Sale of argiculture land
meeranaineshmehta
(Querist) 13 July 2017
This query is : Resolved
Is the amount received on sale of part agriculture land taxable.
Rajendra K Goyal
(Expert) 13 July 2017
Agricultural land in Rural Area in India is not considered a capital asset. Therefore any gains from its sale are not taxable under the head Capital Gains. For details on what defines an agricultural land in a rural area.
*Definition of Rural Area – from AY 2014-15 – Any area which is outside the jurisdiction of a municipality or cantonment board having a population of 10,000 or more is considered Rural Area, if it does not fall within distance(to be measured aerially) given below – (population is as per the last census)
2kms from local limit of municipality or cantonment board
-- If the population of the municipality/cantonment board is more than 10,000 but not more than 1lakh
6kms from local limit of municipality or cantonment board
-- if the population of the municipality/cantonment board is more than 1lakh but not more than 10 lakh
8kms from local limit of municipality or cantonment board
-- If the population of the municipality/cantonment board is more than 10lakh
Kumar Doab
(Expert) 13 July 2017
You can benefit from the inputs provided by Mr. Rajendra K Goyal.
T. Kalaiselvan, Advocate 
(Expert) 18 July 2017
Capital gain on sale of agriculture land is exempt if land is situated in rural area.
Land is agriculture in rural if:
Land situated in area within municipality or juridiction where population is less than 10000.
Where distance of land from municipality and populaiton limit is as under:
Distance from municipality
Population
Within 2 kilometers 10,000 to 1,00,000
2 km to 6 km 1,00,000 to 10,00,000
6 km to 8 km
More than 10 lakhs
Such distance should be decided as per distance on straight line aerially as crow file.
When agriculture land is held as stock in trade ( The assessee has business of selling and purchasing properties like land, plot etc. ), capital gain tax will not be applicable but the profit should be charged as business income under head of ‘ profit and loss from business or profession’ head.
DEDUCTION U/S 54B:
This deduction is available to reduce capital gain for transfer of agriculture land.
The deduction is available to individual or HUF only.
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.
The capital gain received on this transfer should be invested in another agriculture land within 2 years from the date of transfer.
The asset should be held by assessee for 3 years from the date of purchase. ( lock in period).
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.
