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Agricultural land meaning

usha gautam (CA Final Year Student) (38 Points)

24 October 2013

Hello Friends,

Would anyone of you help me to resolve the follwoing query:

I have a residential land at a village where no Municipal committee is exist, now I have sold this land, would the transaction considered for capital gain purpose. there is any difference exists for agricultural land and residential land as per income tax act. if I ask in details then can a residential land be considered as agricultural land under income tax act.

Thanks in advance.

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4 Replies

CA Pallav Singhania (❤ Work Hard Party Harder ❤) (32532 Points)
Replied 24 October 2013

Meaning of Rural agriculture land in India:

It situated in any area which is comprised within the jurisdiction of a municipality ( whether known as a municipality, municipal corporation, notified area committee, town committee or by any other name) and its population should be less than 10,000 as per the last published census, or
If situated outside the limit of municipality, etc., it should be situated certain kilometers away from the local limits of any municipality, etc. as may be specified by the Central government in the official Gazette. The Central government can notified urban land upto maximum 8Kms from the limits of municipality, etc.

However, Agricultural land as defined above is not considered as Capital Asset,

But Rural Residential Land is a capital asset...

1 Like

CA Subhash Bhaskar (Practicing CA) (291 Points)
Replied 24 October 2013

Ms. usha

First af all understand the meaning of agricultural land. You are confused with the terms "agricultural land", "Urban area", and "rural area". The conditions provided by the central govt having regard to population and area are only for the purpose of differentiating between rural and urban land it does not have any link with the term agricultural land. If u see sec2 of the income tax act there u will see that any land used for agricultural purpose shall be agricultural land either it can be situated in rural area or urban area.

In ur case first of all see whether for the last two years (immediately preceeding the date of transfer) it is being used by ur parents for agriculture purpose, if yes it is a agricultural land and any capital gain arising on the sale of such land shall be exempt subject to the conditions prescribed u/s 54B. if not then it is not a agricultural land and it shall be subject to tax without any exemption. It does not matter whether it is situated in urban or rural area.

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MAHESHWARI HARIDAS JEUGHALE (STUDENT) (21 Points)
Replied 30 December 2015

If the land is within the municipalty area and use for agriculture immidiately preceeding 2 yeras and sold after converting it NA shall it treated as capital assets?or It is taxable?