Capital Gain Arising From The Transfer Of Land Used For Agricultural Purpose – Sec. 54B

Capital Gain Arising From The Transfer Of Land Used For Agricultural Purpose – Sec. 54B

NATURETransfer of land used for agricultural purpose used by an individual or his parents or a HUF
NATURE OF CAPITAL GAINLand must be used for atleast a period of 2 years immediately preceding the date of transfer thus the capital gain can be Long Term or Short Term)
AMOUNT EXEMPTION OFIf capital gain < amount invested = full amount

If capital gain > amount invested = difference is taxable

In other words capital gain will be exempt to the extent it is invested for acquiring the new agricultural land

CONDITIONS
  • Agricultural land shall not be in rural areas used by assessee or his parents for a period of two years prior to date of transfer for agricultural purposes is transferred
  • Purchase of agricultural land within period of two years from date of transfer should not be transferred for 3 years from the date of acquisition of new land.
IF AMOUNT NOT UTILIZED TILL FILING OF RETURN U/S 139(1)Deposit in Nationalized bank under the capital Gains Deposit A/c scheme.
IF DEPOSIT NOT UTILISEDUnutilized amount taxable as CG (LT or ST) in the previous year in which two years from the date of transfer of original asset expires.
CONSEQUECES OF TRANSFER BEFORE THREE YEARSThe capital gain which was exempted earlier u/s 54B shall be reduced from the cost of new agricultural land. Therefore amount of Capital gains exempted along with Capital gains on sale of new property chargeable to tax in the year of sale of house property as STCG.

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