Chapter IV - Computation of Total Income
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.
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This article is for general information. Refer to the Income-tax Act, 2025 as amended by the Finance Act, 2026 and the Taxation and Other Laws (Amendment) Act, 2026 for the official provisions. If you need professional advice for your situation, contact Bizeneed.
Statutory text
Bare law
Irrespective of anything contained in sections 82, 83, 84, 85 and 86,— (a) if the transfer of the original asset mentioned in those sections is by way of compulsory acquisition under any law; and (b) if the compensation awarded for such acquisition is not received by the assessee on the date of transfer, then, the period available to him under those sections for acquisition of the new asset or investment or deposit of capital gain in specified bank or institution shall be reckoned from the date of receipt of compensation.
Introduction
Compulsory acquisition can occur before the owner receives compensation. For the reinvestment provisions named here, Section 89 starts the applicable purchase, investment or deposit period from receipt of compensation if it was not received on the transfer date.
Key takeaways
Compulsory-acquisition timing
For relief under Sections 82–86, if compulsory-acquisition compensation was not received on the transfer date, the reinvestment or deposit clock starts when compensation is received.
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.
Which clocks shift
The rule is limited to Sections 82 through 86. For a qualifying compulsory acquisition, recalculate the particular provision's purchase, investment or deposit deadline from the compensation receipt date; the underlying exemption conditions still apply.
Step-by-step flow for applying Section 89
- 1
Is a relief under Section 82, 83, 84, 85 or 86 being claimed?
- No: Section 89 does not apply.
- Yes: Go to the next step.
- 2
Was the original asset transferred by compulsory acquisition under any law?
- No: Use the normal periods in those sections.
- Yes: Go to the next step.
- 3
Was the compensation received on the date of transfer?
- Yes: The normal periods apply from the date of transfer.
- No: The period for acquiring the new asset, or investing or depositing the gain in a specified bank or institution, is reckoned from the date compensation is received.
- 4
Keep evidence of the receipt date
The award, the payment record and the bank credit show when compensation was actually received, which fixes the start of the period.
Practical checklist
Do
- Keep the acquisition order, transfer date and proof of actual compensation receipt.
- Identify the applicable provision among Sections 82–86 and recalculate its deadline from receipt of compensation.
Avoid
- Do not apply this timing rule to a voluntary sale.
- Do not assume the receipt-date start applies if compensation was already received on the transfer date.
Illustrative example
Scenario: land acquired by the government, compensation paid later
Hypothetical facts (illustration only, not a real taxpayer): Ms. Joshi's land is compulsorily acquired under a land acquisition law. The transfer date falls in one tax year, but the compensation awarded is actually paid to her about 18 months later. She plans to buy a replacement asset to claim relief under one of Sections 82 to 86.
Compulsory acquisition
The transfer is by way of compulsory acquisition under a law, so clause (a) is met.
Compensation not received on transfer date
Compensation was received later, so clause (b) is met.
Start of the clock
Whatever period the relevant section allows for acquiring the new asset or depositing or investing the gain is counted from the date she received the compensation, not from the transfer date.
Outcome
- Ms. Joshi has the full period under the relevant section, counted from the receipt date.
- Section 89 only moves the starting point; the conditions and amounts of the relief still come from Sections 82 to 86.
Glossary
- Compulsory acquisition
- Transfer of an asset under a legal acquisition process rather than an ordinary negotiated sale.
- Receipt of compensation
- The date from which Section 89 measures the relevant reinvestment or deposit period when payment follows transfer.
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.
Does Section 89 apply to a voluntary sale of property?
No. It applies only where the original asset is transferred by compulsory acquisition under a law and the compensation is not received on the date of transfer.
Need help applying this provision to your situation?
Plan your capital gains reinvestment with our tax teamLast updated 9 October 2026