Can inherited agri land sale claim Section 54F tax exemption

Agricultural land in India is generally not a capital asset unless it falls within urban limits defined by population and distance from a municipality or cantonment board. For a reader who inherited such land 40-50 years ago, the tax expert Parizad Sirwalla of KPMG explains that only if the land qualifies as a capital asset does its sale generate taxable long-term capital gains (LTCG).

Section 54F of the Income-tax Act (Section 86 of the new Act) allows a deduction if the net sale consideration is reinvested in a residential house in India, subject to conditions. Section 54, which applies only to sale of a residential house, does not apply. Another option is Section 54B (Section 83 of the new Act), which offers a deduction if the proceeds are used to buy another agricultural land and other conditions are met.

The answer depends on the land's location and use. The reader must first check if the land is a capital asset, then evaluate which deduction applies.