Capital Gain Tax on Urban Agricultural Land: Use Sec 54B, 54F, 54EC to Save Lakhs!

Описание: Capital Gain Tax on Urban Agricultural Land: Use Sec 54B, 54F, 54EC to Save Lakhs!
This video focuses on the Capital Gain Tax applicable to agricultural land situated in urban areas or land that is not classified as rural agricultural land.
Understanding Capital Gains Tax
To calculate the tax, you must first check the holding period.
1. Short Term Capital Asset (STCA): If the land is held for less than 24 months and sold, the gain is taxed according to your applicable income tax slab rate (e.g., 5%, 10%, 30%).
2. Long Term Capital Asset (LTCA): If the land is held for more than 24 months, you have two options for tax calculation:
◦ A flat 12.5% tax on the profit made.
◦ 20% tax with indexation, calculated using the Capital Gain CII Index (Cost Inflation Index), which is notified every financial year by the Income Tax Department.
The lower of the two tax calculations (12.5% flat or 20% with indexation) will be applicable.
3 Ways to Save Capital Gains Tax
If tax is applicable, three key sections allow you to save or exempt the tax liability:
1. Section 54B: Exemption is available if you invest the entire amount into buying new agricultural land, even in an urban area. A mandatory condition is that the land you sold must have been used for agricultural purposes for at least the last two years, and it must be a Long Term Capital Asset.
2. Section 54F: You can save tax by investing the entire sale consideration (the full amount received from selling the land, e.g., ₹50 lakh) into buying or constructing a new residential house. The house must be purchased up to one year before or two years after the sale date, or constructed up to three years after the sale date. If the purchase/construction is pending when the ITR is filed, the money must be deposited into a Capital Gain Account Scheme (CGAS) Deposit FD, not a normal FD.
3. Section 54EC Bonds: Tax can be saved by investing the proceeds in bonds issued by the Government (like NHAI or Rural Electrification Corporation). The money must remain invested in these bonds for 5 years.
Crucial Mistakes to Avoid & Required Proofs
To ensure your land is correctly classified (especially as rural/exempt, or to mitigate urban tax liability), avoid these common mistakes and collect documentation:
• Always check the aerial distance, not the distance measured via the road, to determine if the land is rural or urban.
• Ensure that agricultural activity on the land is documented for the last 2 years. Obtain a certificate from the Tehsildar or Patwari stating the farming activity on the specific Khasra or plot number.
• Check the population of the Municipality. When calculating the distance from the nearest Municipality, measure from the city limit (where the jurisdiction ends) and not from the Municipality’s office.
• Ensure your land registration clearly states it is agricultural land (Krishi Bhumi); if it was registered or shown as commercial land, it will not be classified as agricultural land.
Essential Documents to Collect:
1. Proof of population (from Census website data plus a certificate from the Collectorate office or Gram Panchayat Tehsildar).
2. Screenshots of the aerial distance measurement (coordinates to coordinates).
3. Latest copy of Khasra and Khatauni (to confirm ownership, tenure, and last agricultural activity).
4. Certificate of Distance from the Tehsildar or Architect (for point-to-point aerial distance).
Fulfilling these legal requirements is necessary to save "lakhs of rupees in tax"

Capital Gain Tax on Urban Agricultural Land
Agricultural Land Tax Exemption
Rural vs Urban Agricultural Land
Saving Capital Gain Tax
Specific Sections and Exemptions (Tax Planning)
Section 54B (New Agricultural Land Investment)
Section 54F (Residential House Investment)
Section 54EC (Bond Investment – NHAI/REC)
Capital Gain Account Scheme (CGAS)

Short Term Capital Asset (STCA)
24 Months Holding Period
Tax on Land Sale (12.5% flat tax vs 20% with indexation)
Cost Inflation Index (CII Index)
Capital Gain CII Index Calculation

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