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Gift received from father - Agriculture Land

Neil (Accountant Assistant) (67 Points)

07 April 2016

Sir,

My mom has received an Agriculture Land from her father in inheritance. Now my mom has sold this land for Rs. 5 Lac to other one. She got Rs. 5 lac in cash. Now my question is , whether it is taxable or not. and how we have to use this amount, if we have to deposit the same in Bank. What proocedure has to be followed to avoid tax. Please reply asap.

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3 Replies

CA Suri Kota (Assistant Manager @ EY) (955 Points)
Replied 07 April 2016

If it is rural land, tax is exempted

If it is urban land, you have to invest in Capital gain scheme which is available in SBI if at all you dont want to pay tax on such income.

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Vishal Goel (Chartered Accountant) (1693 Points)
Replied 12 December 2016

Hello,

Rural Agricultural Land has been specifically excluded from the definition of Capital Asset as defined in Section 2(14). As Rural Agricultural Land is not considered as a Capital Asset – therefore Tax won’t be levied on sale of Rural Agricultural Land as it is only levied on sale of a Capital Asset

Agricultural Land situated in an Urban Area would be considered as a Capital Asset and therefore the Capital Gains Tax would be levied on the sale of Agricultural Land situated in non Rural Area.

Vishal Goel (Chartered Accountant) (1693 Points)
Replied 12 December 2016

You can claim below deductions to lower the tax liability on capital gains of sale of Urban Agricultural land;

Deduction Under Section 54B
- If you sell an agricultural land and make capital gains, you can re-invest such gains in acquiring another agricultural land. You have to buy another agricultural land within 2 years.
- This deduction is available only if you/your parents have been using the agricultural land for a period of two years prior to date of transfer (sale).
- The new agricultural land that is acquired should be held by you for atleast 3 years from the date of purchase.
Deduction under section 54F
- If you sell land and make long-term capital gains, you can re-invest entire sale proceeds to purchase a residential house within 1 year before or 2 years after from the date of sale of land or you should construct the residential house within 3 years from the date of sale.
- You should not own more than one residential house on the date of transfer of land.
Deduction under section 54EC
- If you sell agricultural land and make long-term capital gains, you can re-invest Capital Gain amount to purchase NHAI or REC bonds within 6 months from the date of transfer.
- The maximum allowed investment is Rs 50 Lakh.
- The bonds should not be sold/transferred for 3 years.
The capital gains can also be deposited in Capital Gains Account Scheme of any designated banks.