Capital Gain on Agriculture Land

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

03 March 2011 An Assessee is having agriculture land (In municipal limit of city) measuring around 14000 sq. yds.from last 25 years, now converted as non agriculture residential land measuring about 7500 sq. yds (after conversion from all agriculture land) and within 3 months of its conversion, it sold 5500 sq. yds out of total 7500 sq. yds in Rs. 75 Lacs. Whether it will be trated as capital gain on agriculture land or not. If not it will be a long term cap gain or short term. if long term what type of exemptions are avaialble to the assessee. Please clarify in detail.

CA.Yogesh Patel

CA.Yogesh Patel (Expert)
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03 March 2011 As the land is situated within the municipal limits the agricultural land is a capital assets and therefore the gain is taxable as capital gain.

Moreover the gain is long term, and the assessee can take the benefit of exemption by investing the gain in another agricultural land whether rural or urban provided the transfered land is used for agricultural purpose within 2 years prior to transfer either by the assessee or his/her parents.

Hope this clarification may serve your purpose.

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Querist : Anonymous

Querist : Anonymous (Querist)

04 March 2011 Thanks for your expert advice. My question is just before 3 months of sale took place land has been converted into Non Agriculture (Residential) so if it is treated as capital asset, will it be necessary to invest into agriculture land only to get exemption or we can invest into other residential properties for exemption purpose. Since the land is convereted from agriculture to non agriculture prior to 3 months of sale, will it be long term capital gain and exemption will be available as above??