Income Tax Act 2025: Section 83 for Tax Year 2026-27

Capital gains on transfer of land used for agricultural purposes not to be charged in certain cases

[Section-83 as per the Income Tax Act, 2025 (this Act) w.e.f. 1st April, 2026.]

Section 83(1) of Income Tax Act 2025

83(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.

Section 83(2) of Income Tax Act 2025

83(2) If the capital gains 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 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 the return on or before the due date of filing of the return.

Section 83(3) of Income Tax Act 2025

83(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.

Section 83(4) of Income Tax Act 2025

83(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 the unused amount according to the scheme referred to in sub-section (2).

FAQs on Section 83 of Income Tax Act 2025

What is Section 83(1) of the Income Tax Act, 2025 about?
Section 83(1) provides relief from capital gains tax in certain cases where an individual or Hindu Undivided Family (HUF) transfers agricultural land and reinvests in another agricultural land within a specified time.

Who can claim exemption under Section 83(1)?
Only individuals or Hindu Undivided Families (HUFs) can claim exemption under Section 83(1).

What type of land transfer is covered under Section 83(1)?
It covers the transfer of land that was used for agricultural purposes by the assessee or their parent, or by the Hindu Undivided Family, in the two years immediately preceding the date of transfer.

What is the time limit for purchasing new agricultural land to claim exemption?
The assessee must purchase new agricultural land within two years from the date of transfer of the original asset.

What happens if the capital gains exceed the cost of the new asset?
If the capital gains exceed the cost of the new agricultural land, the excess amount will be taxed under Section 67, and the cost of the new asset will be treated as nil for future capital gains calculation if sold within three years.

What happens if the capital gains are equal to or less than the cost of the new asset?
If the capital gains are equal to or less than the cost of the new asset, no capital gains tax will be charged under Section 67. However, if the new asset is transferred within three years, the cost will be reduced by the amount of capital gains for future tax computation.

What is Section 83(2) about?
Section 83(2) deals with the situation where the capital gains amount is not fully utilised before filing the income tax return and requires the amount to be deposited in a specified bank or institution.

Where should the unutilised capital gains be deposited?
The unutilised amount should be deposited in a specified bank or institution as per the scheme notified by the Central Government.

What is the deadline for making the deposit under Section 83(2)?
The deposit must be made on or before the due date applicable for filing the return of income under Section 263(1).

Is proof of deposit required?
Yes, proof of the deposit must be submitted along with the income tax return filed on or before the due date.

What does Section 83(3) specify?
Section 83(3) clarifies that the amount spent on purchasing new land along with any amount deposited under Section 83(2) will together be treated as the cost of the new asset.

What happens if the deposited amount is not fully utilised within the specified time?
If the deposited amount is not fully used to purchase new agricultural land within the prescribed period, the unutilised portion will be taxed under Section 67 in the tax year when two years from the date of transfer expire.

When is the unutilised deposit taxed?
It is taxed in the tax year in which the two-year period from the date of transfer of the original land expires.

Can the assessee withdraw the unused deposited amount?
Yes, the assessee can withdraw the unused amount in accordance with the scheme notified under Section 83(2).

What is the consequence of selling the new asset within three years?
If the new agricultural land is sold within three years, the cost of acquisition for computing capital gains will either be nil or reduced by the earlier capital gains amount, depending on whether the earlier capital gains were partially or fully exempted.

Is the exemption under Section 83(1) available for non-agricultural land?
No, the exemption is strictly for agricultural land used for agricultural purposes as specified.

Can companies or firms claim benefit under Section 83?
No, only individuals and Hindu Undivided Families are eligible under Section 83.

What happens if the assessee fails to deposit the unutilised capital gains by the due date?
Failure to deposit the unutilised amount by the due date would make the unutilised amount taxable under Section 67.

Is the scheme for deposit notified yet?
The scheme must be notified by the Central Government; the Act provides for the scheme but the exact details depend on government notification.