agricultural land - rural or not?????

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Ritu (Querist)
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19 July 2009 Hello

I have just sold some agricultural land in Punjab. While the land is out of the municipal limits (we have a leter from patwari) it is within 8 km of the municipal limit. The village's radius itself is 4 km. The village does not appear in the govt of India's notification specifying areas/ villages following within notified muncipal limits.

Different lawyers have given us different opinions & the latest lawyer says there is no 8 km limit............according to him the rural land classifies as land outside of municipal limit or outside of any containment board with the population of X thousand.

Can someone please explain to me what is the latest criteria to assertain the rural land. I would appreciateif comeone can reply asap as I am very short of time. THanks.

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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19 July 2009 The relevant section is 2(14)(iii) of the Income tax Act,1961. This section has two limbs.
a)If the land is situated in any area which is comprised within the jurisdiction of a municipality/municipal corporation/notified area committee/town area committee/town committee or by any other manner or a cantonment board and which has a population of not less than ten thousand according to the latest census. If the land referred in the query falls in the said definition,the said land will be treated as urban land and accordingly capital gains tax liability arises.
OR
b)in any area with in such distance, not being 8 kilometres, from the local limits of any municipality etc as referred in (a) above as the central govt may specify in this behalf by notification in the official gazette. If the land referred in the query fits into the above, capital gains tax liability arises.

Coming back to the query, the land referred is with in 8 km from the municipal limits but it is not notified ( ref para 1 of the query). Hence it is agricultural land(since it doesn't fit to clause b above) and is out of the of capital gains tax.
Again ,as u said, the land is situated outside the municipal limits which means it is outside the jurisdiction of municipality etc. If it would have been with in the jurisdiction of municipality etc., then only the question of population arises. Hence your case will not come under clause (a) also. In other words the land is agricultural and is out of capital gains tax.

This is my understanding about the concerned law and not an opinion or advise. U may discuss the issue once again with your lawyers keeping in mind what I said above and decide according to their advise.

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