Capital Gain (Income Tax)
hitesh
(Querist) 18 December 2010
This query is : Resolved
If some one sell Agriculture land in the plots will it be eligible for exemption u/s 54B. If Yes then tell me the method to save tax
Further whether selling the land in plots will be treated as business income or capital gain.
A V Vishal
(Expert) 18 December 2010
If some one sell Agriculture land in the plots will it be eligible for exemption u/s 54B. If Yes then tell me the method to save tax
Ans. Agricultural land cannot be sold as plots, so it must have been converted to N.A land before selling hence no question of exemption for sale of agricultural lands arises.
Further whether selling the land in plots will be treated as business income or capital gain.
Ans. The circumstances has to be considered to reply to this question since plotting is done and sold to different parties it can be treated as business since it is in the nature of adventure and taxed as business income.
On how to save taxes you need to consult your auditor or tax consultant.
SANJAY GUPTA
(Expert) 18 December 2010
agree with Mr. Vishal
Vineet
(Expert) 23 December 2010
You can still avail benefit u/s 54B by creating an intermediary. Sell the Land used for Agricultural purposes (I am deliberately not using term Agricultural Land which has a different connotation under Income Tax Act and no capital gains chargeable on transfer of such agricultural land), to an intermediary say partnership firm and avail benefit u/s 54B. This would however attract stampt duty.
The other method to avail exemption u/s 54B is by converting this land as stock in trade of the propreitorship concern of the owner at fair market value. No stamp duty. Conversion chargeable to Capital Gains tax u/s 45(2) of the Act in the year in which actual sale of plots happen. Avail exemption u/s 54B by purchasing another land used for agricultural purposes within two years from such date of transfer.
Let the said firm/ propreitorship get this land converted into NA and sell non agricultural plots. Even if selling as farmhouse plots, the activity shall be viewed in the nature of trade and commerce. Once taxed under the Head Business and profession no further exemption is available whether plots are sold as farm plots or NA plots.
