How to assert exemption on long-term capital acquire on sale of an agricultural land

I’ve obtained a compensation of round 1 Crore for land acquired by the Government of Gujrat. The mandatory paperwork had been executed on thirtieth June 2021. The land is my ancestral property. This was utilized by me for agriculture. I’m planning to purchase one other agricultural land inside a interval of two years. Whether can I declare any tax exemption if I purchase new agricultural land by thirty first December 2022 and the amount of cash required to be invested for claiming such exemption.

First it’s important to verify whether or not the land bought by you is an agricultural land throughout the which means of definition of Income Tax Act. This you want to get examined by a Chartered Accountant primarily based on the details in regards to the location of the land and inhabitants of the realm the place that is positioned. In case the land bought falls throughout the definition of agricultural land you shouldn’t have any earnings tax legal responsibility for such acquisition by the federal government. Even in case the land bought by you doesn’t fall throughout the definition of agricultural land, you continue to have avenues to avoid wasting your long run capital acquire tax. Section 54B of the Income Tax Act gives for exemption for long run capital good points on sale of land used for agricultural function which doesn’t fall throughout the definition of agricultural land. In respect of any long-term capital good points arising on sale of land which was used for agricultural function over the past two years both by you or your mother and father, you possibly can declare exemption in case you make investments the capital good points for purchases of one other land for use for agriculture. You need to buy one other agricultural land inside two years from the date of such sale switch. Since the land bought by you is your ancestral property so most likely you wouldn’t find out about the price of this land. 

You have an choice to take the truthful market worth of this land as on 1st April 2001 as your price for the aim of computation of capital good points. You can apply the fee inflation index to the truthful market worth as on 1st April 2001 and calculate your long run capital good points by lowering such listed price from the compensation obtained. Please notice in case you aren’t in a position to buy the brand new land for agricultural use earlier than the due date of submitting of your return subsequent yr i.e. thirty first July 2022, it’s important to deposit the quantity of listed capital good points in a checking account to be opened beneath the Capital Gains Account scheme to be opened with a financial institution. You can use the cash on this account for the aim of buying the land for agricultural function. 

Balwant Jain is a tax and funding professional and may be reached on jainbalwant@gmail and @jainbalwant on Twitter

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