undertaking 54D.
Who is eligible? It can be anyone.
It can be an individual.
It can be a factory in the name of the company.
I am an individual.
It can be a factory in my name.
The conditions to be fulfilled are that compulsory
acquisition should be done.
And that land and building, industrial land,
I have been using it for at least 2 years.
I have been using it for 2 years.
And the new land and building that I am buying to make an
industrial undertaking,
I am buying it within 3 years.
At what rate for 3 years?
From the rate of transfer.
How much exemption will I get?
Quantum of exemption, come here.
What is quantum of exemption?
If the cost of the new asset is more than the capital gain,
then the entire capital gain is exempted.
If the cost is 40 lakhs,
if the capital gain is 15 lakhs, then 15 lakhs is exempted.
But if the cost is 10 lakhs, and if the capital gain is 15
lakhs,
then 10 lakhs is exempted.
Okay, sir?
No problem?
And he is saying that if you transfer the new asset within
3 years, from the date of purchase, then the cost of the
asset will be reduced by the capital gain.
As we have been reading in other sections as well.
Is this point clear?
Shall I go ahead?
Do you have permission to see?
If you want to see.
Okay, sir?
Come on, sir.
Next, 54 EC.
This is our second to last topic.
He is also saying to the chapter that go and teach me also,
because this chapter has made us do this and that, it was
looking so tough in the beginning, we have made it so
tough, 54 EC, it was looking like what is capital gain, I
don't know what is capital gain, what is capital gain, it
is over, 54 EC, what is 54 EC, it is a simple thing, it is
a long term capital gain, you have a land and a building,
you sold some land today, you have land, you sold that
land, you have a building, you sold
building, and you have the long term capital gain, think
and tell me,
that to become long term, how long should the land and the
building time should be, two years, very good, you
remember, more than two years you hold your land and
building,
you hold, then what will become of it? Long term capital
asset.
Now if you sell it, then what will be in your long term
capital gain? The government says, it is long term capital
gain and we have to exempt.
So you do one thing, because this whole topic, you think
that section 54 is running of exemptions, on what basis is
it going on? Original basis you will sell the land.
In that case, you will sell the land, you will get a
long-term capital gain for no reason. You won't know about
the gas section. You will get a tax from the government.
The government won't say, okay, give it to me.
Yes, but if you know that I have a long-term capital gain,
then where should I invest it so that I get all of it
exempted? In that case, you will save your tax, sir. In
that case, you will save your tax. If you have the
knowledge of the law, that's enough for you.
No one will be able to make you crazy. Come, let's
understand what it is.
That long-term capital gain has come by selling land and
buildings. You have sold some land, etc.
You have some long-term capital gain.
In that case, where have you invested that money?
In the bonds of NHAI. You have invested that money in the
bonds of National Highway Authority of India.
Or in the bonds of Rural Electrification Corporation Ltd.
What did I say? These are government companies. National
Highway Authority of India Ltd.
Or Rural Electrification. What is their objective? National
Highway. Making highways.
What is the second one? Rural Electrification. Meaning,
delivering electricity to the villages.
The tax that you pay, all that tax goes to these agencies.
It goes to these organizations so that the country can
develop.
In this case, what is being said directly is that we are
issuing our bonds.
You will buy those bonds. What is the use of that? We will
give you the exemption.
And what is the use of us? Will we get the money?
We can directly use that money in the development of the
country.
Your benefit is that you will get the exemption.
So, to get the exemption, what you have to do is, if you
sell land and buildings, long-term capital gain, then buy
the bonds of NHAI and RECL which will be redeemed after 5
years.
Redeem them after 5 years.
Go to the NHAI people and tell them that I took this bond
from you 5 years ago.
Take this paper and return it along with my money.
They will return it to you.
But, the ones that were redeemable 5 years ago should not
be there.
When should you buy them? Within 6 months.
When you sell your land, within 6 months, buy these bonds
which will be redeemable after 5 years.
In that case, you will be exempted.
How much will you be exempted?
Can it be all or nothing? Yes.
Sir, I sold a land worth Rs. 100 crores.
I sold a land worth Rs. 100 crores.
Can 100 be covered in 100 exemptions?
Can my capital gain be zero in that case?
Sir, the capital gain will be zero if you buy the bonds of
NHAI and RECL within 6 months.
What will be the capital gain?
Either this, or you will repay the money you have invested.
Or what will be the maximum?
Rs. 50 lakhs.
In that case, what will be the maximum of Rs.
100 crores?
Rs. 50 lakhs.
I sold a land worth Rs. 100 crores.
Whatever capital gain I got, what will be the maximum?
Rs. 50 lakhs.
This is the point.