Your questions answered: How I claimed LTCG exemption as an NRI selling agricultural land
Q. I am an NRI. I sold my agricultural land at Pune in November 2023. After consulting my CA., I deposited the indexed capital gain amount in a Capital Gains Account with a nationalised bank as per Sec. 54B to purchase agricultural land within two years from date of sale. i.e. till November-2025. But as of today, I am not in position to purchase agricultural land. Is it possible to invest the entire capital gain amount in non-agriculture assets? Is it also possible to purchase agricultural land after November-2025 without having to pay the capital gain tax? Is there any other way for capital gain tax exemption?
If the individual or an HUF (Hindu Undivided Family) wishes to claim exemption for long term capital gains rising on sale of an agricultural land the taxpayer is required to purchase another agricultural land within a period of two years.
Use of CGAS
In case the amount is not utilised for buying agricultural land by the due date of filing of the ITR (Income Tax Return), the tax payer is required to deposit the unutilised amount in a Capital Gains Account under Capital Gains Account Scheme (CGAS) by the due date of filing of ITR. The amount deposited in the Capital Gains Account before the due date of furnishing returns of income along with the amount already utilised is deemed to be the amount utilised for the purpose.
Taxability of unutilised amount
However, if the amount is not utilised wholly or partly for the buying of agricultural land, then the amount of capital gains related with the unutilised portion of the deposit in CGAS is charged as the capital gains of the year in which the period of two years expires. You have to buy the agricultural land by November 2025.
Please note that under the FEMA (Foreign Exchange Management Act) laws an NRI (Non-Resident Indian) is not allowed to buy agricultural land in India without obtaining prior permission from the Reserve Bank of India.
Limitation on switching to Section 54F
You cannot buy agricultural land after November 2025 for claiming the benefit. As far as claiming exemption by investing in another asset i.e. a residential house under section 54F now is concerned, I think you cannot claim exemption under Section 54F now as you would have already opted for section 54B exemption while filing your ITR for the financial year 2023-2024. In my opinion, the law does not allow you to change the option now and opt for section 54F which allows a longer time of three years from date of sale of the agricultural land.
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Balwant Jain is a tax and investment expert and can be reached at [email protected] and @jainbalwant on his X handle.
Disclaimer: The views and recommendations made above are those of individual analysts, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
