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.
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.
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.
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