Section 89 — Extension of time for acquiring new asset or depositing or investing amount of capital gains. Successor to s.54H of the 1961 Act.
Section 89 is in Chapter IV — Computation of Total Income, which runs from section 13 to section 95.
The section overrides sections 82, 83, 84, 85 and 86 in one narrow situation. Clause (a) requires that the transfer of the original asset mentioned in those sections was by way of compulsory acquisition under any law. Clause (b) requires that the compensation awarded for that acquisition was not received by the assessee on the date of transfer.
Where both hold, the period available to the assessee under those sections — for acquiring the new asset, or for investing or depositing the capital gain in a specified bank or institution — is reckoned from the date of receipt of the compensation instead of from the date of transfer.
In a compulsory acquisition the transfer happens when the authority takes the land, but the money often arrives long afterwards, so an assessee whose reinvestment window ran from the date of transfer could lose the exemption without ever having had the funds. The section moves the starting point to the date the compensation is actually received.
The section shifts a starting date; it does not lengthen any period. Whatever time sections 82 to 86 give for acquiring the new asset or depositing the capital gain stays the same, counted from receipt of the compensation. Both conditions must hold — a compulsory acquisition under a law, and compensation not received on the date of transfer — so a negotiated sale to the same authority gets nothing from this section.
An individual's land is compulsorily acquired under a State law, the transfer taking effect in the tax year 2026-27, and the compensation is paid to him only in September 2028. His period under section 85 for depositing or investing the capital gain does not expire measured from the 2026-27 transfer; under section 89 it is reckoned from the date in September 2028 on which he received the compensation, and he has the full period allowed by that section from then.
In a capital gains exemption claim in the return following a land acquisition award, and in reply to an assessment query that the new asset was acquired or the deposit made beyond the time allowed by sections 82 to 86.
shall be reckoned from the date of receipt of compensation
See the full 1961 to 2025 concordance.