Section 54B - Capital gain on transfer of land used for agricultural purpose

Section 54B: Tax Exemption on Capital Gains for Urban Agricultural Land Transfers with Conditions on New Land Purchase

Section 54B of the Income Tax Act provides an exemption on capital gains from the transfer of urban agricultural land used by an individual or their parents for agricultural purposes in the two years preceding the transfer. The exemption applies if the individual or Hindu Undivided Family (HUF) purchases or constructs new agricultural land, either rural or urban, within two years of the transfer. The deduction is the lesser of the capital gains or the cost of the new asset or deposit amount. If the new asset is transferred within three years, the cost of acquisition is adjusted by the exemption amount. No capital gain arises if the new land is rural.