Tax on conversion of business asset to capital asset

Facts of the case

An assessee is having a proprietorship business. As it is a proprietorship business the asset purchased in the name of the assessee is being used in the business and being disclosed in the books of the Proprietorship business.

The assessee is having an agricultural land in his own name. The agricultural income from the land is being disclosed in the annual return of the assessee and the value of land is being shown in the trial balance of the Proprietorship business.

Now, the assessee is willing to convert his proprietorship business in to a private limited company. The assessee will be allotted shares of the private limited company for transfer of the business.

Queries:

1) On conversion into Private limited company, will the agricultural land shown in the books of proprietorship business be transferred to Private Limited Company?

2) Will Capital Gain arise for transfer of Agricultural land to Private Limited Company? If so, what can be done to save tax? ( The land is situated within 7 Kms from Municipal area)