Availing exemption u/s 54f of it act, 1961

The purchase of house should be within 2 years or 1 year before (in case it is constructed, then the construction should complete within 3 years) from the date of transfer.
Further, the deduction u/s 54F will be proportionate in case you have not invested the whole of amount in purchase/construction of house. In your case, the deduction will be 1,00,000 [i:e (2,50,000*2)/5].

If the agricultural land is a " rural agricultural land " there is no capital gain .  rural agricultural land is not a capital asset.

in other case , YES the exemption is available in proportion to sale consideration as explained by Mayur Kashinpure . 

 

Deductions under sec-54F is available if the following conditions are satisfied:

1. Assessee should be an Individual or HUF

2. Assets transferred should be any long term capital asset other than residential house property

3. Asseesee have to invest the net sales consideration for purchasing or acquiring house property 'within 1 year before' or 'within 2 years after' the date of transfer of original asset or for constructing a house property 'within 3 years' from the date of transfer of original asset.

4. Assessee should not be the owner of more than one residential house property from the date of transfer of original asseet to the date of in which period of 2 years or 3 years expires for purchasing or constructing a residential house property respectively.

Now, since you have mentioned the time period as "within 3 years from the date of transfer", it seems condition '3' as stated above has not been fulfilled & hence the assessee cannot claim exemption u/s-54F.

Moreover, as per the provisions of law, only sale of agricultural land, not being the land as referred in section-2(14)(b)(iii) [NOTE-1] & held as "investment" is outside the purview of taxation as then it will not be a capital asset at all. "Held as investment" means you have bought the land for investment purpose are not engaged in the business of "trading of lands", which is held by you as "stock-in-trade" as then it will become taxable u/h " Profit & Gains from Business or Profession" & no exemption will be available to you under the IT Act, 1961.  

However, if the agricultural land, sold by you, is in the nature of land as referred in section-2(14)(b)(iii) above, then you can claim exemption u/s-10(37), if conditions specified gets satisfied [Note-2] OR exemptions available u/s-54B, 54EC or 54F, provided all the conditions of the relevant section gets satisfied, & balance, if any, will be taxable u/h- "Capital Gains".

Notes:

(1) The relevant extract of provisions of sec-2(14)(b)(iii) reproduced herewith:

"Capital Asset" means—  

(a)  property of any kind held by an assessee, whether or not connected with his business or profession;

(b)  any securities held by a Foreign Institutional Investor which has invested in such securities in accordance with the regulations made under the Securities and Exchange Board of India Act, 1992 (15 of 1992), but does not include—

(iii) agricultural land in India, not being land situate—

(a)  in any area which is comprised within the jurisdiction of a municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee, or by any other name) or a cantonment board and which has a population of not less than ten thousand ; or

(b) in any area within the distance, measured aerially,— (I)  not being more than two kilometres, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than ten thousand but not exceeding one lakh; or (II) not being more than six kilometres, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than one lakh but not exceeding ten lakh; or (III) not being more than eight kilometres, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than ten lakh.

Explanation.—For the purposes of this sub-clause, "population" means the population according to the last preceding census of which the relevant figures have been published before the first day of the previous year;]

(2) The provisions of sec-10(37), is reproduced herewith:

"In the case of an assessee, being an individual or a Hindu undivided family, any income chargeable under the head "Capital gains" arising from the transfer of agricultural land, where—  

(i) such land is situate in any area referred to in item (a) or item (b) of sub-clause (iii) of clause (14) of section 2;

(ii) such land, during the period of two years immediately preceding the date of transfer, was being used for agricultural purposes by such Hindu undivided family or individual or a parent of his;  

(iii) such transfer is by way of compulsory acquisition under any law, or a transfer the consideration for which is determined or approved by the Central Government or the Reserve Bank of India;

(iv) such income has arisen from the compensation or consideration for such transfer received by such assessee on or after the 1st day of April, 2004. Explanation.—For the purposes of this clause, the expression "compensation or consideration" includes the compensation or consideration enhanced or further enhanced by any court, Tribunal or other authority".

Hope ur doubt is cleared now...

What if the stamp duty valuation of the document is say Rs. 600000 and it is urban Ag. land? Also what will be the tax liability if he had invested Rs. 100000 in 54EC bonds in time.

1. Urban argiculture land is NOT A CAPITAL ASSET , therefore there can't be any capital gain . SECTION 50C has not applicability, does'nt matter stamp valuation is 6 lakh or 60 lakh . consequently there is no need of any kind of exemption (54F / 54EC)

HOWEVER , remember the applicability of 56(2)(vii) in hands of receiver.

2. if  argiculture land is NOT "Urban argiculture land" then you can avail exemption of rs 100000 u/s 54EC . MAX LIMIT OF 54EC IS 50 LAKH.

Ankit ji, can you please explain why 'urban agricultural land' is not a capital asset? Any case laws??

As per IT Act, 1961, only 'agricultural land in rural area' as per sec-2(14)(b)(iii) is not a capital asset. It means 'agricultural land in urban area' & 'non-agricultural land', both are capital assets liable to capital gain tax.

Hence, as per Sec-50C, deemed sales consideration will be Rs.6 lakhs from which further deduction of Rs. 1 lakh u/s-54EC will be available, provided it has been held as 'investment' & not as "stock-in-trade" as already explained in my earlier post.

Thanks "STRANGER " , I TYPED URBAN BY MISTAKE ,  I CORRECT MYSELF :

1. RURAL argiculture land is NOT A CAPITAL ASSET , therefore there can't be any capital gain . SECTION 50C has not applicability, does'nt matter stamp valuation is 6 lakh or 60 lakh . consequently there is no need of any kind of exemption (54F / 54EC) HOWEVER , remember the applicability of 56(2)(vii) in hands of receiver.

2. if  argiculture land is NOT "RURAL argiculture land" then you can avail exemption of rs 100000 u/s 54EC . MAX LIMIT OF 54EC IS 50 LAKH.

I APPOLOGIES OF ANY MISUNDERSTANDING.
 

It's ok ankit ji..it can happen with anyone...