What will be the capital gain on sale of agriculture land?
Someone Asked on Yahoo Answer-replied by me on 26/10/06
I am selling agricultural land in Haryana and reside in Delhi,the receipts i understand are tax free.I seek advice to ensure that proper documentation is done/proper process is followed to ensure income tax hassles now or later on.I want to show actual receipts,an all white transaction.The seller agrees to pay me through bank draft but wants to show lesser price at the time of registration of sale to pay lesser stamp duty.Please advice .
1.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 …”
So, if you see that your land is TRULY agricultural land , the sale proceeds is NON taxable.
2. The second point to remember , which is necessary only if the land in question is not AGRICULTURAL . Then the question of capital gain comes into play . Then , you should know that Value adopted by the Stamp Valuation Authority can be taken as sales consideration IF the same is MORE than the value of sales shown by you.this is on account of Section 50C of the I T Act which was introduced from FY 2002-03 .
On that case , you should also know other ways of saving taxes on capital gain which is given in I T Act.This way even if it becomes taxable, you can still save on tax and shall be free of -so called hassles perceived by you. Section 54B provided scheme to save capital gains tax specifically on sale of agricultural land which is subject to capital gain tax. Further Section 54EC and 54F provides relief if you invest in bond or residential house as per the conditions set in the respective provisions of the I T Act.
What will be the case if a land is not agricultural land but it is situated more than 8 KM from the municipality. Will it be considered as the agricultural land?
Agriculture Capital Gains