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Capital gains tax on sale of land

sachin (M.Com) (24 Points)

27 February 2015

Hello,

I am planning to sell agriculture land which I purchased 5 years ago. The land is 5 kms from corporation limit.
Exactly 11 months ago I have already purchased a house.

What I got to know is, if I purchased a property one year before sale of land I will not have to pay capital gains tax. Please let me know if this is right?
If yes please let me know if I need do something while filing returns to declare that since I have purchased a house, capital gains tax is not applicable?

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2 Replies

CMA Poornima Madhava (CMA) (13097 Points)
Replied 05 March 2015

Assuming that the agricultural land is situated in urban area, I think you can claim exemption u/s 54F. In order to claim this exemption, you need to sell the land within 1 yr from the date of purchase of house. Also you should not be owning more than one house (excluding the house for which you intend to claim exemption)

Amount of exemption = investment in new asset / net sale consideration x capital gain

You need to mention these details in the ITR when you file your return this July.

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Swami Ayyappa Nuli (TAX ADVISOR & CONSULTANT AT G.S.T SUVIDHA CENTER) (1372 Points)
Replied 05 March 2015

In your case, as per definition of Capital Asset u/s.2(14), It excludes Rural Agriculture land. Rural agriculture Land for this purpose means- Rural Agriculture Land sold for Agriculture Purpose. So Rural agriculture land sold for Non-agri purpose still assessable to capital gain tax. So what is rural agricultural land as per Capital gain u/s.2(14) is as follows.

If your agriculture land is not situtated with in limits of Municipality or cantonment board where population is 10,000 or more(as per Latest census published before the first day of previous year) then it is Rural Agriculture Land. If you sold it for Agriculture purpose then it is Agricultural Income under the head "Income from other souces" and exempt u/s.10(1). If you sold such above land for Non agri purpose even though it is Rural agricultural land as per above criteria, still it is assessable to Capital gain tax. For your information w.e.f A.Y 2014-15, if your land is not situated in Municipality or cantonment board still is is Urban Agricultural Land if it is a) with in 2Kms from the Municipality or Cantonment Board if Population in Municipality or Cantonment Board is above 10,000 or more and up to 1Lakh b) with in 6Kms from the Municipality or Cantonment Board if population is More than 1Lakh and up to 10Lakhs and c) with in 8Kms from the Municipality or Cantonment board if Population in municipality or cantonment board is More than 10Lakhs

So from the above explaintaion if your land does not fall under any of above conditions, your Income sale of such agricultural land is Agriculture Income and exempt u/s.10(1), Otherwise you would be eligible u/s.54F as per conditions specified by Poornima..

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