Capital gains on sale of agricultural land and house constructed on the land
This query is : Resolved
28 April 2026
Assessee sold agricultural land having Mango, Coconut and Supari Trees for Rs.81,00,000/-
Rs.81,00,000/- is bifurcated as Rs.62,16,000/- towards sale of land and Rs.18,84,000/- towards cost of house constructed on the land.
My question is whether both above receipts are exempt from capital gains tax ?
Rs.81,00,000/- is bifurcated as Rs.62,16,000/- towards sale of land and Rs.18,84,000/- towards cost of house constructed on the land.
My question is whether both above receipts are exempt from capital gains tax ?
28 April 2026
The correct view is that both receipts cannot be blanketly treated as exempt.
The amount attributable to agricultural land will be outside capital gains tax only if the land qualifies as rural agricultural land under section 2(14). If it is urban agricultural land, capital gain will be taxable, subject to possible exemption under section 54B if conditions are satisfied.
The amount of ₹18,84,000 attributed to the house constructed on the land should be examined separately, because the house/building is a separate capital asset. Exemption for the house portion will not arise merely because it is situated on agricultural land. Its taxability will depend on period of holding, cost of construction, nature of use, and availability of exemption under section 54/54F, if applicable.
Therefore, exemption depends on facts such as location of land, municipal distance/population, agricultural use, cost records, construction date, and reinvestment details.
The amount attributable to agricultural land will be outside capital gains tax only if the land qualifies as rural agricultural land under section 2(14). If it is urban agricultural land, capital gain will be taxable, subject to possible exemption under section 54B if conditions are satisfied.
The amount of ₹18,84,000 attributed to the house constructed on the land should be examined separately, because the house/building is a separate capital asset. Exemption for the house portion will not arise merely because it is situated on agricultural land. Its taxability will depend on period of holding, cost of construction, nature of use, and availability of exemption under section 54/54F, if applicable.
Therefore, exemption depends on facts such as location of land, municipal distance/population, agricultural use, cost records, construction date, and reinvestment details.
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