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M.V.GIRI (ADVOCATE & TAX CONSULTANT)     10 May 2010

SALE OF AGRICULTURAL LAND

Mr.X is running a business in the individual capacity. He has an agricultural land with farm house and he has shown in his balance sheet. It has purchased the same in the year 2007. Now he has sold for Rs. 10 lakhs. The cost of the asset was Rs. 5 lakhs. At present he has deposited in his SB a/c. How to save capital gain tax. Whether if he purchases any asset, can he claim exemption from capital gain tax. Otherwise if he deposited in the Housing Deposit Scheme account and claim exemption from the capital gain tax. The acquisition and sale period is less than 3 years. So it comes under short term capital gain tax.  Please reply.



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 8 Replies

A V Vishal (Advocate)     10 May 2010

Capital gain (or loss) is a profit (or loss) made while selling a capital asset.

Capital asset roughly means property – a house, an apartment, office space, factory, godown or a plot of land.

Agricultural land is not considered as a capital asset, unless it is situated within the limits of, or within 8 kilometers of a municipality.

AMIT BAJAJ ADVOCATE (ADVOCATE)     10 May 2010

Yes agricultural land is not considered as capital asset unless it satisfy certain conditions like situated within 8 kms of muncipal limits. If its a capital asset then no exemption from the STCG arising therefrom its sale can be claimed u/s 54, 54f, 54B, 54EC etc.

Surya Kannt (ADVOCATE)     12 May 2010

Yes agricultural land is not considered as capital asset

Vineet (Director)     13 May 2010

Agree with above. Please verify whether the Agricultural land and house appertenant thereto are "Capital Asset " or not as per test specified in section 2(14)(iii).

Saurabh Bansal (Tax Consultant)     13 May 2010

Kindly notice..

Exemption u/s 54B can availed if the agricultural land is used for atleast two years(not three years)

and hence exemption u/s can be claimed if the capital gain is invested within 2years from the date of sale..

         The only condition is that you have to invest he capital gain in any agricultural land only.....


Vineet (Director)     13 May 2010

Good Observation Mr Bansal.

Saurabh Bansal (Tax Consultant)     14 May 2010

Thankyou Mr. Vineet...

M.V.GIRI (ADVOCATE & TAX CONSULTANT)     21 May 2010

Thanks Mr.Bansal


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