Explained: How can you save income tax on the sale of urban agricultural land?

I made a long-term capital gain (LTCG) from the sale of an ancestral urban farmland. How can I save taxes on those long-term capital gains?

With respect to the sale of capital gains from agricultural land, which is taxable because it is not agricultural land and is not considered a capital asset for tax purposes, a person and Hungarian Forint You have three options for applying for a tax exemption on long-term agricultural land. This type of land is generally referred to as urban agricultural land.

Under the first option, you can avail the exemption under Section 54EC by investing in indexed shares. LTCG for purchase of capital gain bonds from specified financial institutions like NHAI, REC, RFC and PFC within six months from the date of sale of urban agricultural land.

Finally, let us assume that you do not wish to invest in capital gains bonds or buy a residential house. In that case, you can claim exemption from long-term capital gains tax on your agricultural land under Section 54B by investing the index-linked LTCG to acquire another agricultural land within two years from the date of sale of the original agricultural land.

Please note that to the extent the money is not used to acquire the house or agricultural land on the due date of filing your ITR, the unutilized portion of the funds must be deposited in a capital gains account, which can be used for the specified purpose.

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Balwant Jain is a tax and investment expert and can be contacted at [email protected] and @jainbalwant on his X account.

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