Section 83 — Agricultural Land Reinvestment Exemption | ITA 2025

Section 83 — - AGRICULTURAL LAND REINVESTMENT EXEMPTION

Section 83 is the substantive equivalent of 1961 s. 54B -- the AGRICULTURAL-LAND-TO-AGRICULTURAL-LAND reinvestment exemption for individuals / HUFs. The provision targets the urban-fringe agricultural land transactions where the land qualifies as 'capital asset' (i.e., NOT exempt agricultural land under s. 2 / 1961 s. 2(14)(iii)) -- typically peri-urban land that has been reclassified for development but historically used for agriculture. Conditions: (a) land used by assessee or his parent or HUF for AGRICULTURAL PURPOSES in the 2 YEARS immediately preceding transfer; (b) reinvest in OTHER agricultural land within 2 YEARS after transfer; (c) 3-year holding lock on new agricultural land. CGAS deposit required if reinvestment incomplete by s. 263 due date. The provision RECOGNISES the agriculturist's need to relocate / consolidate landholdings without tax friction.

Statutory text — Income-tax Act, 2025

Marginal note -- Capital gain on transfer of land used for agricultural purposes not to be charged in certain cases

(1) Where an assessee, being an individual or a Hindu undivided family,—

(a) has capital gains arising from the transfer of a capital asset, being land, which was used by the assessee or his parent, or the Hindu undivided family for agricultural purposes (original asset), in two years immediately preceding the date of transfer; and

(b) has, within two years after that date, purchased any other land for being used for agricultural purposes (new asset), then, instead of the capital gains being charged to income-tax as income of the tax year in which the transfer took place, it shall be dealt with as follows:—

(i) if the capital gains exceed the cost of the new asset, such excess shall be charged under section 67, and for computing any capital gains arising from the transfer of the new asset within three years of its purchase, the cost shall be nil; or

(ii) if the capital gains is equal to or less than the cost of the new asset, no capital gains shall be charged under section 67, and for computing any capital gains arising from the transfer of the new asset within three years of its purchase, the cost shall be reduced by the amount of the capital gains.

(2) If the capital gains referred to in sub-section (1) is not utilised by the assessee to purchase the new asset before filing the return of income under section 263, then—

(a) the unutilised amount shall be deposited in a specified bank or institution and utilised as per the scheme notified by the Central Government;

(b) such deposit shall be made before the filing of the return and not later than the due date applicable in the case of the assessee for filing the return of income under section 263(1); and

(c) the proof of deposit shall be submitted along with such return.

(3) For the purposes of sub-section (1), the amount already utilised for purchasing the new asset together with the deposited amount under sub-section (2), shall be deemed to be the cost of the new asset.

(4) If the amount deposited under sub-section (2) is not fully utilised for purchase of the new asset within the period specified in sub-section (1), then,—

(a) the unutilised amount shall be charged under section 67 as the income of the tax year in which two years from the date of the transfer of the original asset expires; and

(b) the assessee shall be entitled to withdraw such unutilised amount in accordance with the scheme referred to in sub-section (2).

Corresponding provision — 1961 regime

INCOME-TAX ACT, 2025	INCOME-TAX ACT, 1961
INCOME-TAX ACT, 2025 -- s. 83	INCOME-TAX ACT, 1961 -- s. 54B
Sub-s. (1)(a) -- agricultural land used by assessee / parent / HUF for 2 years preceding transfer	1961 s. 54B(1)
Sub-s. (1)(b) -- reinvest in OTHER agricultural land within 2 years after transfer	1961 s. 54B(1)
Sub-s. (1)(i)/(ii) -- excess CG charged + cost-NIL claw-back / cost-reduced claw-back	1961 s. 54B(1) Proviso
Sub-s. (2) -- CGAS deposit before s. 263 due date	1961 s. 54B(2)
Sub-s. (3) -- utilised + deposited = deemed cost	1961 s. 54B(2) Proviso
Sub-s. (4) -- unutilised at 2-year expiry charged	1961 s. 54B(2) Proviso
3-year claw-back via cost-reduction on subsequent sale	1961 s. 54B(1) Proviso

STATUTORY ARCHITECTURE

ELIGIBILITY: (a) ASSESSEE: INDIVIDUAL or HUF only. (b) ORIGINAL ASSET: capital asset being LAND used for AGRICULTURAL PURPOSES. Critical distinction: only land that is 'capital asset' under s. 2 (i.e., URBAN agricultural land within municipal-corporation / municipality limits OR within prescribed distance) qualifies. RURAL agricultural land outside scope of CG regime altogether (s. 2 exclusion); s. 83 not invoked because there's no CG to begin with. (c) USE REQUIREMENT: land used by ASSESSEE OR HIS PARENT OR HUF for AGRICULTURAL PURPOSES in 2 YEARS immediately PRECEDING transfer. The 'or his parent' inclusion captures inheritance scenarios; 'or HUF' captures family-property scenarios. (d) NEW ASSET: ANY OTHER LAND for AGRICULTURAL PURPOSES. Note: new land may be RURAL agricultural land (outside CG scope) -- the exemption still applies. May be situated anywhere in India. (e) WINDOW: 2 YEARS AFTER date of transfer. Note: NO 1-year-before window (unlike s. 82) -- only post-transfer purchase qualifies. MECHANICS (sub-s. 1(i)/(ii)): (i) CG > cost of new land: excess chargeable u/s 67; new asset cost = NIL for 3-year claw-back; (ii) CG <= cost: no charge; new asset cost reduced by exempt CG. CGAS DEPOSIT (sub-s. 2): standard CGAS-88 framework. UTILISATION FAILURE (sub-s. 4): unutilised at 2-year expiry charged in expiry year.

CASE LAW

(i) CIT v. T.K. Dayalu (Kar HC) -- 'used for agricultural purposes' liberally construed; cessation of cultivation immediately before transfer due to imminent sale doesn't disqualify. (ii) CIT v. K.S. Yadav (Bom HC) -- 'parent' includes adoptive parent; usage by adoptive parent qualifies. (iii) ITAT decisions on parent-vs-grandparent: only PARENT (not grandparent) qualifies. (iv) CIT v. Gopal Saran Lal (All HC) -- HUF land use by karta for agriculture qualifies. (v) CIT v. Smt. Janaki Doss (Mad HC) -- new land in rural area still qualifies despite being outside CG-asset scope.

PLANNING NOTES

(i) USE-EVIDENCE -- 7/12 / Khasra / Khatauni records / pahani extracts; village land records establish agricultural use. (ii) 2-YEAR PRE-TRANSFER USE -- continuous agricultural use; minor cessation just before sale typically tolerated (T.K. Dayalu). (iii) PARENT EXTENSION -- inherited land qualifies if parent used; document succession with mutation. (iv) NEW LAND IN RURAL AREA -- may be outside CG-asset-scope altogether; s. 83 still applicable for ORIGINAL transaction's exemption. (v) URBAN-FRINGE TRANSACTIONS -- common scenario; verify original land falls within s. 2 'capital asset' definition (within municipal limits / prescribed distance). (vi) CGAS DISCIPLINE -- standard before s. 263 due date; designated bank. (vii) 3-YEAR HOLDING LOCK -- DO NOT transfer new agricultural land within 3 years; cost-reduction claw-back.

CROSS-REFERENCES

Section 67 -- CG charge.
Section 70 -- Transactions not regarded as transfer.
Section 72 -- Mode of computation.
Section 82 / 86 / 87 -- Other reinvestment exemptions.
Section 84 -- Compulsory acquisition of industrial undertaking.
Section 263 -- Return-filing due date.
CGAS-88 scheme.
Section 2 -- Capital asset definition (rural agricultural land carve-out).

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