Skip to content

Sec 54B of Income Tax Act

Sec 54B of Income Tax Act

​​Section 54B​ of income tax act provides the exemption from capital gains arising from the transfer of agricultural land. The exemption can be availed if the amount of capital gains are further invested in the purchase of a new agricultural land under the prescribed time limit. ​

Who can claim exemption under section 54B?

​Only Individual or HUF are eligible to claim exemption under this section. ​

 

Which capital asset is qualified for section 54B exemption?

The exemption under this section can be claimed if the capital gain arises from the transfer of agricultural land. It has been mandated that the agricultural land transferred must be used for agricultural purposes for at least a period of 2 years prior to the date of transfer.
This exemption is solely based upon the fact that the agricultural land is used by the assessee himself or his parents or by HUF irrespective of the ownership of the land. The exemption is allowed irrespective of the fact that the capital gain is arising on the transfer of long-term or short-term capital assets.
Further, the exemption is available only on the transfer of urban agricultural land. Rural agriculture land is not considered as a capital asset and thus it is out of the scope of capital gains tax.

Which new asset should be acquired for claiming exemption under section 54B?

​Exemption under this section applies if the proceeds from the transfer of the agricultural land are invested in agricultural land. New agricultural land can be situated in rural area or urban area. ​

 

What is the maximum amount of exemption allowed under section 54B?

​​ Exemption under s​ection 54B will be lower of the following:
• Amount of capital gains arising on the transfer of agricultural land; or
• Investment in new agricultural land [including the amount deposited in Capital Gains Deposit Account Scheme]

What is the prescribed time limit for investment in new asset under section 54B?

​To claim an exemption under this section, the assessee needs to purchase the agricultural land within 2 years after the date of transfer of original asset. ​

Is the benefit of depositing amount of capital gains in capital gain account scheme is available to claim exemption under section 54B?

​Yes, if till the date of filing the return of income the capital gain arising on transfer of the old land is not utilised (in whole or in part) for purchase of another agricultural land, then the benefit of exemption can be availed by depositing the unutilised amount in Capital Gains Deposit Account Scheme. The new land can be purchased by withdrawing the amount from the said account within the specified time-limit of 2 years. ​

 

What are the circumstances in which exemption under section 54B can be withdrawn?

​​The exemption claimed by assessee under section 54B can be withdrawn in the following circumstances:
a) Transfer of new agricultural land within 3 Years: If a taxpayer purchases new agricultural land to claim exemption under s​ection 54B and subsequently transfers the new agricultural land within a period of 3 years from the date of its acquisition, then the benefit granted under s​ection 54B will be withdrawn.
If the agricultural land is sold within a period of 3 years from the date of its purchase, then at the time of computation of capital gain arising on transfer of the new agricultural land, the amount of capital gain claimed as exemption under s​ection 54B will be deducted from the cost of acquisition of the new agricultural land.
b) Amount deposited in capital gains scheme account is not utilized in prescribed time limit: Where amount deposited in capital gains scheme account is not utilised to purchase an agriculture land within 2 years after the date of transfer, the unutilised deposit is deemed to be long-term capital gain of the relevant previous year in which the time-limit of 2 years expires.
Click here for know about Section 54 of Income Tax (Capital Gain from Sale of Residential Property) https://taxdot.in/sec-54-of-income-tax-act/

Leave a Reply

Your email address will not be published. Required fields are marked *