Sale of agriculture land - tax rules


Hello, I have sold an Agriculture land in Jaipur- (Rajasthan). And was told i had to keep the sales amount in bank for 3 years before i could use the amount. Now that 3 year time is approaching, i would like to know if there is any tax, on this amount i would be withdrawing. Some friends have told me i HAVE to buy another LAND with this amount, or would be charged 30% Tax. Or please forward me to any pages that describe the same. Thanks! Mike
 
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Lawyer

Mike what kind of property it is? self acquired or ancestral?


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CEO

Under  the following limited circumstances Agricultural land is taxable and in all other cases it is  not taxble.Let Us examine what those limited circumstances are and whether  by sale of  agricultural land capital gains are generated and if so how to save them.If you appreciate this answerplease click the thnak you button on this forum.

How to save tax on Capital Gains on Sale of Agricultural Land

By on December 24, 2014 in Capital Gains, Tax Saving

Many users write to us to find out how they can save tax on capital gains that arise when their parents sell agricultural land or when they sell agricultural which they inherited. Let’s take a look at what are the exemptions available on capital gains on sale of agricultural land.

In some cases, when you sell Agricultural Land – it may be entirely exempt from income tax or it may not be taxed under the head Capital Gains

  • 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, see details of capital assets here.
  • Do you hold agricultural land as stock-in-trade? If you are into buying and selling land regularly or in the course of your business, in such a case, any gains from its sale are taxable under the head Business & Profession.
  • Under Section 10(37) of the Income Tax Act, Capital Gains on compensation received on compulsory acquisition of urban agricultural land is exempt from tax.

If you want to know how to compute your gains – read here. If you have inherited this land, your capital gains will be calculated like this. Don’t forget to reduce these expenses from the sale price.

When you have sold an agricultural land which does not meet any of the above exemption criteria, here are the conditions you need to meet under Section 54B for claiming exemption from Capital Gains

  • The exemption is available to an Individual or an HUF.
  • The land which is being sold must have been used for agricultural purposes by the individual or his parents or by the HUF for a period of 2 years immediately before the date of transfer.
  • Another land for agricultural purpose should be purchased within a period of 2 years from the date of transfer of this land.
  • The new agricultural land which is purchased to claim capital gains exemption should not be sold within a period of 3 years from the date of its purchase.
  • In case you are not able to purchase agricultural land before the date of furnishing of your Income Tax Return – 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.
  • If the amount which was deposited as per Capital Gains Account Scheme was not used for purchase of agricultural land – it shall be treated as the capital gain of the year in which the period of 2 years from the date of sale of land expires. Of course, in this case you can withdraw these amounts for any use you may want.

Amount of Exemption

  • If the cost of the new agricultural land purchased is more than the amount of capital gains, entire capital gains are exempt.
  • If the cost of the new agricultural land purchased is less than the amount of capital gains, Capital Gains less cost of the new agricultural land = capital gains chargeable to tax

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@adv.bharat The land was bought by myself.

@Mrs Usha,

- The Land is situated in Jaipur, RAJ. It would be in urban area, within JDA Jaipur.

- Stock-in-trade, also nope.

- Also not Inherited.

- Agriculture purpose, nope.

- Purchase of another Agriculture land, have not done so far, unless abolutely necessary.

Deposit capital gain deposit - Yes, we have done this. We deposit the total amount of Land sale in public sector bank. Now close to three years time is approaching, so would like to how to use the amount.

"Exemption can be claimed for the amount which is deposited."

Please explain how/ what i need to do for claming this?? Thanks!

 

 

 
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CEO

Buy another Agricultural land.or Farm House etc.


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Sale of Agricultural Land under the following circumstances also will not attract Capital Gains Yax.

1. Situated in a village with a population of less than 10,000.

2. Situated 8 Kms from the bprder of any miunicipality ot 32 Kms from the Metro.

3. Should have been used for Agricultural purpose for the previous 2 Years.

Also, Sec 54 B is allowed.

Consult an Auditor also.

You can easily Google search the relevent portions.


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Student

Originally posted by : Mike
@adv.bharat The land was bought by myself.

@Mrs Usha,

- The Land is situated in Jaipur, RAJ. It would be in urban area, within JDA Jaipur.

- Stock-in-trade, also nope.

- Also not Inherited.

- Agriculture purpose, nope.

- Purchase of another Agriculture land, have not done so far, unless abolutely necessary.

Deposit capital gain deposit - Yes, we have done this. We deposit the total amount of Land sale in public sector bank. Now close to three years time is approaching, so would like to how to use the amount.

"Exemption can be claimed for the amount which is deposited."

Please explain how/ what i need to do for claming this?? Thanks!

 

 

 

 

The total consideration of the sale amount has to be deposited in a capital gain account. Not in a saving back account. And that too have to be utilised for purchasing another agriculture land within 2 years of your sale which you have not done. So, the amount will be taxable now under Capital Gain only if the land has been put to agriculture use for atleast two years before selling.

 
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