Section 67 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Section 67 is the charging provision for the head "Capital gains". Sub-section (1) says profits or gains from the transfer of a capital asset are taxed under this head in the tax year of the transfer, and the remaining sub-sections deal with special situations: insurance money, conversion to stock-in-trade, depository transfers, contributions to firms, reconstitution, enhanced compensation and joint development projects. This article reads section 67 as per the Income-tax Act, 2025 as amended by the Finance Act, 2026; later amendments, rules and notifications should be checked. For computing the gain, see our capital gains calculation service.
Profits or gains from the transfer of a capital asset in a tax year are chargeable under "Capital gains" and are the income of that tax year, save as sections 82 to 89 provide otherwise. Sub-sections (2) to (18) override or add to this rule for particular receipts: they change the tax year in which the gain is taxed, or the deemed full value of consideration used in section 72, or both.
Section 67(1): the basic charge
Any profits or gains arising from the transfer of a capital asset effected in a tax year are chargeable to income-tax under the head "Capital gains", and are deemed to be the income of the tax year in which the transfer took place. The rule is "save as otherwise provided in sections 82, 83, 84, 85, 86, 87, 88 and 89", which are the exemption sections. How the gain is computed is in section 72 (see section 72); the transactions that are not transfers are in section 70 (see section 70). To see where the earlier Act's provision sits in the 2025 Act, see our note on the capital gains sections mapping.
The special cases at a glance
| Sub-section | Situation | Tax year of the gain | Deemed full value of consideration (for section 72) |
|---|---|---|---|
| (2) to (4) | Money or assets received under insurance for damage to or destruction of a capital asset in the listed circumstances | Year of receipt | Money, or fair market value of other assets on the date of receipt |
| (5) | Amount (including bonus) under a unit linked insurance policy to which the exemption at Schedule II (Table: serial number 2) does not apply | Year of receipt | Calculated "in such manner as may be prescribed" |
| (6) | Conversion of a capital asset into, or its treatment as, stock-in-trade | Year in which the stock-in-trade is sold or otherwise transferred | Fair market value on the date of conversion or treatment |
| (7), (8) | Securities held through a depository or participant | Year of transfer, in the beneficial owner's hands | Cost and holding period by first-in-first-out |
| (9) | Transfer of a capital asset to a firm, association of persons or body of individuals (not a company or co-operative society) of which the person is or becomes a partner or member | Year of transfer | Amount recorded in the books of the firm, association or body |
| (10), (11) | Receipt from a specified entity on reconstitution | Year of receipt | Formula A = B + C – D |
| (12), (13) | Enhanced compensation or consideration | See below | See below |
| (14) to (16) | Transfer of land or building under a specified agreement | Year the certificate of completion is issued | Stamp duty value on that date, plus any consideration received |
| (17), (18) | Repurchase of units referred to in section 80CCB(2) of the Income-tax Act, 1961 | Year of repurchase or termination of the plan | Difference between repurchase price and capital value |
Insurance receipts: section 67(2) to (4)
If a person receives money or other assets under an insurance from an insurer on account of damage to, or destruction of, a capital asset as a result of the circumstances in sub-section (3), the profit or gain is taxed as capital gains in the year of receipt, and the money (or fair market value of other assets) on the date of receipt is deemed to be the full value of consideration under section 72. Sub-section (3) lists: flood, typhoon, hurricane, cyclone, earthquake or any other convulsion of nature; riot or civil disturbance; accidental fire or explosion; and action by an enemy or action taken in combating an enemy (whether with or without a declaration of war). "Insurer" has the meaning in section 2(9) of the Insurance Act, 1938; check that law.
Unit linked insurance: section 67(5)
Profits or gains from any amount, including a bonus, under a unit linked insurance policy to which the exemption at Schedule II (Table: serial number 2) does not apply are capital gains of the year of receipt, with the taxable income calculated in the manner prescribed. That manner is left to the Income-tax Rules, 2026.
Conversion into stock-in-trade: section 67(6)
If a capital asset is converted into, or treated by the owner as, stock-in-trade of a business he carries on, the gain is taxed in the tax year in which the stock-in-trade is sold or otherwise transferred, and the fair market value on the date of conversion is the deemed full value of consideration.
Example (invented). Meera treats a plot as stock-in-trade of her business. On the date of conversion its fair market value is Rs. 40,00,000 (assumed). She sells the stock-in-trade for Rs. 55,00,000 two tax years later. Under section 67(6)(a) the capital gain is taxed in the year of the sale; under (b), Rs. 40,00,000 is the full value of consideration for the section 72 computation (cost of acquisition and the rest of the computation are left to section 72).
Depository transfers: section 67(7) and (8)
Where a person had a beneficial interest in securities at any time in the tax year and profits arise from a transfer by the depository or participant, the profits are the income of the beneficial owner of the tax year of the transfer, not of the depository (deemed registered owner by section 10(1) of the Depositories Act, 1996). For section 72 and section 2(101)(b), cost of acquisition and period of holding are determined on the first-in-first-out method. Sub-section (8) borrows "beneficial owner", "depository" and "security" from section 2(1)(a), (e) and (l) of the Depositories Act, 1996.
Contribution to a firm: section 67(9)
A person who transfers a capital asset to a firm, association of persons or body of individuals (not a company or co-operative society) in which he is or becomes a partner or member, by way of capital contribution or otherwise, is taxed in the year of transfer; the amount recorded in the firm's books as the value of the asset is deemed to be the full value of consideration.
Reconstitution: section 67(10) and (11)
Where a specified person receives money or a capital asset, or both, from a specified entity in connection with the reconstitution of the entity, the gain is deemed income of the specified entity of the tax year of receipt and chargeable under "Capital gains", worked out as A = B + C – D:
| Symbol | Meaning |
|---|---|
| A | Income chargeable under this sub-section as income of the specified entity |
| B | Value of money received by the specified person on the date of receipt |
| C | Fair market value of the capital asset received on the date of receipt |
| D | Balance in the specified person's capital account in the entity's books at the time of reconstitution |
If A is negative it is deemed to be zero. D is calculated without any increase from revaluation of an asset or from self-generated goodwill or any other self-generated asset. The sub-section operates in addition to section 8, and tax under section 8 is worked out independently.
Example (invented). Rohan receives Rs. 5,00,000 in money and a capital asset with a fair market value of Rs. 12,00,000 on reconstitution; his capital account balance (excluding revaluation) is Rs. 9,00,000. A = 5,00,000 + 12,00,000 – 9,00,000 = Rs. 8,00,000.
"Reconstitution of the specified entity", "specified entity" and "specified person" have the meanings in section 8.
Enhanced compensation: section 67(12) and (13)
For a transfer by compulsory acquisition under any law, or a transfer whose consideration was determined or approved by the Central Government or the Reserve Bank of India, where the compensation or consideration is enhanced by a court, tribunal or other authority:
- (a) the gain on the first compensation or consideration is taxed in the year in which it (or part) was first received;
- (b) the enhancement is deemed income under "Capital gains" of the year in which the amount is received;
- (c) enhancement received under an interim order is deemed income of the year in which the final order is made;
- (d) the gain assessed is recomputed if the amount is reduced, and the reduced value is the full value of consideration.
Under sub-section (13), cost of acquisition and cost of improvement are nil for the enhancement, and where the enhancement is received by another person because of the transferor's death or any other reason, it is that person's income under "Capital gains".
Joint development: section 67(14) to (16)
For an individual or Hindu undivided family transferring land or building (or both) under a "specified agreement" (a registered agreement to let another person develop a real estate project in consideration of a share in the project, with or without part payment in cash), the gain is taxed in the tax year in which the competent authority issues the certificate of completion for the whole or part of the project, with the stamp duty value on that date of the share, increased by any consideration received in cash, cheque, draft or any other mode, as the full value of consideration. "Competent authority" is the authority empowered to approve the building plan under any law. If the person transfers his share on or before the certificate date, sub-section (14) does not apply; the gain is income of the year of that transfer and the rest of the Act applies to determine the full value of consideration.
Units referred to in section 80CCB(2): section 67(17) and (18)
The Act refers to "section 80CCB(2) of the Income-tax Act, 1961"; that reference is quoted as printed. The difference between the repurchase price of such units and their capital value (any amount invested by the assessee in them) is deemed to be capital gains in the tax year of repurchase or of termination of the plan. Check that Act for the provision cited.
Need help with the year of taxability of a gain?
The tax year in which a gain is taxed can differ from the year of transfer or sale under these sub-sections. Our capital gains calculation team can help you work out the correct year and full value of consideration.
Key takeaways
- Section 67(1) taxes gains in the tax year of transfer, save as sections 82 to 89 provide.
- Sub-sections (2) to (18) change the tax year, the deemed consideration, or both.
- Joint development gains arise in the year the certificate of completion is issued.
- Enhanced compensation is taxed in the year received, with cost taken as nil.
- Reconstitution receipts follow the formula A = B + C – D, with a negative result taken as zero.
Read next
- Sections 68, 69 and 71: liquidation, buy-back and withdrawal of exemption
- Sections 74 to 76: capital gains on depreciable assets and market linked debentures
- Section 72: how capital gains are computed
- Section 70: transactions not regarded as transfer
- Capital gains sections mapping
Disclaimer: Based on the Income-tax Act, 2025 (30 of 2025) as amended by the Finance Act, 2026, as consulted on 2 October 2026. It explains the words of the Act only; the Income-tax Rules, 2026, notifications, circulars, later amendments and the way the tax authorities and courts apply these provisions should be checked. This article is general information, not legal advice; check the official text before acting.