Tax liabilities on purchase of agriculture land from adivasi to adivasi person in Maharashtra
This query is : Resolved
01 December 2025
My friend having Salary Income being Adivasi (Buyer) has gone through Registered Agreement for Purchasing Agriculture Land (Part) from Adivasi 4 joint Holder (Seller) for Agriculture Purpose only.
The Registered Agreement Sale Value is made for Rs. 29 Lakh. But as per Ready Reckoner Value of this Land is workout to be Rs. 70 Lakh, and it is Mandatory as per Govt of Maharashtra Adivasi Rule to Pay Full amount of Rs.70 lakhs to Sellers Bank a/cs, only then Sale Deed will be Executed. The mandatary NOC from Distt. Collector for Purchasing Agriculture land from Adivasi to Adivasi (Both Seller and Buyer Adivasi) has been obtained.
Buyer has arranged Rs. 29 Lakh as own Contribution (Including Personal Loan etc,) and Additional amount of Rs. 41 lakhs will be arranged from Friends and Relatives, by way of Cheques.
My query is what is the Legal way, the Buyer will get Refund of Excess amount of Rs. 41 lakhs from Sellers by way of Cheques/ Cash in his favor or Friends and Relatives so that their Contribution can be refunded.
What are Tax Implications on Buyers Side in 26AS SFT information, is there any Capital Gain/Exemption of Agriculture Income, and how to show these Financial Transaction in his Income Tax Return FY-2025-26. Also is there any Income tax implication on Friends/Relatives to issue cheques in Buyers Name and get Refund (Received Cheques) from Sellers. What is the Tax implication of Excess Amount of Sale Deed Value on the part of Sellers side, who are Poor Adivasi Farmers having Pan Card.
The Registered Agreement Sale Value is made for Rs. 29 Lakh. But as per Ready Reckoner Value of this Land is workout to be Rs. 70 Lakh, and it is Mandatory as per Govt of Maharashtra Adivasi Rule to Pay Full amount of Rs.70 lakhs to Sellers Bank a/cs, only then Sale Deed will be Executed. The mandatary NOC from Distt. Collector for Purchasing Agriculture land from Adivasi to Adivasi (Both Seller and Buyer Adivasi) has been obtained.
Buyer has arranged Rs. 29 Lakh as own Contribution (Including Personal Loan etc,) and Additional amount of Rs. 41 lakhs will be arranged from Friends and Relatives, by way of Cheques.
My query is what is the Legal way, the Buyer will get Refund of Excess amount of Rs. 41 lakhs from Sellers by way of Cheques/ Cash in his favor or Friends and Relatives so that their Contribution can be refunded.
What are Tax Implications on Buyers Side in 26AS SFT information, is there any Capital Gain/Exemption of Agriculture Income, and how to show these Financial Transaction in his Income Tax Return FY-2025-26. Also is there any Income tax implication on Friends/Relatives to issue cheques in Buyers Name and get Refund (Received Cheques) from Sellers. What is the Tax implication of Excess Amount of Sale Deed Value on the part of Sellers side, who are Poor Adivasi Farmers having Pan Card.
01 December 2025
1. Refund of Excess Amount (Rs. 41 Lakhs) from Seller to Buyer
Since the buyer has arranged Rs. 29 lakh as his own contribution and the additional Rs. 41 lakh is being arranged via friends and relatives through cheques, here are the key points:
Refund Mechanism: The buyer cannot directly refund this excess amount back to himself or his friends and relatives unless the sale deed explicitly mentions such a refund mechanism. Typically, the excess amount may be a form of "adjustment" (i.e., the buyer paying more than the sale value), and the seller should either return this amount after the sale or adjust it as per an agreement between the buyer and seller.
Legal Way for Refund: To ensure the transaction is legal, the buyer should have a clear agreement with the seller about how the excess amount of Rs. 41 lakh is handled. Ideally, there should be a provision that the seller will refund the excess amount to the buyer, or that amount could be returned to the friends and relatives. This would ideally be documented as part of the sale agreement or a separate agreement. This refund should happen via banking channels (cheques or RTGS/NEFT) to maintain transparency and to avoid any tax-related complications.
Gift Tax or Loan: If the refund is not treated as part of the purchase transaction, then the money received from the seller could be considered a loan or a gift, and tax implications could vary accordingly. If friends/relatives are contributing large sums, it could be treated as a loan (which may be repaid with interest) or a gift (which may attract gift tax).
2. Tax Implications for the Buyer in FY 2025-26 (Income Tax Return)
26AS SFT (Specified Financial Transactions): The buyer’s transaction, particularly the Rs. 70 lakh paid to the seller's account, will be reported in the buyer's Form 26AS under the SFT section if the payments are made via cheques or bank transfers. The Rs. 41 lakh (paid via friends and relatives) will also be tracked if these transactions are reported as loans or gifts. The buyer must ensure that these are correctly disclosed in the Income Tax Return (ITR).
Capital Gains and Agricultural Income Exemption: If the agricultural land being purchased is used for agricultural purposes (and not for investment), the land should be exempt from capital gains tax under the provisions for agricultural income. However, there are specific conditions to qualify for this exemption (such as the land being used for farming, not being in a specified urban area, etc.). Any capital gain on the sale of agricultural land, if applicable, would not be taxed under section 10(37) of the Income Tax Act, but the buyer must maintain records proving the land's use for agriculture.
Income Tax on Loan/Gift Transactions: The buyer must report the contributions from friends and relatives. If these are structured as loans, the buyer must disclose the loan and repayment details. If the contributions are gifts, the buyer should ensure that the total value of gifts doesn’t exceed the permissible threshold (Rs. 50,000) for non-taxable gifts under Section 56(2) of the Income Tax Act. If the gifts exceed this amount, the buyer might be liable for tax, and the relatives might need to report these gifts under their own tax returns.
Reporting in ITR: The buyer will need to declare the full sale value (Rs. 70 lakh) in the ITR, and the source of the Rs. 41 lakh must be explained. The buyer should report any gift or loan arrangements clearly in the ITR. If any amount is refunded by the seller to the buyer (or his friends/relatives), that needs to be recorded as well. If the funds are treated as loans, they would need to be reported under liabilities. Gifts, if properly documented, will not attract income tax.
3. Tax Implications on Friends/Relatives Who Issue Cheques
Gift Tax Implications: If friends and relatives are issuing cheques to the buyer (and not directly to the seller), they may be treated as gifts. If the gifts are over Rs. 50,000, they would need to be reported in their own Income Tax Returns. However, if these payments are treated as loans, they must have proper loan agreements in place. If the money is treated as a loan, the friends/relatives should also ensure they do not violate any tax regulations on lending (i.e., charging interest, specifying repayment terms).
Tax Reporting for Friends/Relatives: If the payments are loans, the lender (friend or relative) would not have tax implications unless the loan is written off or treated as a gift. However, if treated as gifts, the relative could be subject to tax under Section 56 if the total gifts exceed the exemption limit.
4. Tax Implications for the Seller (Adivasi Farmers)
Sale of Agricultural Land: If the sellers are Adivasi farmers and the land is agricultural land, the sale may qualify for exemption from capital gains tax under Section 10(37) if the land is used for agricultural purposes and is not in a specified urban area. The sellers must ensure that they fulfill the conditions for this exemption.
Income Tax on Sale: If the land is sold at a value greater than the cost of acquisition, the sellers may be liable for capital gains tax. However, considering the nature of the transaction (agricultural land) and the fact that the buyers are Adivasi, it may be eligible for tax exemption under Section 10(37), provided the other conditions are met (e.g., if the land is used for agriculture and is not part of a non-agriculture project or development).
Pan Card and Reporting: Even though the sellers are Adivasi farmers, they are required to have PAN cards for tax reporting purposes. Any capital gain, if applicable, must be reported by the sellers. If the transaction is exempt, the sellers may not need to pay tax but should keep all documentation related to the sale and agricultural use of the land for future reference.
Since the buyer has arranged Rs. 29 lakh as his own contribution and the additional Rs. 41 lakh is being arranged via friends and relatives through cheques, here are the key points:
Refund Mechanism: The buyer cannot directly refund this excess amount back to himself or his friends and relatives unless the sale deed explicitly mentions such a refund mechanism. Typically, the excess amount may be a form of "adjustment" (i.e., the buyer paying more than the sale value), and the seller should either return this amount after the sale or adjust it as per an agreement between the buyer and seller.
Legal Way for Refund: To ensure the transaction is legal, the buyer should have a clear agreement with the seller about how the excess amount of Rs. 41 lakh is handled. Ideally, there should be a provision that the seller will refund the excess amount to the buyer, or that amount could be returned to the friends and relatives. This would ideally be documented as part of the sale agreement or a separate agreement. This refund should happen via banking channels (cheques or RTGS/NEFT) to maintain transparency and to avoid any tax-related complications.
Gift Tax or Loan: If the refund is not treated as part of the purchase transaction, then the money received from the seller could be considered a loan or a gift, and tax implications could vary accordingly. If friends/relatives are contributing large sums, it could be treated as a loan (which may be repaid with interest) or a gift (which may attract gift tax).
2. Tax Implications for the Buyer in FY 2025-26 (Income Tax Return)
26AS SFT (Specified Financial Transactions): The buyer’s transaction, particularly the Rs. 70 lakh paid to the seller's account, will be reported in the buyer's Form 26AS under the SFT section if the payments are made via cheques or bank transfers. The Rs. 41 lakh (paid via friends and relatives) will also be tracked if these transactions are reported as loans or gifts. The buyer must ensure that these are correctly disclosed in the Income Tax Return (ITR).
Capital Gains and Agricultural Income Exemption: If the agricultural land being purchased is used for agricultural purposes (and not for investment), the land should be exempt from capital gains tax under the provisions for agricultural income. However, there are specific conditions to qualify for this exemption (such as the land being used for farming, not being in a specified urban area, etc.). Any capital gain on the sale of agricultural land, if applicable, would not be taxed under section 10(37) of the Income Tax Act, but the buyer must maintain records proving the land's use for agriculture.
Income Tax on Loan/Gift Transactions: The buyer must report the contributions from friends and relatives. If these are structured as loans, the buyer must disclose the loan and repayment details. If the contributions are gifts, the buyer should ensure that the total value of gifts doesn’t exceed the permissible threshold (Rs. 50,000) for non-taxable gifts under Section 56(2) of the Income Tax Act. If the gifts exceed this amount, the buyer might be liable for tax, and the relatives might need to report these gifts under their own tax returns.
Reporting in ITR: The buyer will need to declare the full sale value (Rs. 70 lakh) in the ITR, and the source of the Rs. 41 lakh must be explained. The buyer should report any gift or loan arrangements clearly in the ITR. If any amount is refunded by the seller to the buyer (or his friends/relatives), that needs to be recorded as well. If the funds are treated as loans, they would need to be reported under liabilities. Gifts, if properly documented, will not attract income tax.
3. Tax Implications on Friends/Relatives Who Issue Cheques
Gift Tax Implications: If friends and relatives are issuing cheques to the buyer (and not directly to the seller), they may be treated as gifts. If the gifts are over Rs. 50,000, they would need to be reported in their own Income Tax Returns. However, if these payments are treated as loans, they must have proper loan agreements in place. If the money is treated as a loan, the friends/relatives should also ensure they do not violate any tax regulations on lending (i.e., charging interest, specifying repayment terms).
Tax Reporting for Friends/Relatives: If the payments are loans, the lender (friend or relative) would not have tax implications unless the loan is written off or treated as a gift. However, if treated as gifts, the relative could be subject to tax under Section 56 if the total gifts exceed the exemption limit.
4. Tax Implications for the Seller (Adivasi Farmers)
Sale of Agricultural Land: If the sellers are Adivasi farmers and the land is agricultural land, the sale may qualify for exemption from capital gains tax under Section 10(37) if the land is used for agricultural purposes and is not in a specified urban area. The sellers must ensure that they fulfill the conditions for this exemption.
Income Tax on Sale: If the land is sold at a value greater than the cost of acquisition, the sellers may be liable for capital gains tax. However, considering the nature of the transaction (agricultural land) and the fact that the buyers are Adivasi, it may be eligible for tax exemption under Section 10(37), provided the other conditions are met (e.g., if the land is used for agriculture and is not part of a non-agriculture project or development).
Pan Card and Reporting: Even though the sellers are Adivasi farmers, they are required to have PAN cards for tax reporting purposes. Any capital gain, if applicable, must be reported by the sellers. If the transaction is exempt, the sellers may not need to pay tax but should keep all documentation related to the sale and agricultural use of the land for future reference.
02 December 2025
Thank You Very Much Sir, All doubts regarding Taxation are clear. We make specific TC in Sale Agreement about excess payment and Refund.
02 December 2025
Tried to give you generalized answer to all your doubts, but would advise to consult local professional for specific query before finalizing agreement.
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