Capital gains deferral for agricultural land transfers depends on timely replacement purchase or prescribed deposit to avoid immediate tax.

Capital gains from sale of agricultural land by an individual or HUF are deferred if replacement agricultural land is purchased within two years; excess gains over the replacement cost are taxed immediately and where gains do not exceed replacement cost no tax is charged while the replacement land's cost basis is reduced by the amount of the gains. Unutilised gains must be deposited in a specified institution by the return filing due date under a notified scheme, such deposits together with sums already used count as the cost of the new asset, and any deposit not applied within the two year period is charged as income when that period expires.

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