How is income from sale of agricultural land or property taxed?

Income from sale of agricultural land is taxable under the head ‘capital gains’. As per Section 2(14) of the Income Tax Act, transfer of a capital asset situated in India results in capital gains which are taxable. However, if agricultural land situated in specified areas is compulsorily acquired and compensation is received, such compensation is treated as agricultural income exempt under Section 10(1). The Bombay High Court in Vinod S. Shetty v. ACIT (2006) held that sale of agricultural land results in taxable capital gains unless specifically exempted.