26/02/2019
Capital gains arising from the transfer of land used for agricultural purpose Sec. 54B] :- Exemtion under section 54B is available to an individual. From the assessment year 2013-14, it is also available to a Hindu undivided family.
Capital gains arising from the transfer of land, being used by an individual or his parents or Hindu undivided family for agricultural purposes' for a period of 2 years, immediately preceding the date of transfer are exempt from tax if the assessee has purchased another land for agricultural purpose within a period of 2 years from the date of such transfer.
Amount of Exemption :- If the amount of capital gains is less than the cost of the new agricultural land, the entire amount of capital gains is exempt. On the other hand if the amount of capital gains is greater than the cost of the new agricultural land, the difference between the amount of capital gains and the cost of new land is chargeable to tax as capital gains.
CONSEQUENCES IF THE NEW AGRICULTURAL LAND IS TRANSFERRED WITHIN 3 YEARS :- If the new agricultural land is transferred within a period of 3 years from the date of its purchase, the amount of capital gains arising therefrom, together with the amount of capital gains exempted earlier, will be chargeable to tax as capital gains in the year of sale of the new agricultural land. To attain this, it has been provided that if the new agricultural land is transferred within 3 years from the date of its acquisition, the amount of exemption under section 548 shall be reduced from the cost of acquisition of the new agricultural land. while computing short-term capital gains on the transfer of the new agricultural land. It may be noted that if the new agricultural land is situated in a rural area in India, the gain arising on its transfer is not chargeable to tax. as an agricultural land situated in a rural area is not a “capital asset” under section 2(14).
SCHEME OF DEPOSIT IN RESPECT 0F EXEMPTION UNDER SECTION 54 :- Where the amount of capital gain is not appropriated or utilised by the assessee for purchase of the agricultural land before the date for furnishing the return of income, it shall be deposited by him on or before the due date of furnishing the return of income in the deposit account in any branch (except rural branch) of a public sector bank or IDBI Bank in accordance with Capital Gains Accounts Scheme, 1988. The amount already utilised for purchase of the agricultural land together with the amount so deposited shall be deemed to be the amount utilised for the purchase of agricultural land.
If the amount deposited is not utilised fully for purchase of the agricultural land within the stipulated period then the amount not so utilised shall be treated as the capital gain of the previous year in which the pen of 2 years from the date of transfer of the original asset expires‘. In such case the assessee shall be entitle to withdraw such amount in accordance with the aforesaid scheme.
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