Capital gains not to be charged on investment in certain bonds
[As per the Income Tax Act, 2025 (this Act) w.e.f. 1st April, 2026.]
Section 85(1) of Income Tax Act 2025
(1) Where an assessee has––
(a) long-term capital gains arising from the transfer of land or building, or both, (original asset); and
(b) within six months after the date of such transfer, invested whole or part of the capital gains in a long-term specified asset (new asset),
then, the capital gains shall be dealt with as follows:—
(i) if the capital gains exceed the investment in the new asset, the amount of capital gains as exceeds such investment shall be charged under section 67; or
(ii) if the capital gains is equal to or less than the investment in the new asset, the whole of such capital gains shall not be charged under section 67.
Section 85(2) of Income Tax Act 2025
(2) For the purposes of sub-section (1), investment made in the long-term specified asset from capital gain arising from transfer of one or more original asset shall not exceed fifty lakh rupees,––
(a) during any tax year; or
(b) in the year of transfer of the original asset or assets and in the subsequent tax year.
Section 85(3) of Income Tax Act 2025
(3) If the new asset is transferred or converted (otherwise than by transfer) into money within five years of its acquisition, the capital gains not charged under section 67 as per sub-section (1), shall be deemed to be income chargeable as long-term capital gains in the tax year of its transfer or conversion.
Section 85(4) of Income Tax Act 2025
(4) Any loan or advance taken on the security of the new asset shall be regarded as transfer of the new asset on the date of such loan or advance.
Section 85(5) of Income Tax Act 2025
(5) Where the investment in the new asset has been taken into account for sub-section (1), no deduction under section 123 for any tax year shall be allowed for such investment.
Section 85(6) of Income Tax Act 2025
(6) In this section, “new asset” means any bond, redeemable after five years and as notified by the Central Government for the purposes of this section with such conditions (including a condition for providing a limit on the amount of investment by an assessee in such bond).