Capital gains tax: Options for non-resident Indians after land sale

I am a non-resident Indian Citizen working abroad. I sold my agricultural land on 15 October 2022. As per Sec, I deposited the indexed capital gain in a capital gain account with a nationalised bank. 54B to purchase another agricultural land within two years from the date of sale. i.e. by 14th October 2024. But as of today, I am not able to buy agricultural land. Can I invest the entire capital gain amount in non-agriculture assets? Can I buy the agricultural land after 14th October 2024 without paying the capital gain tax, i.e. till which date can I purchase agrarian land? Is there any other way to get a capital gain tax exemption?

Capital Gains from Agricultural Land Sale and Investment Options Explained"

In respect of long-term capital gains arising from the sale of various assets where the taxpayer wishes to claim exemption Section 54, 54B, 54D, 54F or 54G and the taxpayer is not able to fully utilise the amount required to be utilised for the acquisition of the asset needed before the due date of filing of the ITR, the taxpayer has to deposit the unutilised amount in Capital Gains Account to be opened with a bank under Capital Gains Account Scheme. The taxpayer must utilise the money deposited in the Capital Gains Account within the prescribed period under the relevant section.

Section 54 B provides an exemption for tax on long-term capital gains on the sale of agricultural land by investing the capital gains for buying another agrarian land within two years from the original agricultural land's sale date. Suppose the amount deposited in the capital gains account is not utilised wholly or partly for the stipulated purpose. In that case, the amount claimed exempt in earlier years is charged as the capital gains of the year in which the prescribed period expires.

Since the period of two years is getting over on 15th October 2024, by which time you feel you will not be able to utilise the money for buying another agricultural land, the long-term capital gains claimed exempt for the financial year 2022-2023 will be taxed as long term capital gains of the current financial year 2024-2025. You cannot buy agricultural land after the prescribed period is over to ensure that the exemption claimed is not reversed.

Though the period for investing Section 54F is applicable for assets other than a residential house is three years, where one can claim an exemption by investing in a residential house because while filing the ITR, you would have claimed exemption under Section 54B, I do not think you can avoid reversal of the exemption claimed under Section 54B by investing in a residential house now by taking resort to Section 54F.

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Balwant Jain is a tax and investment expert and can be reached on jainbalwant@gmail.com and @jainbalwant on his X handle.

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