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.
- Only individual can claim Exemption
- He transfers agriculture land. It may be STCA/LTCA
- The individual or his parents should use agriculture land for agriculture purpose for a period of 2years prior to date of transfer.
- 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:
- Capital gain arises on transfer of agriculture land ; or
- 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
Short term capital gain