Tax Exemption on Capital Gains when selling Agricultural Land

January 25, 2010

Capital Gains, Income Tax

In the past I have written many articles about the capital gains and capital gains while selling the agricultural land. Also I have written separate article about when agricultural land is capital asset?. Note that, in certain cases the capital gains are fully exempt in case of the  profit from selling the agricultural land. This article presents the rules associated with that scenario. If you have any doubts, please post it in the comments section. If you like the article, get free email updates.

Capital Gains Exemption (Section 54B)

  • If Agricultural land not forming part capital asset and sale of which will attract capital gains tax subject to exemption under Section 54B. The following are the conditions mentioned in the section 54B to get the tax exemption.
  • If the agricultural land should have been used for the agriculture purpose.
  • Exemption¬†is not available to a Hindu Undivided Famiy (HUF) or any other taxpayer.
  • The land should have been used by the asses see or his parents with in two years immediately preceding the land sale or transfer date.
  • The asses see should have been purchased the agricultural land with in two years immediately preceding the land sale or transfer date.
  • The whole amount should have been used for purchasing the new agricultural land. Otherwise the difference amount will be charged for the capital gains tax.
  • The new asset purchased should not sold with in three years of time.

References

I have published many other articles related to capital gains and the agricultural land sale. I would suggest you to read the following articles to get more knowledge on the topic. If you have any doubts, please post it in the comments section. Also get free email updates.

  1. Capital Gains on Agricultural Land
  2. When Agriculture Land is Capital Asset?
  3. What is Capital Gains Account Scheme?
  4. What is capital gains tax saving bonds?
  5. What is capital gains tax saving bonds?

Summary

I hope this article would have provided the some basic idea on how to exempt from the capital gains coming from agricultural land sales. If you have any queries, please post it in the comments section.

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22 Responses to “Tax Exemption on Capital Gains when selling Agricultural Land”

  1. sherry Says:

    we bought 147 acers of agricultuer land 2 years ago at $450 per acer we now are going to sellfor it for $3250 per acer we are in the 15% tax bracket do we have to pay capital gains tax on it

    Reply

  2. sherry Says:

    we bouht that grond 20 years ago not 2

    Reply

  3. piyu Says:

    The agriculture land was purchased in 2006 for rs.2,00,000 in urban area.It was sold in 2009 for Rs,10,00,000 and agriculture land was puchased for Rs.6,00,000 inurban area.
    what amount of capital tax is levied on it and what should be done to reduce amount of capital tax????

    Reply

  4. MANGALAMPALLI JL Says:

    I want to sell house property and purchase/construction a houe and and an acre of agriculture land. Can we do so like this? please clarify.

    Reply

  5. Laxman Says:

    I have a agriculture land in Sukeli Village Taluka Roha District Raigad State Maharastra.As per central Govt. Notification Tax on Agricultural Land, is this place exempted?.
    Pl. tell me whether i have to pay any tax for the sale on above agricultural land. The profit from the agricultural land is completely tax free. Because the land is not falling under the capital assets as the law defines the acpital assets but how to get information whether this place is exempted or not?.
    If i want to above place is exempted or not where i can apply or can see web-site.

    Reply

  6. A.K.GUPTA Says:

    I SOLD AGRICULTURE LAND WHICH I ACQIRED FROM MY FATHER 20-25 YEARS BACK.HOW MUCH %TAX I HAVE TO PAY ON IT. IS THERE ANY METHOD TO SAVE TAX

    Reply

  7. A.K.GUPTA Says:

    I SOLD AGRICULTURE LAND WHICH I ACQIRED FROM MY FATHER 20-25 YEARS BACK.HOW MUCH %TAX I HAVE TO PAY ON IT. IS THERE ANY METHOD TO SAVE TAX

    Reply

  8. k k gupta Says:

    can capital on sale of agriculture land be exempt if
    residentilal land or residential house is purchased
    or invested in specified bonds

    Reply

  9. Don Francis Says:

    I purchased a piece of agricultural land in Pune in 1985 for Rs.100,000 and sold it in 2010 for 900,000. When I sold the land it was within the urban land area. The buyer deducted TDS of 160,000 since I became NRI in 2005. Now I want to claim the 160,000 TDS, how can I do this? Can I buy agricultural land worth the capital gains of 800,000 and claim the TDS? Is there any other way to claim the TDS? – Many thanks.

    Reply

  10. sachin Says:

    pls tell me if i buy agriculture land which is 8 kms away from population of 10000 and sell in 6 to 12 months and do not invest any where is it taxable

    Reply

  11. jitedra Says:

    pls tell me if i buy agriculture land which is 8 kms away from population of 10000 and sell in 6 to 12 months and do not invest any where is it taxable or not

    Reply

  12. jitedra Says:

    pls tell me if i buy agriculture land which is 8 kms away from population of 10000 and sell in 6 to 12 months and do not invest any where is it taxable or not

    Reply

  13. chetan Says:

    Facts of the case: Assessee is a farmer and holds agricultural land for past 10 years. He entered into a sale agreement with buyer and at the request of the buyer, he converted the said land and sold it the very next day post conversion. Land was converted as buyer could not buy agricultural land. Assessee reinvested proceeds in another agr land and claimed exemption u/s 54B ITO not allowing 54B as on day of sale, land is not agri land. Seek your view with citations, especially Karnataka High Court Thanks in Advance

    Reply

  14. mp Says:

    i inherited last year ancetsral property from my deceased grandmother/mother in my name upto 1acre43 cents in muthukulam panchayat, alleppey dist kerala out of which one acre is agriculture paddy fields. Now this agriculture land has not been used for the past 20 years.This is located 13 kms away from the main city.
    Will i be exempt of capital gains tax while selling. If so were can i invest money from its sale. What tax do i pay on the remainder 43 cents.?

    Reply

  15. luv Says:

    sir i have sol my parentral agricultural land in haryana for 90 lakh . i dont want to buy agricultural land and i own a flat in cooperative society . so can i get tax exemption on buying a residential property .

    Reply

    • krishnas Says:

      Hello Luv,

      You have to find out if the land is situated with in the range of 8 Km from the municipal limit. If it is with in 8 KM, it is treated as the Urban area. In that case you have to pay the capital gains tax.

      In your case, if the land is situated beyond 8KM, then it is treated as the rural area and there won’t any capital gains tax for your sale. That means you need not worry about saving the capital gains tax for you sale.

      The important thing is, you have to check whether your land is fall under capital asset or not by deciding the above factors.

      Please let me know if you have more deoubts.

      Thanks,
      Krishna

      Reply

      • Jitender Says:

        Hi Krishan,

        Where do I find out if my land falls within 8KM? Which person do I need to talk to, where do I get this information. My land is in Punjab.

        Appreciate you help.

        Thanks,
        Jitender

        Reply

  16. Garima Says:

    You have mentioned in the article that whole amount is to be spent for claiming the exemption. What is meant by whole amount, capital gain or selling price?

    Reply

  17. pvsubba rao Says:

    we sold agricultural land which is within the municipal area. shall we invest in house property to avoid capital gain tax?

    Reply

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