Capital gain on sale of agriculture land

To save capital gains tax under Section 54B, first check if the sold land qualifies as exempt rural agricultural land. If taxable, claim Section 54B by documenting that the client funded 100% of the new purchases, supported by High Court precedents allowing exemption for purchases in a spouse's or mother's name.

Agree with first checking whether the land is a capital asset at all. A checklist before claiming relief:

1. Rural or urban. Agricultural land outside the specified municipal limits and population bands is not a capital asset, so no capital gain arises. Check the distance and population test for the village.
2. If it is urban agricultural land, relief under 54B needs the land to have been used for agriculture by the seller or his parents for the 2 years before the sale.
3. Reinvestment must be in other agricultural land within 2 years after the sale (rural or urban).
4. Unused money. If the purchase is not done before the ITR due date, the unspent gain must be deposited in the Capital Gains Account Scheme with a bank before that date, or the exemption is lost for the unspent part.
5. Lock-in. The new land must not be sold within 3 years, otherwise the exemption is reversed.
6. Name on the new plots. The section speaks of the assessee purchasing land, so plots bought in the mother's and wife's names are a risk. Some courts have allowed it where the assessee's money paid for it, but the position is contested, so keep the bank trail showing the client funded 100%, and consider whether any part should be bought in his own name. Also note the transfer of money to wife and mother can bring clubbing under the gift clubbing provisions for the income from plots in the wife's name.
7. Only the gain up to the amount reinvested is exempt, and the exemption is capped at the gain.

Ask what the sale date was, because that decides which Act and section numbers apply.