Capital Gain Tax on Agricultural Land

As, I earlier discuss in article when an agricultural land is capital asset or not, that is the first step to calculate capital gain tax on agricultural land. So, if Agricultural land not forming part capital asset and sale of which will attract capital gains tax subject to exemption under Section 54B, which is explained below.

Section 54B – Capital gain on transfer of land used for agricultural purposes not to be charged in certain cases.

• The agricultural land should have been used for agricultural purposes.
• Exemption is not available to a Hindu Undivided Famiy (HUF) or any other taxpayer
• It must have been used either by the asses see or his parents in the two years immediately preceding the date on which the transfer of land took place.
• The assessee should have purchased another land, which is being used for agricultural purposes, within a period of two years from the date of sale.
• The whole amount of capital gain must be utilised in the purchase of the new agricultural land. If not, the difference between the amount of capital gain and the new asset will be chargeable as capital gains and the tax will be computed accordingly.
• The new asset purchased should not be sold within a period of three years.

Amount of Exemption –

The following of the lowest amount will be exempt -

• The amount of exemption under section 54B is equal to –
• The amount of capital gain generated on transfer of agricultural land; or
• The amount of invested in purchasing new agricultural land (including the amount deposited in the deposit scheme)

Consequences if the new agricultural land is transferred within 3 years –

• The amount of exemption given earlier would be taken back.

Capital Gain Deposit Scheme:

• Where the amount of capital gain is not utilised by the assessee for the purchase of the new asset before the due date of furnishing his return of income, he may deposit it in the Capital Gains Account Scheme (CGAS) of any specified bank..
• In such a case, the cost of the new asset shall be deemed to be the amount already utilised by the assessee for the purchase of the new asset together with the amount deposited in the Capital Gain Account Scheme.
• If the deposited amount is not utilised for the purchase of the new asset within the specified period, then the unutilised amount shall be charged in the year in which the period of two years from the date of sale of the original asset expires.

See the detail procedure about capital gain account Scheme

Related posts:

1. Capital Gains exemption u/s 54F: Capital Gain on Transfer of Asset, other then a Residential House (Sec. 54F)
2. Capital Gain Exemption u/s 54: Capital Gains from Transfer of a Residential House
3. Capital Gain Tax Exemptions on Inheritance Property
4. Capital Gain Exemption u/s 54, 54B, 54D, 54EC, 54F, 54G, 54GA Table
5. Factors Determine when an Agricultural Land is Capital Asset or Not

Tagged as: 54B, Agricultural Land, Capital Gain Tax, Exemption