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Capital gains tax on compulsor agricultural land acquisition

Pushkar (b) (41 Points)

12 May 2012

Hi,

My agricultural land was recently compusorily acquired for road widening. The land is situated outside 8kms of the municipality. However, I am not sure whether the population is less or more than 10000. Will the compensation I have received attract capital gains tax??

If so can I invest the proceeds is capital gain exemption bonds (under sec 54EC) using the proceeds from agriculturl land acqusition?

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GOPAL AGGARWAL (DOING NOTHING) (1339 Points)
Replied 12 May 2012

Since your land is situated out side the municipal limit So, capital Gain is exempt u/s 10(37) (given as under)

10(37) in the case of an assessee, being an individual or a Hindu undivided family, any income chargeable under the head "Capital gains" arising from the transfer of agricultural land, where—

(i) such land is situate in any area referred to in item (a) or item (b) of sub-clause (iii) of clause (14) of section 2;

(ii) such land, during the period of two years immediately preceding the date of transfer, was being used for agricultural purposes by such Hindu undivided family or individual or a parent of his;

(iii) such transfer is by way of compulsory acquisition under any law, or a transfer the consideration for which is determined or approved by the Central Government or the Reserve Bank of India;

(iv) such income has arisen from the compensation or consideration for

such transfer received by such assessee on or after the 1st day of April, 2004.

Explanation.—For the purposes of this clause, the expression "compensation or consideration" includes the compensation or considera-tion enhanced or further enhanced by any court, tribunal or other authority;