EXEMPTION ON CAPITAL GAIN ON AGRICULTURE LAND U/S 54B

EXEMPTIONS FOR CAPITAL GAINS ARISING ON TRANSFER OF LAND USED FOR AGRICULTURAL PURPOSE

[Section 54B of Income-tax Act, 1961]

Under Income-tax Act, 1961, there are certain exemptions given to different class of assesses from Capital Gain provided certain investment is done. One of such exemptions are given on capital gain arising on sale of agricultural land under section 54B of Income-tax Act

Condition to avail Benefits under Section 54B

Who Can avail Benefits under Section 54B	Individual or Hindu Undivided Family (HUF)*
Assets Transferred	Land which was used for Agricultural Purpose by Individual or his parent or a HUF, two years immediately before date of transfer of land
Type of Capital Assets transferred (Depending upon period of holding of capital assets)	Long Term Capital Assets **(If period of holding)
When New Land should be purchased	For Purchase of Land for Being used for Agricultural Purpose *** Within a period of two years after the date of transfer of old land,
How many years the New Land should be held	For 3 years from the date of purchase/ from the date of completion of construction of New House

*   Whether resident or non-resident

**Period of holding for becoming Long term Capital assets is reduced from 36 months to 24 months w.e.f. assessment year 2020-2021

 *** The assessee shall have option to invest the unutilized investment to claim exemption U/s 54 of the Act in Capital Gain Saving Scheme on or before due date for filing of Income Tax Return and to utilize the deposited amount for the purpose of purchase of new land for agricultural purpose.

How much amount exempted from Capital Gain Tax

Sr. No.	Situations	Amount Exempted
1	(amount of capital gain on Old Land) < (amount of investment in New Land)	Amount of Capital Gain
2	(amount of capital gain on Old Land) > (amount of investment in New Land)	Amount of long term capital gain as reduced by amount of investment in new land

 

CONSEQUENCES IF THE NEW LAND TRANSFERRED BEFORE STIPULATED TIME PERIOD

If the new Land is sold before 3 years from the date of purchase, then cost of acquisition of new land at the time of sale of new Land shall be as follows:

Situations	Cost of acquisition
Where amount spent on purchase of New Land equal to or greater than amount of Capital Gain (LTCG) on Old Land	Amount spent on purchase of new land as reduced by amount of Capital gain exemption on sale of old land
Where amount spent on purchase of New Land less than amount of Capital Gain on Old Land	NIL

 

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