Sale of agircultural land

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

25 March 2015 Dear Sir

I have an issue with regards to sale of Agircultural land.

Our land is in Kerala in a small village with a population of about 13000 as per recent census.

The Municipal office is about 8-9 Kms

If we sell this land is there tax payable under capital gains?

Please reply anyone

GULRAJ AILANI

GULRAJ AILANI (Expert)
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25 March 2015 If agriculture land is within 2kms from muncipal limits then capital gain tax will be applicable.
See where the muncipal limit is ending

Querist : Anonymous

Querist : Anonymous (Querist)

26 March 2015 The Municipal office is about 8 KMS from our land. I can assume its not taxable in that case?

CS,CA F,Numrologi TusharSampat

CS,CA F,Numrologi TusharSampat (Expert)
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26 March 2015 check out with govt records whether it is within 8 kms or not

Querist : Anonymous

Querist : Anonymous (Querist)

26 March 2015 We have verified that, also confirmed by local talati.

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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22 July 2025 You're on the right track — the **taxability of agricultural land** on sale depends on whether it's considered a **"capital asset"** under the **Income Tax Act**, particularly **Section 2(14)(iii)**.

Let’s break it down based on your case:

---

## ✅ **Is Your Agricultural Land Taxable on Sale?**

### 🔹 **Capital Gains Tax *applies only if* the land is a "capital asset".**

Under **Section 2(14)(iii)**, **agricultural land is *not* a capital asset** if:

1. It is situated **in a rural area**, i.e.,
2. It is **not**:

* Within the limits of a municipality or cantonment board with a population of **10,000 or more**, **or**
* Within a certain **distance from the municipal limits**, based on population:

| Population of Municipality | Distance from limits where land is taxable |
| -------------------------- | ------------------------------------------ |
| > 10,000 but ≤ 1 lakh | Within **2 km** |
| > 1 lakh but ≤ 10 lakh | Within **6 km** |
| > 10 lakh | Within **8 km** |

---

## 🔍 Your Situation:

* Land is in a **village in Kerala**
* **Population of the village: \~13,000**
* **Municipality (urban area) is 8–9 km away**
* You’ve **verified the land is more than 8 km from municipal limits**
* Local **Talati confirmed it's outside urban limits**

✅ **Conclusion: The land is rural agricultural land, not a capital asset → Sale is NOT taxable under Capital Gains.**

---

## 📌 Important Notes:

* The **distance is measured "aerially" (straight-line)**, not by road — as per recent CBDT circulars and court rulings.
* If it’s used for genuine agricultural purposes and not for plotting/commercial activities, the **exemption holds.**
* Keep documentation such as:

* Land revenue records
* Certificate from Talati or local authority
* Evidence of agricultural use (e.g., crops grown, electricity bills, etc.)

---

## ✅ Summary:

| Parameter | Your Case | Taxable? |
| -------------------------- | -------------- | ------------- |
| Population of area | 13,000 (rural) | ❌ Not taxable |
| Distance from municipality | 8+ km | ❌ Not taxable |
| Agricultural use | Assumed yes | ❌ Not taxable |

---

Let me know if you’d like a **draft certificate format** from Talati confirming the distance and land use — useful in case of any future scrutiny.

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