Section 70 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 70 lists the transactions to which the capital gains charge of section 67 does not apply. This article reads the section as per the Income-tax Act, 2025 as amended by the Finance Act, 2026, clause group by clause group, and notes the one clause the Finance Act changed.
Section 67 charges capital gains on transfer of a capital asset. Section 70(1) says that section 67 does not apply to the transfers in clauses (a) to (zl): family partitions, gifts, wills, irrevocable trusts, group company transfers, amalgamations, demergers, certain non-resident transfers, relocation of funds, gold bond redemption, conversions, and more. Many clauses carry conditions, such as share-holding tests of 25%, 50% or 75%, Indian-company tests or periods of five years. Clause (x), on Sovereign Gold Bonds, was substituted w.e.f. 1-4-2026. Later amendments, rules and notifications should be checked.
Where section 70 sits
Section 67 is the charge; section 70 carves out transactions from it. Gains computation follows in section 72, and the cost of the previous owner is dealt with in section 73. Withdrawal of the relief in some cases follows in section 71, covered in our article on sections 68, 69 and 71. If you hold an asset that moves under one of these clauses, a quick check with our capital gains calculation service tells you whether the later sale is taxable and how.
Section 70(1): the clauses in groups
| Clause | Transfer covered | Key conditions printed |
|---|---|---|
| (a) | Distribution of capital assets on total or partial partition of a Hindu undivided family | None beyond the description |
| (b) | Capital asset by an individual or Hindu undivided family under a will, a gift or an irrevocable trust | None beyond the description |
| (c) and (d) | Capital asset (not stock-in-trade) between a company and its wholly owned subsidiary | Whole of subsidiary's share capital held by the parent or its nominees (or by the holding company); the receiving or Indian company test as stated |
| (e) to (h) | Amalgamation: asset by amalgamating to amalgamated company; shareholder's shares; foreign amalgamations | Amalgamated company an Indian company; for foreign cases, at least 25% of shareholders continue and the transfer does not attract capital gains tax in the country of incorporation |
| (i) | Banking company to banking institution under a scheme sanctioned under section 45(7) of the Banking Regulation Act, 1949 (10 of 1949) | As printed |
| (j) to (m) | Demerger: asset to resulting company; shares issued to shareholders; foreign demergers | Resulting company an Indian company; for foreign cases, shareholders holding not less than 75% in value continue and no capital gains tax abroad |
| (n) and (o) | Business reorganisation of co-operative banks | Predecessor to successor co-operative bank or converted banking company; shareholder gets shares in the successor |
| (p) to (s) | Certain non-resident to non-resident transfers outside India, or on a recognised IFSC stock exchange for foreign-currency consideration | Bonds or Global Depository Receipts referred to in section 209(1); rupee denominated bonds; derivatives; Government securities; other securities as notified |
| (t) and (u) | Relocation of an original fund to a resultant fund; shareholder, unit holder or interest holder's exchange | Definitions in the Table in section 70(2) |
| (v) and (w) | India Infrastructure Finance Company Limited to a notified institution; public sector company transfers under a plan approved by the Central Government | Notification and approval as printed |
| (x) | Redemption of Sovereign Gold Bond | See below |
| (y) | Gold into Electronic Gold Receipt and back | Terms defined in the Table |
| (z) to (zb) | Conversion of bonds, debentures, debenture-stock or deposit certificates into shares or debentures; bonds under section 209(1) into shares or debentures; preference shares into equity shares | Of the same company where stated |
| (zc) | Works of art and similar items to the Government, a University, the National Museum, National Art Gallery or National Archives, or a notified institution | As printed |
| (zd) to (zf) | Succession of a firm by a company; conversion of a private or unlisted public company into an LLP; succession of a sole proprietorship by a company | Assets and liabilities pass; shareholding, voting power and profit-sharing tests; a five-year hold; consideration limited to shares (or profit share) |
| (zg) to (zl) | Securities lending; reverse mortgage; shares of a special purpose vehicle to a business trust; mutual fund scheme and plan consolidation; interest in a joint venture exchanged for shares of a foreign-incorporated company | As printed |
Because the clauses are long, always read the full clause before relying on one. In the Table above, "as printed" means the clause has conditions that you should read in the Act.
Clauses with numbers worth noting
- Clause (g) and (h): at least 25% of the shareholders of the amalgamating foreign company continue as shareholders of the amalgamated foreign company, and the transfer does not attract tax on capital gains in the country of incorporation.
- Clause (l) and (m): shareholders holding not less than 75% in value of shares of the demerged foreign company continue, and no capital gains tax arises abroad. Sections 230 to 232 of the Companies Act, 2013 (18 of 2013) are stated not to apply; check that Act for its own rules.
- Clause (zd): the partners' aggregate shareholding must be not less than 50% of the total voting power and must continue at not less than 50% for five years from the date of succession.
- Clause (ze): a conversion of a company into a limited liability partnership under section 56 or 57 of the Limited Liability Partnership Act, 2008 (6 of 2009), subject to seven conditions, including a profit-sharing ratio of shareholders not less than 50% at any time during five years, total sales, turnover or gross receipts in any of the three preceding tax years not above sixty lakh rupees, total assets in the books not above five crore rupees, and no payment to partners out of accumulated profit for three years.
- Clause (zf): a sole proprietor's shareholding of not less than 50% of total voting power, continuing for five years.
Clause (x): Sovereign Gold Bond (Finance Act, 2026)
Clause (x) was substituted by the Finance Act, 2026, w.e.f. 1-4-2026. Before, it referred to redemption of bonds under the Sovereign Gold Bond Scheme, 2015 by an individual. It now covers redemption of Sovereign Gold Bond issued by the Reserve Bank of India under the Sovereign Gold Bond Scheme, 2015 or any subsequent Sovereign Gold Bond Scheme, if held by an individual from the date of original issue till maturity.
The Table in section 70(2)
Section 70(2) gives definitions for the clauses in column B: for example, "banking company" and "banking institution" by reference to the Banking Regulation Act, 1949; "relocation" meaning a transfer to a resultant fund on or before the 31st March, 2030; "resultant fund" being an Indian fund located in an International Financial Services Centre; and "equity oriented fund" meaning a fund investing more than 65% of the total proceeds in equity shares of domestic companies, computed on the annual average of monthly averages. The terms of the other laws are as printed there, and each should be checked in the law named. The notified items (clauses (r)(iv), (v), (w), (zc)(iv), (zh) and (zl)) depend on notifications whose content is not in the text consulted.
Worked example
The names and amounts are assumed. Mohan's father gifts him a plot of land. Under section 70(1)(b), a gift by an individual is not a transfer for section 67, so no capital gains tax arises on the gift itself. Later Mohan sells the plot; the computation of that sale is covered by section 72 and the previous owner's cost by section 73.
A private company, Lotus Packs Private Limited, converts into an LLP under section 56 of the Limited Liability Partnership Act, 2008. Its gross receipts in each of the three preceding tax years were Rs. 55,00,000, below the sixty lakh rupee limit, and its assets in the books were Rs. 4,50,00,000, below five crore rupees. If the other conditions of clause (ze) are met (all assets and liabilities pass, all shareholders become partners in the same ratio, no extra consideration, 50% profit share kept for five years, no payment out of accumulated profit for three years), the conversion is not a transfer under section 67.
Common mistakes
- Assuming every gift or merger is outside section 67 without testing the clause's conditions.
- Missing a time test, such as the five-year holding period in clauses (zd), (ze) and (zf).
- Reading clause (x) as covering a person other than an individual, or an individual who bought the bond after original issue.
Key takeaways
- Section 70(1) lists transfers outside section 67, clause (a) to (zl).
- Conditions include 25%, 50%, 65% and 75% tests, five-year periods and a 31 March 2030 relocation date.
- Clause (x) on Sovereign Gold Bond was substituted w.e.f. 1-4-2026.
- Planning around these clauses should be done before the transaction; see tax planning advisory.
Read next
- Section 67: charge of capital gains and year of taxability
- Sections 68, 69 and 71: liquidation, buy-back and withdrawal of exemption
- Section 72: how capital gains are computed
- Section 73: previous owner's cost
- Sections 74 to 76: depreciable assets and market-linked debentures
- Where the earlier Act's capital gains provisions sit in the 2025 Act
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.