Dear All,
Facts of Case:
One of my client purchased an Agricultural Land at a cost of Rs. 3 Lacs. She is a widow receiving Pension of her husband. Now due to new norms the land comes under the limits (8 Kms) of Munipality Area, hence being converted into Urban Land.
Now she wants to sell one part of the land to a Govt Company at a sales price of Rs. 60 Lacs.Her son is constructing a residential house in his own name.
Problem:
What will be the best Capital Gain Planning under Sec. 54?
I THINK BEST CAPITAL PLANNING WILL BE U/S 54B .IN THIS SECTION TO GET THE EXEMPTION ANOTHER AGRICULTURE LAND IS PURCHASED (MAY BE RURAL OR URBAN) COSTING EQUAL TO AMOUNT OF AT LEAST CAPITAL GAIN WITHIN FROM THE DATE TRANSFER.
SHE CAN SELL THE NEW LAND AFTER 3 YEARS FROM THE DATE OF IT'S ACQUISION SO THAT CAPITAL GAIN ARISING ON SUCH RURAL LAND WILL BE EXEMPT FROM TAX.
If the land was in agricultural use for 2 years then the best option would be to first purchase an agricultural land from the proceeds and claim exemption u/s 54B. And then sell that agricultural land at whatever price and on wt ever date and the proceeds would be totally exempt u/s 10(1)
I think the relevant case does not fall under sec-54B. Sec 54B requires that the urban agricultural land must be in use for the last 2 years. and it is not in use as such.
So, the next best option would be to buy a residential house to claim exemption u/s 54F or to invest in REC/NHAI bonds u/s 54EC
the matter of her son constructing a residential house has no relevance.
BETTER PRACTICE IS TO CLAIM 54B
BUT FOR THIS U HAVE TO PROOF THAT THE LAND WAS IN USE FOR AT LEAST 2YEARS N FROM THE SALES AMOUNT PURCHASE RURAL AGRICULTURAL LAND N SELL EVEN THE NEXT DAY.
NO CAPITAL GAIN ARISES AS RURAL AGRICULTURAL LAND IS EXEMPT U/S 10(1)
IF U HAVE NO PROFF THEN GO FOR SEC. 54
Gupta Sachdeva & Co. Chartered Accountants
New Delhi
CA Final
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