Section 83 — Capital gains on transfer of land used for agricultural purposes not to be charged in certain cases. Successor to s.54B of the 1961 Act.
Section 83 is in Chapter IV — Computation of Total Income, which runs from section 13 to section 95.
Sub-section (1) applies where an assessee, being an individual or a Hindu undivided family, has capital gains from the transfer of a capital asset being land which was used by the assessee, his parent, or the Hindu undivided family for agricultural purposes in the two years immediately preceding the date of transfer (the original asset), and has within two years after that date purchased other land to be used for agricultural purposes (the new asset). Instead of the gains being charged as income of the year of transfer, two outcomes follow: under clause (i), if the capital gains exceed the cost of the new asset, the excess is charged under section 67 and, for computing gains on a transfer of the new asset within three years of its purchase, the cost of the new asset is nil; under clause (ii), if the gains are equal to or less than the cost of the new asset, nothing is charged under section 67 and the cost of the new asset is reduced by the amount of the capital gains for computing gains on a transfer of it within three years of purchase.
Sub-section (2) covers the gap between the transfer and the purchase. Where the capital gains are not used to purchase the new asset before filing the return under section 263, the unutilised amount must be deposited in a specified bank or institution and used as per a scheme notified by the Central Government; the deposit must be made before filing the return and not later than the due date applicable to the assessee under section 263(1); and proof of deposit must be submitted with the return. Sub-section (3) treats the amount already used for the purchase together with the deposited amount as the cost of the new asset.
Sub-section (4) deals with failure to spend the deposit: if the deposited amount is not fully used to purchase the new asset within the period specified in sub-section (1), the unutilised amount is charged under section 67 as income of the tax year in which two years from the date of transfer of the original asset expire, and the assessee may withdraw that amount in accordance with the scheme.
An agriculturist who sells one field to buy another has not realised wealth in any real sense, and the section defers the charge for exactly that case. The two-year prior-use condition confines the relief to land actually farmed rather than held, the deposit machinery stops the relief being claimed on an intention to reinvest that never materialises, and the three-year cost adjustment means the deferred gain is recovered if the new land is sold quickly.
| What | Figure | The condition on it | Where |
|---|---|---|---|
| Period of agricultural use before the transfer | Two years immediately preceding the date of transfer | Use by the assessee, his parent, or the Hindu undivided family, for agricultural purposes | Sub-section (1)(a) |
| Window to purchase the new asset | Within two years after the date of transfer | Purchase of other land for being used for agricultural purposes | Sub-section (1)(b) |
| Cost of the new asset where gains exceed its cost | Nil | For computing capital gains on a transfer of the new asset within three years of its purchase; the excess of gains over cost is charged under section 67 in the year of the original transfer | Sub-section (1)(i) |
| Cost of the new asset where gains do not exceed its cost | Cost reduced by the amount of the capital gains | For computing capital gains on a transfer of the new asset within three years of its purchase | Sub-section (1)(ii) |
| Last date for the deposit of unutilised gains | Before filing the return and not later than the due date under section 263(1) | Where the gains are not used to purchase the new asset before filing the return under section 263 | Sub-section (2)(b) |
| Year in which an unutilised deposit is charged | The tax year in which two years from the date of transfer of the original asset expire | Where the deposited amount is not fully utilised for purchase of the new asset within the period specified in sub-section (1) | Sub-section (4)(a) |
The relief runs on three clocks and they are not the same. The land must have been used for agriculture in the two years before the sale; the new land must be bought within two years after it; and the new land must be held for three years or the deferred gain comes back through a nil or reduced cost. The deposit deadline is tighter than the filing deadline it is attached to: sub-section (2)(b) requires the deposit before filing the return and in any event not later than the due date under section 263(1), so a late return does not buy extra time to deposit, and proof of deposit has to travel with the return. Where the deposit is not spent, the charge does not fall in the year of the failed purchase but in the year the two-year window expires, under sub-section (4)(a). Note that the relief is available only to an individual or a Hindu undivided family — a firm or company selling farmland is outside it — and that use by the assessee's parent counts, but use by a grandparent or a sibling does not.
An individual sells land he had farmed for the preceding two years, in November 2026, realising a capital gain of Rs. 60 lakh. In March 2027 he buys other agricultural land for Rs. 45 lakh. Under clause (1)(i), Rs. 15 lakh is charged under section 67 and the new land carries a nil cost if he sells it within three years. Had he instead bought for Rs. 70 lakh, nothing would be charged and the new land's cost for a sale within three years would be Rs. 10 lakh. If he could not buy before filing his return, he would have had to deposit the unutilised Rs. 60 lakh under the notified scheme by the section 263(1) due date and file proof with the return; anything left unspent by November 2028 is charged in that year under sub-section (4)(a).
You meet this section in the capital gains schedule of the return and in the proof of deposit filed with it under sub-section (2)(c), and again as an addition in a later assessment where the Assessing Officer charges an unutilised deposit under sub-section (4) or recomputes the gain on a quick sale of the new land.
has, within two years after that date, purchased any other land for being used for agricultural purposes (new asset)
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
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)
See the full 1961 to 2025 concordance.
See the circulars index.