Section 71 - Withdrawal of exemption in certain cases
A tax-neutral transfer can become taxable if post-transfer conditions are breached. The section identifies the person and year in which the deferred gain revives.
Reviewed by CA Nikhil Gupta · Updated 9 October 2026
Section 71 is presented using the consolidated Income-tax Act, 2025 as amended by the Finance Act, 2026. The general commencement date is 1 April 2026. Earlier years and saved proceedings may remain governed by the Income-tax Act, 1961 and the repeal/savings framework.
2-minute professional decode
A tax-neutral transfer can become taxable if post-transfer conditions are breached. The section identifies the person and year in which the deferred gain revives.
Who should test this section?
Section 71 matters to investors, property owners, promoters, companies, firms and advisers where the transaction involves withdrawal of exemption in certain cases; the charge, computation and relief steps should be separated.
Evidence to retain
The section 71 file should preserve acquisition and transfer instruments, valuation or stamp records, payment evidence, holding-period material and every document that supports the treatment of withdrawal of exemption in certain cases.
1961 Act bridge
| Legacy provision | Legacy heading | Mapping |
|---|---|---|
| 47A | Withdrawal of exemption in certain cases. | Renumbered / mapped |
The bridge is a research aid. Legacy case law carries over only after the current wording and transition rules are matched.
Rules and forms linked to this section
No provision-specific Rule was independently mapped from the current Rules register for this section. That does not mean the wider Rules are irrelevant.
Worked application
Prepare a hypothetical transaction involving withdrawal of exemption in certain cases. Identify the person, tax year, trigger, evidence and connected provision first; then apply section 71 step-by-step and document why each statutory condition is or is not met.
Common mistake
For section 71, do not jump from sale proceeds to a capital-gain number: first identify the transfer/charging event, then consideration, cost, timing and any exemption or rollover condition relevant to withdrawal of exemption in certain cases.
Compliance approach
Identify the statutory trigger for section 71, lock the relevant tax year, reconcile the facts to the operative sub-section, preserve the evidence trail and separately test every linked Rule, Form, Schedule and exception before finalising the return position.
Numeric / timing checkpoints in the operative text
- (1) The profits or gains arising from the transfer of capital asset not charged under section 67 by virtue of section 70(1)(c) and (d) shall, irrespective of any- thing contained in the said clauses, be deemed to be income chargeable under the head “Capital gains” of the tax year in which such transfer took place, if at any...
- (2) If any of the conditions laid down in section 70(zd) or (zf) are not complied with, the profits or gains arising from the transfer of such capital asset or intangible asset not charged under section 67 by virtue of such conditions shall be deemed to be the profits and gains chargeable to tax under the head “Capital...
- (3) If any of the conditions laid down in section 70(ze) are not complied with, the profits or gains arising from the transfer of such capital asset or intangible assets or share or shares not charged under section 67 by virtue of such conditions shall be deemed to be the profits and gains chargeable to tax under the head...
Related provisions
Current statutory text
Primary-source trail
- Consolidated Income-tax Act, 2025 (as amended by Finance Act, 2026) (official external source)
- Income Tax Department - Act/Rules/Forms hub (official external source)
- CBDT commencement material - Act operative from 1 April 2026 (official external source)
Source status: full Section 71 statutory text in the local source corpus; reconciled to the current consolidated Act control on 8 October 2026.