Section 54B Exemption on Sale of Urban Agricultural Lans

Example

In case,we sell Urban Agricultural Land, earn LTCG or STCG and later purchase another Agricultural Land,(Urban or Rural)

Then LTCG/STCG on Sale will be  exempt

Conditions to be Fulfilled

• Deduction is available only to Individual and HUF
• This deduction is on both LTCG and STCG
• Only Sale of Urban Agricultural Land covered (Rural Agricultural Land is not a Capital Asset and no Capital Gain will be computed on it)
• Land must be used in Indiafor agricultural purpose by Individual, Parents, HUF for last 2 years
• Person should invest the amount of LTCG in purchasing new Agricultural Land

      (This land may be urban or rural)

Time Period

• New Land must be purchased within 2 years of date of transfer

Amount Exempt is Lower of

• Amount of Long Term Capital Gain
• Amount Invested

Question 1 

Urban Agricultural land purchased by Mr A for 5 lacs in May 2013

It was sold  for 12 lacs in June 2015 and rural agricultural land purchased for 14 lacs in July 2015

What is treatment? 

Q2

Solve last question assuming land sold was Rural Agricltural land

Consequences if New Land Sold within 3 years  

If new Agricultural Land is a Rural Land,there will not be any capital gains as Rural Agricultural Land is not a capital asset

Howevwe,if new agricultural land is a urban land

STCA will be calculated on Sale of New House

Amount of Capital Gain Exempt earlier will be reduced from Cost while Calculating this STCA

Q3

Suppose in  Q1 above,new Rural Agricultural Land which was purchased for 1400000 in July 15 was later sold for 2000000 in August 2016