Capital Gains on Agricultural Land

March 16, 2009

Capital Gains, Income Tax

In my previous article I have written about the basics of capital gains and how the capital gains are taxed. That is only the basics and many scenarios will arise when you are facing it in the real life. In this article I will be writing about the capital gains related to selling the agriculture land. There is special case while you are selling the agriculture land. If you have any doubts please post it in the comments section. Also you can subscribe to our future articles here.

Is agriculture land capital asset?

As we know the capital gains are applicable only when you are selling the capital assets. When you are selling the agricultural land, first you have to decide if it is falling under the capital assets, if  it is capital assets then you have to pay the tax for the capital gains as we mentioned in this article.

  • The following points are important to consider while deciding whether the agricultural land is coming under the capital assets:In any area which is comprised within the jurisdiction of a municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee, or by any other name) or a cantonment board and which has a population of not less than ten thousand according to the last preceding census of which the relevant figures have been published before the first day of the previous year ; or
  • In any area within such distance, not being more than eight kilometers, from the local limits of any municipality or cantonment board referred to in item (a), as the Central Government may, having regard to the extent of, and scope for, urbanization of that area and other relevant considerations, specify in this behalf by notification in the Official Gazette.

In simple terms the above statement means,

If the land is situated under municipalty area where the population is above 10000 or the distance from the municiplaty to the specified land is less than 8 KM, then the land is not agricultural land.

Tax on Agricultural Land

Once if the above conditions met, you have decided that the land is agricultural land. Then you need not pay any tax for the sale on your agricultural land. The profit from the agricultural land is completely tax free. Because the land is not falling under the capital assets as the law defines the acpital assets.

Update:

In nut shell , one can claim exemption form capital gains on Sale of Agriculture Land by buying Agriculture land if the agricultural land which was was being used by the assessee or a parent of his for agricultural purposes at least two years preceding the year in which transfer of the land took place   if

the assessee has, within a period of two years after that date, purchased any other land for being used for agricultural purposes, then, capital gain to the extent utilised for buying the new agriculture land shall be given.

Summary

In this article I have written about the special case on dealing the capital gains for agricultural land. In my future article also I will be coming up with some interesting facts on the capital gains. Thank you for reading the article!!! Please post your comments in the comments section.

You can subscribe to our future article here.

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89 Responses to “Capital Gains on Agricultural Land”

  1. Gaurav Mittal Says:

    Dear;
    I had the agriculture land which has been transffered to me before 30 yrs back from my parents.I am selling it to different customers in bits & pieces as nobody can take the complete land in one single shot.

    1) Currently I am transfferred small area of land to three different customers.Whether i had to pay the CGT for the same?
    2) What are ways thru which we can be excepmted from the same?Pls help.

    Rgds
    Gaurav Mittal.

    Reply

  2. rajesh khandelwal Says:

    dear sir
    thanks for the information
    i have invested the entire amount of surplus received in agricultural land …………but i had never cultivated the land i sold and i do not have any certificate of its sowing …….can i still get the benefit under capital gain ???
    please guide…………thanks again

    Reply

  3. KK Jha Says:

    My father-in-law has only one issue and she is his daughter. I am her husband. Father and mother in laws are dead. I am holding the power of attorny of my wife. I have sold the agriculture land which do not fall in municipal area worth Rs. more than 15 lacs . (1) If I do not puchase any land, will I have to pay tax? (2) If I purchase land in municipal area, Will I be exempted from income tax? Let me know the tax details on the sale of agriclture land. thanking you …KK Jha.

    Reply

  4. U A SATISH Says:

    I will like to know whether any document will be required to prove that the land is agricultural to get exemption from capital gains tax.

    Reply

  5. Prasanta Banerjee Says:

    Excellent article.
    Request you for a clarification.
    What is the TECHNICAL difference in definition of agricultural land, farmland, horticulture land, botanical land/gardens and forest/wood from an ownership point of view?

    Reply

  6. Prasanta Banerjee Says:

    Excellent Article.
    Request one clarification
    What is the TECHNICAL difference from the ownership perspective among the following types of lands-
    1.Agricultural land
    2.Horticulture land
    3.Farmland
    4.Botanical garden or land
    5.Forest or wood

    Reply

  7. Biren Says:

    I have purchased agriculture land at adalaj in may 09 & sale in nov 2011. What is the tax liability?

    Reply

  8. VIRUPAKSHA.N Says:

    Sir, My brother purchased Ag.land in lohegoan village at 2008 Aug, rs. 10 lakh which coming under buffer zone… basically it is agri land, but the PMC Proposel to govt. to decide this area as NA… It is under progress… If we sell the property belongs this area is coming under capital gain or not… pls. give me u r opinion

    Reply

  9. vishal shah Says:

    i got agriculture land by the way of herritage and now i have sold it did i eligible for the capital gain and if yes then in how many years i have purchase a new property for exemption of capital gain

    Reply

  10. Manohar Shinde Says:

    Kindly confirm, is it mandatary to do agriculture activity on land situated beyond 8 K.M. from Municipalty to prove the said land was Agriculture land & not covered under Capital Assets u/s 2(14) of Income Tax Act? If any case law on the same, kindly mail.

    Reply

  11. Atul Patel Says:

    Sir,

    We got the agriculture land from my grand mother she got from his brothers who has no kinda now this land transfer to my father & others 4 members and it is sold today in Nadiad city it is in municipal area but it is agricultural land till sold.

    now please give me calculation of tax on it.
    give me special formula to calculate it.

    Atul Patel

    Reply

  12. sahapasu Says:

    an agricultural property in urban area in pune, Maharashtra falling in agricultural zone bought in 1996 by my uncle has been given for development in 2002 by p.o.a & development rights. but the transaction is still incomplete. the builder has yet to pay 30% amount of the consideration mutually agreed upon at that time. on revenue records the property still stands in my uncle’s name. he had heard that u r not liable to pay capital gain until the transaction is not completed in all respects. can u guide me as to how this should proceed further as far as long term capital gain is concerned?

    Reply

  13. Raj Tolani Says:

    If I purchase a Agriculture Land outside limit of Municipality and in village where population is less than 10000, So what will be consequence if the same agriculture land is sold in three months.

    Reply

  14. DEEPAK Says:

    LAND IN

    Reply

  15. goswami Shailesh Says:

    I wants to know the following issues raise in my mind related to agriculture land.

    1. How I can consider the Municipality Limit of the Agriculture land, what is the base for calculation of the 8 kilometer of the municipality.
    2.If I Purchase agriculture land outside the municipality limit of 8 kilometer and sale it within a period of Six month of Purchase then what is the effect of that and under which head I can calculate Tax Liabilities.
    3.What about the Taluka whether it should be consider for calculating municipality limit of 8 kilometer or only city is consider for calculation of Municipality.
    4. what is the meaning of 10000 population in town, if town outside the municipality of more than 8 kilometer then whether it should be consider or not for LTCP Liabilities.
    Pl Clear the matter.

    Reply

  16. aditya abhay kothari Says:

    we have sold our agricultural land used for agricultural purposes before sale situated in gram panchayat away from municipality area approximately 1kms…..whether it is taxable under long term captital gain ……plzzz give ur feeds soon…thank you

    Reply

  17. VISHAL AGARWAL Says:

    Dear Sir,
    My uncle is selling his inherited agriculture land which now has come in urban , still farming is being done till date and lagaan is also deposited every year. If he sell it now how much tax he has to give bcoz he is ready to give tax .

    Reply

  18. Ravi Shankar Agrawal Says:

    Dear Sir,

    The Govt. has compulsaraly aquired our agricultural land situated around 13 Kms away from ny municipal limits and the population of the village is just 1265 person as per last sensus, should i pay LTCG on compensation received amount, please let me inform, Thanx

    Reply

  19. D SUNDAR Says:

    useful. But, most of the times, the buyer would like to give part of the money mentioned in the sale deed. Then, can we insist the real value to be on the sale deed? Does it attract any problems to buyer?

    Reply

  20. j m bharadia Says:

    Dear sir
    my land has been aqqierd by MIDC in return they are giving 15%
    of industrial plot after salling the land do i have to pay income tax on the ammount if yes pleace sand the email

    Reply

  21. vishnu tendolkar Says:

    if i sale agricultural land then it is liable to pay capital gain tax on that or not.
    agricultural land purchased on 2 years before then taxability?
    agricultural land purchased on 1 years before then taxability?
    agricultural land purchased on 3 years before then taxability?

    Reply

    • Arun Kumar Says:

      If it is a urban agricultural land then you have to pay capital gains tax @20% subject to period of holding of the asset. If the asset is purchased before 3 years then you have to pay long term capital gains @20%. If the asset is purchased below the 3 years then you have to pay tax as per normal rates applicable to the individuals. The short term capital gains tax will not apply to it since it is not shares. it is my opinion only.

      Reply

  22. Vishal agarwal Says:

    Sir my uncle sold his ancestral agriculture land in agra which is his village. Village has gram pradhan and panchayat no other facility is given like city gets . Uncle being told by some people if the area is not notified in Offically Gazette by central Govt and also coming within 8km area. then he don’t have to pay Long Term Capital Gain Tax . Pls tell me is it true and how he will come to know that that his village is notified or not or Officially Gazetted by Central Govt. His agriculture land is in Agra Dehtora village still agricultre is being done till date and Lagaan also paid till date. Can u do me a favour wether his land is notified or not or source from where he can know about this.

    Reply

  23. SUNIL JAIN Says:

    If I purchase a Agriculture Land outside limit of Municipality and in village where population is less than 10000, So what will be consequence if the same agriculture land is sold in 15 months.

    Reply

    • Arun Kumar Says:

      In my opinion it will not be taxed under the head capital gains because it is not a capital asset u/s. 2(14). But you have to pay tax on profit on sale of land i.e. sale price less purchase price on the rates prescribed by the govt.

      Reply

      • anil jain Says:

        I don’t agree with your opinion.The land will not be covered by the definition of capital asset.By virtue of this being not a capital asset it will not attract any capital gains tax.

        Reply

    • anil jain Says:

      Since the said land does not fall under the definition of capital asset there will be no tax liability on capital gain if such asset is transferred for consideration.

      Reply

  24. Amol Says:

    Sir I had sold a Agri land to the Pvt Ltd Company

    Land is not situated with in the Municipal limit and not with in the 8 km from any municipal area BUT SITUATED IN A VILLAGE HAVING POPULATION OF MORE THAN 10000

    PLZ SUGGEST ME WHETHER IT IS RURAL AGRI LAND OR URBAL AGRI LAND

    Reply

  25. kanwal juneja Says:

    My question is ;

    I have purchased agricultural land which is beyound 10 km from muncipal are in january 2011 and i am getting handsom amout if i sell the sale.
    In short agricultural land is short term less than 3 years in hand although agricultural income is being shown and accepted by the department. My question is;
    On sale the difference will be taxable ? or

    On sale if I but new agricultural land beyound 10 km again with out of sale proceed in six months then what shall be the position of its taxability

    Reply

  26. YOGI Says:

    Hi Krishna,
    please clarify me, this 8 km distance is from the limits of municipality area or from the municipality building itself? It would be helpful and I would be grateful if you please present it in a diagram so that many confusing issues can be addressed at hand.

    Regards
    Yogi.

    Reply

  27. kulwinder Says:

    DEAR SIR WHAT IS THE EXEMPTION LIMIT ON THE SALE OF AGRICULTURE LAND AND IF THE SAME AMOUNT OR SALE VALUE ARE INVESTED IN ANOTHER PROPERTY…… THAN WHAT IS EXEMPT FROM TAX INVESTMENT VALUE OR SALE VALUE OR SURPLUS AFTER DEDUCT SALE-PURHASE

    Reply

  28. Umesh jain Says:

    Excellent

    Reply

  29. John thomas Says:

    My agricultural land is a capital asset by definition, held for 30 yrs, what are the options available on sale of this property. Buying agricultural land is expted 2. Can you buy capital asset or land to construct asset to avoid capital gain.

    Reply

  30. Juliet Says:

    I’m pretty pleased to find this great site. I wanted to thank you for ones time just for this fantastic read!! I definitely really liked every bit of it and I have you saved to fav to see new information in your website.

    Reply

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