1 week ago

Inherited Agricultural Land May Qualify for Section 54F

Can you claim Section 54F tax exemption on sale of inherited agricultural land? Here's what expert says · livemint.com

Selling inherited agricultural land does not always create a tax bill.

First, it must be checked whether the land counts as a capital asset under tax rules.

Land near certain municipalities or towns may count, depending on population and distance.

If it counts, owning it for 40 to 50 years makes it a long-term asset.

Section 54 usually cannot be used because it is meant for selling a residential house.

Section 54F may help if the money is used to buy or build a house in India.

The taxpayer must also meet Section 54F's other rules and deadlines.

Section 54B could be another option if the land was used for farming by the taxpayer or their parent.

Key facts

Section 54: Not available for gains from selling agricultural land; it applies to long-term gains from selling a residential house.
Section 54F: May be examined when long-term gains arise from selling a non-residential capital asset and the net consideration is invested in a residential house in India.
Section 54B: May apply to long-term gains from land used for agricultural purposes by the taxpayer or their parent.
Holding period: The inherited land's holding period includes the previous owners' holding period, making the stated 40–50-year period long-term.
Capital-asset test: Agricultural land in India is generally excluded from capital assets unless it falls within specified municipal, cantonment-board, population, or distance limits.
Distance limits: The stated limits are two kilometres for populations above 10,000 up to 100,000; six kilometres for populations above 100,000 up to 1,000,000; and eight kilometres for populations above 1,000,000.
New Act references: The article identifies Sections 82, 86, and 83 of the Income-tax Act, 2025 as corresponding to Sections 54, 54F, and 54B of the old Act.

livemint.com · 1 week ago