Capital gain tax for Agriculture land applicable or not

Yes.  Any how agrl., land is also property.
 

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.
• In any area specified by the Government vide Notification NO. 9447, dated January 6, 1994 .

As, earlier discussed when an agricultural land is capital asset or not, that is the first step to calculate capital gain tax on agricultural land. So, if Agricultural land not forming part capital asset and sale of which will attract capital gains tax subject to exemption under 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.
• Exemption is not available to a Hindu Undivided Famiy (HUF) or any other taxpayer
• It must have been used either by the asses see 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.

Amount of Exemption –

The following of the lowest amount will be exempt -

• The amount of exemption under section 54B is equal to –
• The amount of capital gain generated on transfer of agricultural land; or
• The amount of invested in purchasing new agricultural land (including the amount deposited in the deposit scheme)

Consequences if the new agricultural land is transferred within 3 years –

• The amount of exemption given earlier would be taken back.

Capital Gain Deposit Scheme:

• 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..
• 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 Capital Gain Account Scheme.
• 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.

i agree with mr. vishal. You have to see the conditions prescribed in the act

Actually my land is agricultral land i have all the document which can support that is farming land

so it's not taxable under capital gain am i right

It depends where the Agrl/ Land is situated. Agrl. Land within certain limits, like with 8 Kms of Municipality, etc., is treated as Capital Asset. If such Agrl Land is sold there arises capital gain. Refer Section 2(24) of Income tax act. Further if the Agrl. Land within specified limita is sold and sale proceeds are invested in purchase another Agrl Land there is deduction for such investment.
 

Dear Khader,

If agricultural land is in Rural area then it is not a Capital Asset hence does not attract Capital gains.

my dad got notice from Income tax for the sale of agricultural land ,i have enclosed the letter with this kindly provide me adequate replay what to do ,actually the land situated in village where the population less than 1000 and also we have documents supporting the land is farming land so kindly provide what replay i have to give

Dear Khader,

Since the notice has been served to you which calls for the information you will have to contact/ visit IT office. notice does not necessarily meant that you will have to pay tax or it is notice for prosecution or penality. Take it like you ahve been asked to provide calrification on the return you had filed because the ITO is not able to understand certain item of your return.

What i could infer from the Notice is that ITO was expecting transaction of the sale of immoveable property (whether capital asset or not) which he did not find in your return.  

Based on the fact of the case provided by you (I presume you had filed the Return but didnot mention sale of Agricultural land): I can suggest you to reply which includes following points:

Yes there was a sale of Agricultural land on ... (date). You filed the return keeping in the mind definition of Capital Assest as defined in the sec. 2 (14) which does not included Agricultural land (sec 2 (14) (iii).

for your reference:

2 (14)  “capital asset” means property⁴² of any kind held by an assessee, whether or not connected with his business or profession, but does not include—

i)

ii)

iii)agricultural land in India, not being land situate—

      (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 referred to in item (a), as the Central Government may, having regard to the extent of, and scope for, urbanisation of that area and other relevant considerations, specify in this behalf by notification in the Official Gazette

Since Agricultural land is not a Capital asset hence any gain arising from the sale of property which is not a Capital Assest does not attract tax on such Capital Gain/ loss.

hope this will help you.

VK Dwivedi

sir, my dads only occupation agriculture he has not filled any returns,what replay my dad can give to ITO

we have all the supporting documents for proving the land is farming land(agriculture land ) we have sitta document which states that past 20 years we are doing farming,also in that village only 400 -500 population

and its 10km away from municipality

Dear Khader,

Do not panic. You are looking to be at safer side.

Agriculture income is exempt [U/s 10 (1)] under the Indian Income Tax Act.

This means that income of your father from Agriculture cna not be Taxed.  If your Father's total income is less than maximum exemption limit then he is not subject to tax. Provided you can show the land was used for cultivation.  However while computing tax on non-agricultural income agricultural income is also taken into consideration.

The reason for exemption of agriculture income from Central Taxation is that the Constitution gives exclusive power to make laws with respect to taxes on agricultural income to the State Legislature.

It is not clear from your query, does your father has any other income or not. (I presume Agricultural income is the only source) In your reply you can mention that since the income from Agriculture is exempt from Income tax U/s 10 (1) so also the gain from sale of Agricultural land not cover covered u/s 2(14)(iii). since it is not a capital asses

Hence the filing of Income tax return u/s 139 (1) does no arise so your father did not file return.

I'would advice you to consult some advisor at your city and discuss the entire fact of the cases. My advice is based on the fact mentioned in your query, Also my consultation can not be refrred at any official represention as i am in Job/ Service and not a practicing Chartered Accountant.

Hope this will help you.

VKDwivedi

thanks for valuable replay

I am selling my agricultural land and the buyer will convert it to non-agriculture land and sell plots.  The buyer has proposed to pay some advance and balance within 24 months, in the meanwhile he wants to start developing (i.e., get all approvals for plots and enter in to “agreement to sell” with plot buyers).  The village population is less than 10,000 but the land may fall within 8 KMs of the municipal limit (Need to confirm).   

I see 2-3 scenarios and need guidance on how to structure this agreement in a safe & tax efficient manner in each of these scenarios.    

1.     If the land is outside 8 Kms of municipal limit and I do a sale deed before converting to NA then I am assuming no capital gain tax is applicable.

2.     Even if the land is outside 8 Kms of municipal limit BUT the buyer wants to convert the land to NA and then he asks me to directly make the sale to his customers for the plot, then is there a way for me to structure the deal to avoid taxes.

3.     If the land is within 8 Kms of municipal limit and buyer wants to convert the land to NA and then he asks me to directly make the sale to his customers for the plot, then is there a way for me to structure the deal to avoid taxes.