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Exemption under capital gains

25 April 2017

Dear All,

My father sold a property on 3rd nov,2016 and registry had been done on the same date,value of the property is 2.80cr, payments terms mentioned in the sale deed via post dated cheques on diffrent dates till august, 2017.

On current date he paid 85 lacks rupees.

he is also violating the sale deed terms, few cheques also got bounced and the case is running in the court of lucknow that is the other part.

Land is situated in the rural area and is inherit agriculture property(Land)

1. My query is is capital gain tax applicable in this case?

2. what will be mode of saving captial gain tax?

kindly solve my query, its my humble request to you all.

mb. 9910083067

vm3108 @ gmail.com

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13 Replies

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (160327 Points)
Replied 25 April 2017

"Land is situated in the rural area and is inherit agriculture property(Land)

1. My query is is capital gain tax applicable in this case?

2. what will be mode of saving captial gain tax?"

1. No capital gains tax over rural agricultural land.

2. No need for any savings. Just get patwari certificate about rural agricultural land.

PRABIR PAUL (*****Accountant***** Never insult to any person for any kind of lack of knowledge or misread.) (1443 Points)
Replied 25 April 2017

Dear Mr. Varun,

For the porpose of answer of this query you have to make us confirm that you have sold this property for agricultural working purpose or not. If buyer is not use this property for agricultural purpose then you have to pay income tax on this sold out property.

Also you to know that in case of income tax

Agreement is not important.

Payment is not important.

Registration is not important.

Possesion is important to calculate income tax.

varun mishra (27 Points)
Replied 25 April 2017

Thank you sir.

one more query is that we want to deposit money in bank, as rest amount is due for the the payment.so if we does not invest money in buying other land/plot/constructon, then will tax applicable or not?

varun mishra (27 Points)
Replied 25 April 2017

we sold land to property builder and he is selling residential plots.

so if value of sale deed is 2.80 cr, what will be the applicable tax and how can we save max possible tax.

sivaram (Asst Mgr-Taxation) (6918 Points)
Replied 25 April 2017

SALE OF AGRICULTURAL LAND IS EXEMPT FROM CAPITAL GAINS SINCE NOT A CAPITAL ASSET

Studentsca (CA Practice ) (3577 Points)
Replied 25 April 2017

Rural Agricultural Land is not a Capital Asset.

Hence no Capital Gains.

Hence no Capital Gains Tax

Karunakaran (Nil) (35 Points)
Replied 27 April 2017

Even agricultural land is treated as capital asset and subject to Capital Gains Tax, if it is

"a. Within jurisdiction of municipality, notified area committee, town area committee,
cantonment board and which has a population of not less than 10,000;
[As amended by Finance Act, 2016]
b. Within range of following distance measured aerially from the local limits of any
municipality or cantonment board:
i. not being more than 2 KMs, if population of such area is more than 10,000 but not
exceeding 1 lakh;
ii. not being more than 6 KMs , if population of such area is more than 1 lakh but not
exceeding 10 lakhs; or
iii. not being more than 8 KMs , if population of such area is more than 10 lakhs.
Population is to be considered according to the figures of last preceding census of
which relevant figures have been published before the first day of the year."

So, please assess your land location before taking a call on this.

sivaram (Asst Mgr-Taxation) (6918 Points)
Replied 27 April 2017

Querist has clearly stated agricultural land situated in Rural Area we need not look further whether they are in 8 kms limit from municipality since such criteria applies only for agricultural land situated in urban area

Karunakaran (Nil) (35 Points)
Replied 27 April 2017

The doubt arose because the querist says the buyer of land is plotting it for residential purpose. Normally permission for this will be given only for villages close to towns. So, it is best to be cautious and assess the distance.

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varun mishra (27 Points)
Replied 27 April 2017

Thank you sir for clarification, i'll get information on this.

if it is situated in rural area,then how long i can hold money in bank without tax.

sivaram (Asst Mgr-Taxation) (6918 Points)
Replied 27 April 2017

sir if the agricultural land is situated in rural area the capital gains is fully exempt you need not invest these gains in any capital savings bonds or accounts scheme you can use these gains in whatever manner you like

varun mishra (27 Points)
Replied 27 April 2017

okay thank you sir, now my doubt is clear.

Thanks CAclubindia.

Karunakaran (Nil) (35 Points)
Replied 27 April 2017

If it is a rural area, farther than 8 KMs from the border of any municipality (as crow flies), you are not liable for any capital gains tax. You can use the money for any purpose, but please declare it in your IT return.