Capital GainTax On Sale of Agriculture Land
Chintan
(Querist) 01 March 2010
This query is : Resolved
My grand father had acquired agriculture land before 1970 and is been transferred, inherited, to may father in 1975 and from him it was transferred on my name in 1995. Earlier this land was not fall within municipality limit, but now it have covered under the limit.I want to know whether or not the capital gain tax is applicable? if yes what is the rate?
if i will purchase agriculture land from the sales proceedings then what would be the tax liability.
Kindly let me know if any other tax implications on such transactions?
thank you
A V Vishal
(Expert) 01 March 2010
Not all agricultural land is TAX FREE . While sale of rural agricultural land is tax free ;
Urban Agricultural Land is not tax free. So , you should know when is the agricultural land is urban in nature.
This is defined in Section 2(14)(iii) as follows :agricultural land in India, not being land situated-(a) in any area which is comprised within the jurisdiction of a municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee, or by any other name) or a cantonment board and which has a population of not less than ten thousand according to the last preceding census of which the relevant figures have been published before the first day of the previous year; or(b) in any area within such distance, not being more than eight kilometres, from the local limits of any municipality or cantonment board .....
However, in case you do not fulfill the aforesaid conditions, the sale of such land shall result in long term capital gains on which you will have to pay tax . But there are exemption provided u/s section 54B ,54F and 54 EC which can be availed by you for reducing the tax or even exempting from payment of tax.
Vineet
(Expert) 02 March 2010
The Agricultural Land you have inherited falls within the definition of Capital Asset for the purposes of Capital Gains on transfer by virtue of it being within the municipal limits. Hence the incidence of long term capital gains arises on its transfer.
However, if the said land was being used for agricultural purposes within two years prior to the date of transfer, you can claim exemption from Capital Gain tax by investing a sum equal to the capital gains amount in another agricultural land within two years from the date of transfer.
The said exemption is provided u/s 54B of the Act. If you are unable to purchase new land before due date of filing reurn of income, the said amount needs to be deposited in a Capital Gains Account maintained with some specified banks.
Kumar Thadhani
(Expert) 03 March 2010
I do agree with expert MR vishal & Mr Vineet.
Chintan
(Querist) 03 March 2010
Thank you all
