How to save Capital Gain Tax Arising from Transfer of Land Used for Agriculture

The income tax act grant total/ partial exemption from capital gain tax under section 54B of the income tax act on capital gain arising from transfer of agriculture land subject to fulfillment of certain conditions.

Conditions –

  1. Only individual can claim Exemption
  2. He transfers agriculture land. It may be STCA/LTCA
  3. The individual or his parents should use agriculture land for agriculture purpose for a period of 2years prior to date of transfer.
  4. Individual should purchase agriculture land either urban or rural purpose only within a period of 2 years from date of transfer, if capital gain arises on compulsory acquisition of land by government time limit of 2 years will start from the date on which compensation is received by individual

Total Exemption amount will be lower of two:

  1. Capital gain arises on transfer of agriculture land ; or
  2. Amount invested in purchasing new agriculture land
  • Withdrawal of exemption in following circumstances

If the new agriculture land is transferred with in a period of 3years

Sale consideration of new land

Less; cost of acquisition(original cost of new

Minus exemption given under sec-54B

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Short term capital gain

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