Property sale purchase clarification
GAURAV
(Querist) 15 August 2012
This query is : Resolved
Sir, I have sold my agricultural land & now I want to purchase house & agricultural land with that money. I want to seek guidance/clarification for the following points:-
1. The amount received is income tax free or not?
2. Is there any rule that if I don't purchase land within some time limit then the said Principle amount will become taxable after expiry of that specified period.
3. If with that money I purchase land in the name of my wife or minor children , Is it legal or not?
4. Can I gift this amount to my wife by simply transferring the said amount in her bank a/c from my bank a/c. or some gift deed type documentation is required for the same?
A V Vishal
(Expert) 15 August 2012
The sale of agricultual land is not taxable if certain conditions are satisfied, your query lacks the required information.Agriculture land in rural area is not covered in definition of Capital asset hence no capital gain is applicable in case of sale of agriculture land in rural area .However capital gain tax is applicable if land is situated in urban area.
GAURAV
(Querist) 15 August 2012
Dear AV VISHAL Sir, What more information is required?
A V Vishal
(Expert) 15 August 2012
Location of the agricultural land is most important.
A V Vishal
(Expert) 15 August 2012
LAND qualifies to be agricultural land if it is not situated 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 does not have a population of 10,000 or more according to the last preceding census which has been published before the 1st day of the previous year in which the sale of land takes place, and it is not situated less than eight kilometres from the local limits of any municipality or a cantonment board.
If, by the test above, the land is agricultural land, it will not form part of the definition of a capital asset and so there will be no capital gains on the sale of such land.
Agricultural land not forming part of the above will be a capital asset and sale of which will attract capital gains tax subject to Section 54B, which is explained below.
Section 54B - Capital gain on transfer of land used for agricultural purposes not to be charged in certain cases.
The agricultural land should have been used for agricultural purposes.
It must have been used either by the assessee or his parents in the two years immediately preceding the date on which the transfer of land took place.
The assessee should have purchased another land, which is being used for agricultural purposes, within a period of two years from the date of sale.
The whole amount of capital gain must be utilised in the purchase of the new agricultural land. If not, the difference between the amount of capital gain and the new asset will be chargeable as capital gains and the tax will be computed accordingly.
The new asset purchased should not be sold within a period of three years.
If sold, the cost of the new asset will be reduced by the amount of capital gain for the purpose of computing capital gains tax.
Where the amount of capital gain is not utilised by the assessee for the purchase of the new asset before the due date of furnishing his return of income, he may deposit it in the Capital Gains Account Scheme (CGAS) of any specified bank.
The return of income of the assessee should be accompanied by the proof of such deposit.
In such a case, the cost of the new asset shall be deemed to be the amount already utilised by the assessee for the purchase of the new asset together with the amount deposited in the CGAS.
If the deposited amount is not utilised for the purchase of the new asset within the specified period, then the unutilised amount shall be charged in the year in which the period of two years from the date of sale of the original asset expires.
GAURAV
(Querist) 15 August 2012
Dear AV VISHAL Sir, Thanks for reply. only one reply is pending that:-
Can I purchase land in the name of my wife or minor children with the said amount, Is it legal or not?
