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)
Follow

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)
Follow

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)
Follow

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.

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now