Section 89

Section 89: extended time limit when compensation for compulsory acquisition is delayed

Section 89 is a short but useful relief provision: where an asset covered by the capital gains rollover exemptions in Sections 82 to 86 was compulsorily acquired under law, and the compensation for that acquisition was not paid on the date of transfer, the time limit to acquire the replacement asset or make the required deposit runs from the date the compensation is actually received - not from the date of transfer.

What Section 89 says

Irrespective of anything in Sections 82, 83, 84, 85 and 86, if the transfer of the original asset referred to in those sections happens by way of compulsory acquisition under any law, and the compensation awarded for that acquisition is not received by the assessee on the date of transfer, then the time period available under those sections to acquire the new asset, or to invest or deposit the capital gain in a specified bank or institution, is counted from the date of receipt of the compensation, rather than from the date of transfer.

Why this matters

Sections 82 to 86 each give a fixed window (for example, months or years from the date of transfer) to reinvest capital gains and claim an exemption. Compensation for compulsorily acquired property is often paid well after the acquisition itself. Section 89 prevents taxpayers from losing the reinvestment window simply because the government or acquiring authority delayed payment of compensation.

Frequently asked questions

Which sections does Section 89 apply to?

Sections 82, 83, 84, 85 and 86 - all of which give a time-limited exemption for reinvesting capital gains into specified new assets.

From when does the reinvestment period start under Section 89?

From the date the compensation for the compulsory acquisition is actually received, not from the date of transfer of the original asset - but only where compensation was not received on the transfer date.