• Agriculture land sale

I have 3 acres of agriculture land in my home village in AP. I am planning to sell this off to meet financial emergency.

Does the sale invite income tax? Please help.

Thanks
Madhu Mattangi
Asked 7 years ago in Taxation

7 answers received in 1 day.

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8 Answers

Agricultural income is, therefore, exempt under income-tax laws. Profit on the sale of agricultural land is also exempt from capital gains under income-tax laws.

2) however if agricultural land that is located within municipal or cantonment board limits, where the population of the municipality/cantonment board is at least 10,000. The second is land which is within certain notified distance (which can be up to 8km) from the limits of notified municipalities/cantonment boards. in such case sale of agricultural land would be subject to cpaital gains tax

3)the capital gains would be exempt from tax if you purchase another agricultural land within period of 2 years

4) if at time of filing of income tax returns you are not able to purchase agricultural land the amount of capital gains must be deposited before the date of filing of return in the deposit account in any branch (except rural branch) of a public sector bank or IDBI Bank according to the Capital Gains Account Scheme, 1988. Exemption can be claimed for the amount which is deposited.

Ajay Sethi
Advocate, Mumbai
95168 Answers
7604 Consultations

5.0 on 5.0

Is the land rural? Rural agricultural land does not constitute a capital asset, hence capital gains tax is not levied on the sale of rural agricultural land irrespective of the value of the transaction.

Ashish Davessar
Advocate, Jaipur
30763 Answers
972 Consultations

5.0 on 5.0

Selling any proeprty attracts tax. In immovable property it is called Capital Gain Tax.

However the extent of tax can be reduced if you take help of a tax professional.

Devajyoti Barman
Advocate, Kolkata
22917 Answers
497 Consultations

5.0 on 5.0

1. Have you purchased the said property by paying the consideration for it or have inherited it from your parents?

2. If you have purchased the said property by investing yourself, then you shall have to pay Capital Gain tax (long term or short term depending on the period you are holding the property after buying) at appropriate rate to the I.Tax Department.

3. If the said property has been inherited by you, there is no investment from your side to earn any capital gain for which you won't have to pay any capital gain or any tax (other than wealth tax if the value of your total property crosses the prescribed limit) to the I.Tax department.

Krishna Kishore Ganguly
Advocate, Kolkata
27245 Answers
726 Consultations

5.0 on 5.0

1. capital gain tax is applicable on the sale price of the property but only when you utilise all that consideration or sale amount for a purpose other than invest in another landed property.

2. no other tax is applicable.

Shivendra Pratap Singh
Advocate, Lucknow
5127 Answers
78 Consultations

4.9 on 5.0

1. if you have retain that property for more than three years then you have three year time period to invest sale amount in another immovable property.

2. if you do so, no tax is applicable.

Shivendra Pratap Singh
Advocate, Lucknow
5127 Answers
78 Consultations

4.9 on 5.0

Hi

1) In order NOT to invite income tax, we need to ensure that your land meets with the definition of agricultural land as stipulated in Section 2(14) of income tax act and

2) Agricultural activities should have been undertaken in the property for at least 2 out of preceding 5 years.

3)Even assuming that your land does not meet the definition of agricultural land, there are many provisions under section 54 of income tax so as to delay/avoid paying income tax.

So you need to consult a lawyer/ chartered accountant to help you devise a plan to avoid tax.

Please find enclosed the provisions of income tax for determination of whether your land is agricultural land or NOT and provisions of Section 54 of Income Tax

1) As per section 2(14) of income tax, the agricultural land should not be located

a) In any area which is comprised within the jurisdiction of a municipality (whether known as 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 the distance, measured aerially,–

(I) Not being more than two kilometers, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than ten thousand but not exceeding one lakh; or

(II) Not being more than six kilometers, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than one lakh but not exceeding ten lakh; or

(III) Not being more than eight kilometers, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than ten lakh.

Explanation.—For the purposes of this sub-clause, “population” means the population according to the last preceding census of which the relevant figures have been published before the first day of the previous year;

As per above definition,following land is agriculture land in rural area and is not capital asset:

2) CAPITAL GAIN DEDUCTIONS AVAILABLE TO SAVE CAPITAL GAINS ON SALE OF AGRICULTURE LAND:

Following are the deductions for income tax saving on sale of agriculture land.

DEDUCTION U/S 54B:

a) This deduction is available to reduce capital gain for transfer of agriculture land.

b) The deduction is available to individual or HUF only.

c) The deduction is available if the land is used by the individual or his parents or HUF members for period of two years prior to date of transfer.

d) The capital gain received on this transfer should be invested in another agriculture land within 2 years from the date of transfer.

e) The asset should be held by assessee for 3 years from the date of purchase. ( lock in period).

f) If the assessee has transferred the asset within 3 years, capital gain exempted earlier should be used to reduce the cost of new asset while computing capital gain on sale of new asset.

DEDUCTION UNDER SECTION 54EC:

a) Section 54EC is available to reduce burden of long term capital gain. So if your agriculture land is long term asset means held by you for more than 3 years before sale, you can take benefit of this deduction.

b) The capital gain amount should be invested in bonds of NHAI and RECL within 6 months from the date of transfer.

c) The maximum investment amount is Rs. 50 lakhs.

d) The bonds should not be transferred within 3 years from the date of purchase. Addionally, you are not allowed to take any loan or advance on security of the bonds. If you breaks that condition, capital gain exempted earlier shall become taxable in the previous year when the bonds are sold or advane/loan is taken.

DEDUCTION AVAILABLE U/S 54F:

a) This deduction is available for long term capital asset other than residential house. So the deduction is available on transfer of land, jewellery, commercial property, agriculture land etc.

b) The deduciton is available only to individual or HUF.

c) To avail deduction, assessee should purchase residential house within 1 years before or 2 years after from the date of sale of land or he should construct the residential house within 3 years from the date of sale.

d) The assess should own only one house( except the newly purchased house) on the date of transfer of land.

e) The assessee can avail deduction in the proportion of cost of newly purchsed house which it bears to total long term capital gain.

f) The lock in period is 3 years so he is required to held the new house up to 3 years from the date of purchase/ construction. If he breaks this condition, capital gain exempted earlier shall be chargeable to tax in the year of transfer of new house.

Hope this information is useful

Rajgopalan Sripathi
Advocate, Hyderabad
2173 Answers
394 Consultations

5.0 on 5.0

The date of purchase of the property will be reckoned for computation of long term or short term capital gains.

any asset received as inheritance is fully exempt from gift tax but amount on sale of such asset is not exempted from tax. It will be taxable under the head capital gains.

The capital gains may be short term or long term depending on the period for which the asset was held. In case the inherited property is held for more than 36 months, it is considered as long term. While calculating the holding period of the house inherited by you, the period for which it was held by the previous owner is also to be added to your holding period.

T Kalaiselvan
Advocate, Vellore
85369 Answers
2231 Consultations

5.0 on 5.0

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