Section 54B of Income Tax - Exemption of Capital gains on sale of land used for Agriculture purposes
How to save capital gains on the sale of agricultural land situated in urban areas i.e. not exempt from capital gains
Section 54B of Income Tax - Exemption of Capital gains on sale of land used for Agriculture purposes
In our earlier article, we learned that there are no capital gains on the sale of agricultural land situated in any rural area. However such land if situated in urban areas is subject to capital gains tax.
Here we will analyse how the capital gain on the sale of such urban agricultural land and be avoided.
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Provisions of Section 54B provide the relevant exemption in this regard.
The provisions are briefly summarised below :
If any land has been used for agriculture purposes for the last two years by any individual, parents of the individual, or HUF, and the same is sold, then the assessee can purchase another agriculture land within 2 years from the date of sale of original agriculture land. If the same is done, then there will be no capital gain on the sale of original agricultural land even if it is urban land.
2. The new agricultural land purchased should not be sold within 3 years from the date of purchase.
3. If the amount realized from the sale of the original agricultural land is not invested (i.e. for the purchase of new agricultural land) till the due date of filing of IT return for the relevant year, then the whole amount of capital gain has to be invested in Capital gains account scheme in scheduled bank and new agriculture land has to be purchased within 2 years from the date of sale.
4. If the amount invested in the capital gains scheme could not be utilized for the purchase of another agricultural land within 2 years from the date of sale of the original land, then the whole amount of capital gain will be taxed in the year in which the 2-year period expires.
5. The amount can be withdrawn from the scheme after the capital gain is charged to tax in the year of expiration of 2 years.
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