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Tax on agriculture land sale (Income Tax)

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This query is : Resolved

Author : Anonymous

( Author )
23 February 2012

hi,
My father has 5 acres of agriculture land in a rural area (30 KM from the nearest municipal area), which he purchased 15-20yrs back in Rs.30000. The land price has gone up now. He wants to sale it now in 10 lac.
I want to know, whether the money he will be getting will be taxable or not.

If it is taxable, how much he will be taxed.


CA Rushikesh Kolhe

( Expert )
24 February 2012

As per description given by you, the land is agricultural land as per Income Tax Act and is not treated as capital asset. hence sale of such land will not be taxable under Income Tax.


C A S.S.Agarwal, M.Com.,LL.B,

( Expert )
28 February 2012

It is not that there is no tax on sale of agricultural land. It is governed by the provisions of Section 54B which is re-produced below

Section 54B. CAPITAL GAIN ON TRANSFER OF LAND USED FOR AGRICULTURAL PURPOSES NOT TO BE CHARGED IN CERTAIN CASES.


(1) Subject to the provisions of sub-section (2), where the capital gain arises from the transfer of a capital asset being land which, in the two years immediately preceding the date on which the transfer took place, was being used by the assessee or a parent of his for agricultural purposes hereinafter referred to as the original asset, and the assessee has, within a period of two years after that date, purchased any other land for being used for agricultural purposes, then, instead of the capital gain being charged to income-tax as income of the previous year in which the transfer took place, it shall be dealt with in accordance with the following provisions of this section, that is to say, - (i) If the amount of the capital gain is greater than the cost of the land so purchased (hereinafter referred to as the new asset), the difference between the amount of the capital gain and the cost of the new asset shall be charged under section 45 as the income of the previous year; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its purchase, the cost shall be nil; or

(ii) If the amount of the capital gain is equal to or less than the cost of the new asset, the capital gain shall not be charged under section 45; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its purchase, the cost shall be reduced by the amount of the capital gain.

(2) The amount of the capital gain which is not utilised by the assessee for the purchase of the new asset before the date of furnishing the return of income under section 139, shall be deposited by him before furnishing such return such deposit being made in any case not later than the due date applicable in the case of the assessee for furnishing the return of income under sub-section (1) of section 139 in an account in any such bank or institution as may be specified in, and utilised in accordance with, any scheme 794 which the Central Government may, by notification in the Official Gazette, frame in this behalf and such return shall be accompanied by proof of such deposit; and, for the purposes of sub-section (1), the amount, if any, already utilised by the assessee for the purchase of the new asset together with the amount so deposited shall be deemed to be the cost of the new asset :

Provided that if the amount deposited under this sub-section is not utilised wholly or partly for the purchase of the new asset within the period specified in sub-section (1), then, - (i) The amount not so utilised shall be charged under section 45 as the income of the previous year in which the period of two years from the date of the transfer of the original asset expires; and

(ii) The assessee shall be entitled to withdraw such amount in accordance with the scheme aforesaid.


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