Tax liability related
This query is : Resolved
Querist : Anonymous
Querist :
Anonymous
(Querist)
12 August 2014
KINDLY INFORM ME THAT I M PROVIDING BUSINESS AUXILIARY SERVICE AND IS DOING A LABOUR WORK THE TOTAL ANUAL BILL GOES TO AROUND 10 LAKH & IS FILLING RETURN UNDER SECTION 44AD SHOWING 8% INCOME . ALSO HAVING SERVICE TAX NO. FURTHUR TO THIS I HAVE RECEIVED RS.8,00,000/- FROM SALE OF MY FATHER JOINT FAMILY LAND IN CASH. WHETHER THIS AMOUNT WILL BE TAXABLE TO ME IF I PUT THE SAME IN FD OR DEPOSIT THE SAME IN MY BANK ACCOUNT. KINDLY GUIDE ME REGARDING LIABILITY IF COMES TO ME IF ANY IN THIS CASE. KINDLY GUIDE ME REGARDING TAX LIABILITY
12 August 2014
Receipts from sale of rural agricultural land is exempted from tax. You received it in cash, hence you have to check the value considered for stamp duty valuation. your share in the value considered for stamp duty will be exempted from tax and can be deposited in the bank, for the balance you have to pay tax and deposit in the bank.
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12 August 2014
Yes Gain on sale of land will be taxed under LTCG or STCG depending on the holding period of Land ..... Further you can invest the amount into Sec 54EC bond to avoid Tax liability
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Querist : Anonymous
Querist :
Anonymous
(Querist)
16 August 2014
DEAR DEVEN SIR WE HAVE SOLD 1 ACRE LAND WHICH WAS GIFTED TO MY FATHER IN AROUND IN YR 1950. NOW WE SOLD THE SAME FOR RS.65,00,000/- ONLY
THE SHARE WHICH I RECEIVE FROM THIS IS RS.15,00,000/- OUT OF WHICH I RECEIVED IS RS.8,00,000/- OF WHICH I HAVE REC. 4,00,000/- IN CASH. BALANCE CONSIDERATION WILL B RECEIVED BY MAR.2015. HOW MUCH TAX I WILL HAVE TO PAY FOR THE SAME. I M A LABOUR CONTRACTOR DOING LABOUR JOB AMOUNTING RS.900000/- N FILLING RETURN U/S 44AD WITH 8% PROFIT. KINDLY GIVE THE FIGURE OF TAX LIABILITY WHICH I HAVE TO BEAR.
THE SHARE WHICH I RECEIVE FROM THIS IS RS.15,00,000/- OUT OF WHICH I RECEIVED IS RS.8,00,000/- OF WHICH I HAVE REC. 4,00,000/- IN CASH. BALANCE CONSIDERATION WILL B RECEIVED BY MAR.2015. HOW MUCH TAX I WILL HAVE TO PAY FOR THE SAME. I M A LABOUR CONTRACTOR DOING LABOUR JOB AMOUNTING RS.900000/- N FILLING RETURN U/S 44AD WITH 8% PROFIT. KINDLY GIVE THE FIGURE OF TAX LIABILITY WHICH I HAVE TO BEAR.
26 July 2025
Let's break down your situation step-by-step to clarify your **tax liability** on the **sale of agricultural land** and your business income under Section 44AD.
---
### 1. **Sale of Agricultural Land**
* **You sold 1 acre of land gifted to your father in \~1950** for Rs. 65,00,000.
* Your **share is Rs. 15,00,000**, and you received Rs. 8,00,000 so far (including Rs. 4,00,000 in cash).
* Remaining Rs. 7,00,000 to be received by March 2015.
---
### Taxability of Sale of Agricultural Land:
#### Is it taxable or exempt?
* **Rural agricultural land** is exempt from capital gains tax *only* if it is situated in a rural area as defined under Income Tax rules (generally outside municipal limits and not in a town with population over 10,000).
* If the land **qualifies as rural agricultural land**, then:
* **Capital gains on sale are exempt** under Section 10(1), and
* No tax is payable.
* If the land **does NOT qualify as rural agricultural land**:
* Capital gains tax applies.
* Gain is calculated as: **Sale Price - Indexed Cost of Acquisition**.
* Taxed as **Long-Term Capital Gains (LTCG)** if held for more than 24 months.
* Taxed as **Short-Term Capital Gains (STCG)** if held for less than 24 months.
Since the land was gifted in 1950, the cost of acquisition would be the **cost to the original owner**, i.e., your father’s cost or the cost to the previous owner if any.
---
#### Calculation of Capital Gains (if applicable):
* **Sale Price (consideration)**: Rs. 15,00,000 (your share)
* **Cost of Acquisition**: Cost paid by your father in 1950 or Fair Market Value (FMV) as on April 1, 2001, for indexation purposes
* **Holding Period**: More than 24 months → LTCG applies.
You can **invest the capital gains in Section 54EC bonds** (like NHAI or REC bonds) within 6 months of sale to save tax on LTCG up to Rs. 50 lakhs.
---
### 2. **Cash Received & Bank Deposits**
* You received Rs. 4,00,000 in cash.
* Cash receipts above Rs. 2 lakhs are subject to **TDS under Section 194N** and may attract scrutiny.
* It's advisable to keep all **sale documents and payment proofs** to justify the source of funds to the Income Tax Department.
* Deposit the cash into bank accounts to avoid any legal issues related to unexplained cash.
---
### 3. **Business Income under Section 44AD**
* You have business turnover of around Rs. 10 lakhs, and you declare 8% income under Section 44AD (presumptive taxation).
* Your **labour contracting business income** is taxed at your slab rate on 8% of turnover (i.e., Rs. 80,000).
---
### 4. **Total Tax Liability Estimation**
| Income Source | Amount | Tax Treatment |
| ------------------------------ | -------------------- | ----------------------------- |
| Business Income (8% of Rs.10L) | Rs. 80,000 | Taxed at slab rate |
| Capital Gains from land sale | Depends on exemption | If taxable, LTCG @ 20% + cess |
---
### Rough Calculation Example (if land not exempt):
* Suppose LTCG on sale = Rs. 10,00,000 (hypothetical)
* Tax on LTCG @ 20% = Rs. 2,00,000 + cess
* Business income tax depends on your slab.
---
### Recommendations:
* Confirm if the land qualifies as **rural agricultural land** for exemption.
* Calculate **indexed cost of acquisition** for capital gains.
* Consider investing capital gains in **54EC bonds** for exemption.
* Maintain all **documents and proof of receipt** (especially cash).
* File your return declaring business income and capital gains separately.
---
If you want, I can help you with:
* Detailed capital gains computation with indexation,
* Drafting the tax return,
* Advice on investing gains in 54EC bonds to save tax.
Would you like me to prepare that?
---
### 1. **Sale of Agricultural Land**
* **You sold 1 acre of land gifted to your father in \~1950** for Rs. 65,00,000.
* Your **share is Rs. 15,00,000**, and you received Rs. 8,00,000 so far (including Rs. 4,00,000 in cash).
* Remaining Rs. 7,00,000 to be received by March 2015.
---
### Taxability of Sale of Agricultural Land:
#### Is it taxable or exempt?
* **Rural agricultural land** is exempt from capital gains tax *only* if it is situated in a rural area as defined under Income Tax rules (generally outside municipal limits and not in a town with population over 10,000).
* If the land **qualifies as rural agricultural land**, then:
* **Capital gains on sale are exempt** under Section 10(1), and
* No tax is payable.
* If the land **does NOT qualify as rural agricultural land**:
* Capital gains tax applies.
* Gain is calculated as: **Sale Price - Indexed Cost of Acquisition**.
* Taxed as **Long-Term Capital Gains (LTCG)** if held for more than 24 months.
* Taxed as **Short-Term Capital Gains (STCG)** if held for less than 24 months.
Since the land was gifted in 1950, the cost of acquisition would be the **cost to the original owner**, i.e., your father’s cost or the cost to the previous owner if any.
---
#### Calculation of Capital Gains (if applicable):
* **Sale Price (consideration)**: Rs. 15,00,000 (your share)
* **Cost of Acquisition**: Cost paid by your father in 1950 or Fair Market Value (FMV) as on April 1, 2001, for indexation purposes
* **Holding Period**: More than 24 months → LTCG applies.
You can **invest the capital gains in Section 54EC bonds** (like NHAI or REC bonds) within 6 months of sale to save tax on LTCG up to Rs. 50 lakhs.
---
### 2. **Cash Received & Bank Deposits**
* You received Rs. 4,00,000 in cash.
* Cash receipts above Rs. 2 lakhs are subject to **TDS under Section 194N** and may attract scrutiny.
* It's advisable to keep all **sale documents and payment proofs** to justify the source of funds to the Income Tax Department.
* Deposit the cash into bank accounts to avoid any legal issues related to unexplained cash.
---
### 3. **Business Income under Section 44AD**
* You have business turnover of around Rs. 10 lakhs, and you declare 8% income under Section 44AD (presumptive taxation).
* Your **labour contracting business income** is taxed at your slab rate on 8% of turnover (i.e., Rs. 80,000).
---
### 4. **Total Tax Liability Estimation**
| Income Source | Amount | Tax Treatment |
| ------------------------------ | -------------------- | ----------------------------- |
| Business Income (8% of Rs.10L) | Rs. 80,000 | Taxed at slab rate |
| Capital Gains from land sale | Depends on exemption | If taxable, LTCG @ 20% + cess |
---
### Rough Calculation Example (if land not exempt):
* Suppose LTCG on sale = Rs. 10,00,000 (hypothetical)
* Tax on LTCG @ 20% = Rs. 2,00,000 + cess
* Business income tax depends on your slab.
---
### Recommendations:
* Confirm if the land qualifies as **rural agricultural land** for exemption.
* Calculate **indexed cost of acquisition** for capital gains.
* Consider investing capital gains in **54EC bonds** for exemption.
* Maintain all **documents and proof of receipt** (especially cash).
* File your return declaring business income and capital gains separately.
---
If you want, I can help you with:
* Detailed capital gains computation with indexation,
* Drafting the tax return,
* Advice on investing gains in 54EC bonds to save tax.
Would you like me to prepare that?
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