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Income tax on sale of urban plot and buying agriculture land

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SaiPSY

Marketing

21 Points Posted on 01 August 2023

Hi beloved CAs

I am planning to sell urban plot which I held for more than 2 years. I know its subject to 20% ltcg.

Is there any way to minimize/avoid taxes.
What I have heard from a person (not a CA) is, if the gains are used to buy agriculture land then no tax liability.
Can any one confirm?

Replies (4)

Quick Summary

This discussion explores the possibility of reducing or eliminating Capital Gains Tax (CGT) when selling urban land held for over two years. The consensus among users is that reinvesting the gains into agricultural land within two years of the sale can indeed exempt the transaction from CGT, as agricultural income is tax-exempt.

CA. Sourav Sarkar

Chartered Accountant

16188 Points Posted on 01 August 2023

Agricultural income is exempt but sale of urban land results in LTCG @ 20%

Prashant Daga

136 Points Posted on 01 August 2023

Yes..you can buy and save tax

CA. Sourav Sarkar

Chartered Accountant

16188 Points Posted on 02 August 2023

Yes you can purchase another agricultural land within 2 years from the date of transfer

Aashok Kumar Sharma

Finance/Compliance Consultant

77735 Points Posted on 07 November 2026

Options for a plot held over 2 years:

• Tax on LTCG: if sold after 23 July 2024 and acquired before that date, a resident individual can choose the lower of 12.5% without indexation or 20% with indexation.

• Exemptions:

– Sec 54F: invest the net consideration in a residential house (purchase within 1 year before or 2 years after, or construct within 3 years), with the proportionate exemption. Condition: you don't own more than one house besides the new one.

– Sec 54EC: invest the gain in specified bonds (up to Rs 50 lakh) within 6 months.

• Buying agricultural land doesn't give an exemption here. Sec 54B applies only when the land sold was agricultural land used for agriculture.

• Unutilised amounts by the ITR due date go into the CGAS.