Agri Land

The taxability of sale proceeds of agricultural land depends upon whether such land is situated in specified area or not.

1.       If an agricultural land is situated in specified area, its a capital asset within the meaning as provided in section 2(14) and therefore, its transfer may attract CGT. However, exemption can be claimed u/s 54B if the transferred land has been using for agricultural purpose for atleast 2 yrs b4 transfer and a new AGRICULTURAL LAND is acquired within the next 2 yrs.

2.       If the agr. Land is not situated in specified area, its not a capital asset and consequently its transfer shall not attract CGT. Even then, the sale proceeds from the same should be treated as income u/s 2(24) and therefore, should be grouped under the residual head – Income from Other Sources.

 The difference between the above two circumstances is that, in the 2^nd situation, you cannot claim any capital expenditures like cost of acquisition, cost of improvement etc., against the sale proceeds received..