Table of Contents
1. What is section 54B of Income-tax Act?
Section 54B of Income-tax Act provides exemption in respect of capital gain arising on sale of urban agricultural land.
2. What kind of asset should be transferred to claim exemption under Section 54B?
The capital asset transferred should be an urban agricultural land.
3. In what type of asset should I invest in order to claim exemption under section 54B?
Agricultural land (whether urban or rural) should be purchased to claim exemption under Section 54B.
4. When can I claim exemption under section 54B?
Exemption under section 54B is available only if the capital gain on transfer of urban agricultural land is invested in purchase of new agricultural land.
5. Who can claim exemption under section 54B?
Only Individual / HUF can claim exemption under section 54B.
6. When should the new agricultural land be purchased?
The new agricultural land should be purchased within two years from the date of transfer.
7. What is the maximum amount of exemption under section 54B?
Amount invested in new agricultural land or capital gain whichever is less
8. What is capital gain account scheme?
Unutilized capital gain can be claimed as exemption by depositing the same in the capital gain deposit A/c scheme with any nationalized bank before the due date of filing return of income.
9. What if the amount in capital gain account scheme is not utilized within a specified period?
If the amount in the capital gain deposit A/c scheme remains unutilized for a period of two years, the unutilized amount will be taxable as LTCG in the PY in which the 2 years expires.
10. What happens if the entire amount of capital gain is not invested in purchase/construction of a new agricultural land?
The amount of capital gain not invested is charged to tax as long-term capital gains under section 45.
11. Will the exemption be withdrawn if the new agricultural land is transferred within a period of 3 years?
Yes. If transferred, the cost of new asset shall be reduced by the amount of capital gain exempted earlier while calculating capital gain in the year of transfer.
12. Is the exemption under section 54B available if I transfer/sell rural agricultural land?
No, rural agricultural land is not a capital asset as per the provisions of the income tax act 1961, consequently any gain arising from transfer of rural agricultural is not chargeable to tax.