Can Sale of Agriculture land not used for agriculture purpose be tax free?

An agriculture land not used for agriculture purpose since last ten years,situated near municipal limits (5 K.M.) sold during the current financial year. Can the Long term capital gain be tax free. If, no what are the ways to save such gains? I have suffered losses in share trading can it be set off with such gain? Please advice.

2 Replies to “Can Sale of Agriculture land not used for agriculture purpose be tax free?”

  1. Your losses from shares and the capital gains are different. You cannot set off your shares loss in capital gains.

    If the land is not used for agricultural use then it attracts LTC gains tax irrespective of municipal limits.

    You have to buy a house/flat with in 2 years from the date of sale of land, or should construct the house with in 3 years. Mean while, the amount of capital gains should be deposited in a special capital gains account in a Nationalized bank. (Like SBI).

    Otherwise you have to deposit your gains in any infrastructure bonds for 3 years. (with in 6 months from the date of sale).

    There are so many ways to save tax. First consult a good C.A in your area. He will tell you many ideas. Even I can advise you. (for free).

  2. If the share trading does not fall within the meaning of ‘speculation business’ you can set-off the loss with the Long-term Capital Gains, be it a ‘Short-term Capital Loss’ or ‘Business Loss’.

    You can choose tax savings between section 54EC & 54F.

    If you choose section 54EC you need to invest the Capital Gains amount alone within 6 months from the date of transfer of land for a minimum period of 3 years in the specific bonds mentioned under that section, viz., NHAI or REC. However you can claim maximum Rs.50 Lacs only.

    If you choose section 54F, then you have to invest the whole sale consideration in a residential House Property (only one). You can purchase it within 1 year before or 2 years after the date of transfer of the land or construct it within 3 years after the date of transfer of the land. This new residential property also needs to be held for a minimum period of 3 years. However, there are certain conditions to be fulfilled: –

    * you should not own more than one residential house, other than the new asset, on the date of transfer of original asset.

    * you do not purchase within 1 year or construct within 3 years a 2nd residential house.

    * income from such residential house is chargeable under the head “income from house property”.

    * if the amount could not be invested in the residential house before the date of filing return of income, the the amount of sale consideration should be invested in special capital gains bonds with banks till the time of purchase or construction.

    Exemption under section 54EC or section 54F would be available only proportionate to the amount invested.

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