Capital Gains Tax Relief for Agricultural Land: Clause 83 of the Income Tax Bill, 2025 vs. Section 54B of the Income Tax Act, 1961

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....roceeds from the sale of agricultural land into purchasing new agricultural land. Understanding these provisions is crucial for taxpayers involved in agricultural activities, as they offer significant tax benefits under specific conditions. Objective and Purpose The primary objective of both Clause 83 and Section 54B is to encourage the continuation of agricultural activities by providing tax exemptions on capital gains, provided the gains are reinvested in new agricultural land. This legislative intent aligns with broader policy goals of supporting agriculture, ensuring food security, and promoting sustainable land use. By offering tax incentives, these provisions seek to discourage the diversion of agricultural land for non-agricultural....

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....61 Section 54B provides a similar framework for tax exemption on capital gains from the transfer of agricultural land. Key aspects include: 1. Eligibility Criteria: Applies to individuals and HUFs who have used the land for agricultural purposes in the two years before the transfer. 2. Reinvestment Requirement: New agricultural land must be purchased within two years to avail of the exemption. 3. Tax Treatment: - If the capital gains exceed the cost of the new land, the difference is taxed u/s 45, with the new asset's cost considered nil for future gains if sold within three years. - If the capital gains are equal to or less than the cost of the new land, no tax is charged, and the cost of the new asset is reduced by the capi....