INCOME TAX ON SALE OF AGRICULTURAL LAND

By Accommodation Times News Service

By CA VIMAL PUNMIYA

Amendment in definition of Agriculture land By Finance Bill-2013-14

By the provision of “Sec.2(14) Capital Asset”, Rural agriculture land was exempt from capital gain. For being rural agriculture land, land must be satisfied certain condition laid down in section 2(14).The Finance Minister amended this conditions through Finance Bill 2013-14. For, Simplicity we discuss effect of this amended in two part.

  1. Criteria for being rural agriculture prior to 01/04/2013
  2. Criteria for being rural agriculture after to 01/04/2013

Criteria for being rural agriculture prior 1-04-2013:

Prior to 01/04/2013 this section are applicable:

2(14)(iii) [Agricultural land in India, not being land situate-

(a) 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

(b) in any area within such distance, not being more than eight kilometres, 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;]

Thus, if these conditions are satisfied than land will agriculture land.

  • Land is situated in any within the jurisdiction of a municipality or a cantonment board having population of less than 10000.
  • Land is situated outside the notified distance from jurisdiction of municipality. Govt. can notified maximum distance of 8Km.

If this condition was satisfied than land is rural agriculture land. And not liable for capital gain tax.

How to measure distance was not given in the definition. Therefore it was taken by road. And same view was followed in following judicial pronouncement.

(1) CIT V.LAL SINGH [2010] 195 TAXMAN 420 (PUNJ. & HAR.)

(2) CIT V. SANTINDER PAL SINGH  [2010] 188 TAXMAN 54 (PUNJ. & HAR.)

(3) LAUKIK DEVELOPERS V. DY .CIT [2007] 105 ITD 657 (MUMBAI)

Criteria for being rural agriculture After 1-04-2013:

After  01/04/2013 this section are applies as follow:

As Per Section 2(14 )” capital asset” means property of any kind held by an assessee, whether or not connected with his business or profession, but does not include-

(iii)  Agricultural land in India, not being a land situated-

a)    In any area which is comprised within the jurisdiction of a municipality (whether known as 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

b)    In any area within the distance, measured aerially,

(I)           Not being more than two kilometers, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than ten thousand but not exceeding one lakh; or

(II)          Not being more than six kilometers, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than one lakh but not exceeding ten lakh; or

(III)        Not being more than eight kilometers, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than ten lakh.

Explanation.—For the purposes of this sub-clause, “population” means the population according to the last preceding census of which the relevant figures have been published before the first day of the previous year;

Thus, This condition is satisfied than agriculture land will be rural agriculture and accordingly not liable for capital gain tax.

  • Land is situated in any within the jurisdiction of a municipality or a cantonment board having population of less than 10000.
  • Distance of land from municipality  and population limit.
Distance Population
Within 2 kilometers 10,000-1,00,000
2 kilometers – 6 kilometers 1,00,000-10,00,000
6 kilometers – 8 kilometers More than 10,00,000

The distance from the Municipal Corporation measurement:

Such distance is to be measured on straight line aerially as crow flies. The shortest aerial distance has to be considered. Such shortest aerial distance is defined as “A straight line distance between two places.’’ A human would travel further to get from one point to another due to obstacles or lack of roads or trails, but a crow can go in a straight line between them. Humans have to follow roads which have their twists and turns. But, a crow does not have to face the barriers that humans face. Hence, we measure the straight line distance between two places.

“the distance as the crow flies is a way to describe  the distance between two locations without considering all the variable factors. As an example, traveling from California to maine involves a rather indirect route around, over and through mountain ranges and so forth. The driving distance might be about 3,500 miles, but the distance as the crow flies is about 2,800 miles.

Human                                                            By road

Crow’s flight                   straight line distance (aerial measurement)

These amendments will take effect from 1st April, 2014 and will, accordingly, apply in relation to assessment year 2014-15 and subsequent assessment years.

Effect of the amendment

a)    Distance from jurisdiction or municipality or cantonment board within which agricultural land is to be considered as urban land has been changed from uniformly 8 kms to within 8 kms depending on population of municipality or cantonment board .

b)    Distance to be measured straight line aerially as crow flies and not by road method which was used by courts in various decision. This amendment overcomes above court decisions which say that distance should be measured by road.

c)    More land will be covered under the urban land because aerially distance covered more area.

d)    Earlier only notified area were covered under the distance criteria but from now any area will covered under the distance criteria.

e)    Impact on Wealth Tax

The term agricultural land is not defined in Wealth tax act. However, it is defined in Section 2(14) of the Income tax Act. The definition for non-urban land and agricultural land is similar. Hence the above analysis will also be applicable for the purpose of determination of net wealth as per the wealth tax act. Thus a person owning land will need to re-assess on whether the land owned by him will qualify for exemption from wealth tax or not.





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49 thoughts on “INCOME TAX ON SALE OF AGRICULTURAL LAND

  1. I want to sell my agriculture land which is in village and is 15 KM from municipal area. Do I require to pay any tax? Can keep this money in bank Fixed deposits.
    ?

  2. my father have sold his agriculture land. now he wants to purchase new agriculture land for me and my brother, can he purchase this land by our names or can he distribute that money between us to by any kind of land, please give your precious suggestions to save tax.

  3. I have one land which is located in city area under Municiple Corportion area.This is belong to us from grand father. He got from her father.In short it may around before 1950.

    Now this land is aquire by Corporatio for Road development. Against this we get Rs 3 Crore. Now presently we have no any plan to buy land. This is amount get in the name of 3 family member.

    So how much income tax require to pay.We recive this amount in Jan 2015. So is it liable to this financial year ? Also please sugesst how we reduce tax by various method

  4. if agriculture land is not covered under sec 2(14) of income tax than sale consideration is received from sale of that land. Then under which head and which section it is should be shown?

  5. hello sir,
    I have purchased RURAL AGRICULTURAL LAND in feb 2012 for 1.75 lacs and sold in april 2015 at 3.5 lacs ( I hold that land more than 3 years and land was vacant/ no agricultural activity during period of time)
    so does capital gain on RURAL AGRICULTURAL LAND taxable in my case?

  6. Sir we have agricultural land at Aushapur village 20 kilometers from up pal GHMC limits national highway we sale 2cr per acre govt market value is 50 lakhs. This sale comes tax exemption or not please tell me sir

  7. if agriculture land is sold for profit, where we have to show the same in itr.
    Whether we have to disclose gain in the exempt income column in itr 2 ?

  8. Sirs,
    My area is Municipality. I have my Agricultural Land.The land is situated within 2 kilometers (aerially) from Municipality and Population is more than 10000 but not exceeding 100000 (1Lakh). The exact population is 47241 as per the last census of 2011. Sir, Am I eligible for Capital Gain Tax Exemption, if sold? I shall be highly Thankful, if any one help me to send a reply at the earliest. Regards, Saravanan. R

  9. Where from are the Municipal Limits measured? Is it form the Zakat Naka or the territorial boundary of the area under municipality? There are cases where the Agricultural Area is more than 8 kms form the actual land which is to be sold if measured from the Zakat Naka of the Municipality.

  10. I am purchasing agriculture land and distance from pune is 50km and the land in in 4 person name and agriment value is above 50lac
    in this case should I deduct TDS?

  11. we have one agriculture land near the taluka place having arial distance of 5.5 KMS & perticular Tal. Place village having population of 2.6 lacs, & if we sale the land to a company who is then take permission for NA then, the capital gain tax is eligible on sale amount? or it is to be consider as agriculture land and no fall for capital gain tax.

  12. Sir, I have urban agriculture land under MC limit. We are doing agriculture. The above said land has been transferred by our grand fathers. My grandfather mortgage this land to our neighbors. The said land transferred to my father name in 2007 after long court case. So you are requested to tell me which period of purchase we consider for computing capital gain tax either 2007 or 1978. Is that any relief for small farmers. We want to sold this land for sisters marriages. Kindly guide me

  13. I sold 4 acre land which was got from my grandfather in may 2012 , the land is 20 km away from muncipalty, I get all amount in cash, and same was deppositted in my saving bank account, now income tax department served me notice, that i was made more than 10 lakh rupees transaction in my saving bank account and not filed IT return in 2012-13.
    sir plz convey me what i can do now?
    because as per section 2(14) the amount recieved against land sold, which is exempted from income tax.

      1. I sold 4 acre land which was got from my grandfather land is 20 km away from muncipalty, I get all amount in cash, and same was deppositted in my saving bank account, now income tax department served me notice, that i was made more than 10 lakh rupees transaction in my saving bank account and not filed IT return in 2012-13.
        sir plz convey me what i can do now? please

  14. Hi ,

    I want to buy an agriculture land of acres which is at rural place for that i am going to take personal loan around x Lacks and converting it into EMI’s as i am working in private firm.

    Will this loan amount can be shown in tax exemptions ..? if so in which section please give details.

  15. Hi,
    We have an agriculture land inherited. It is with in 2 kms from our municipality. Our town has a population more than a few lakhs. Now we are considering selling. Buyer wants to form residential sites and sell them. Are we liable for income tax? What about the buyer, does he also need to pay tax when he sells the plots?
    Please help us by clarifying our query above. Thanks and appreciate your help

  16. I have an agriculture land in Poni area of Unnao (Uttar Pradesh). The aerial distance of the agriculture land is above 9 kms from Unnao Municipal Corporation and Kanpur Municipal Corporation (Aerial Distance as per Google Map). The 2011 Census of Unnao District has given a population of 31.08 Lakhs people however the Census of Poni area of Unnao District (where the agricultural land is situated) is given at 1078 people. Will this be considered a Capital Asset? Help is much appreciated.

  17. My father has sold his agriculture land which received from his father and this land area under Municipal Corporation, buyer has paid the stamp duty/ registration fee and land value is 8 lakhs. Does this amount taxable or not to my father? My father has a farmer and he is planning to build a house with this amount in another land. Please give your suggestion.

  18. my client bought agri land in Rural area having population is 1700 and no city or muncipal limit he bought in April 2015 for Rs 5 lakhs in total land and now he wants to sell by March 2016 whihtin a year and the said land was utilised during the year for agriculture purpose and now he is selling for say Rs 150 cr as this is agri land and not covered under the Assets defination what will be the tax implication

  19. Hi
    We sold a1 acre of agriculture land in our village , it will be 16 km away from municipality and we received a amount in cash and there is a large difference between govt price &market price and in register paper govt price is mentioned , so please tell me that remaining amount Is treated as black money or not,and the market price mentioned in the agreement paper please tell me that it is tax payable or not

  20. Hi ,
    Agri land is situated in village but muncipality [Population 89000 declred in 2011] is just 2 km away from the land. If it is sold out can it come under capital gain?

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