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agricultural land sale

03 July 2018

I have inherited agricultural land from my parents. It is about 20 km from nearest city. If i sell will it attract LTCG? FATHER purchased 40 years ago. Then mother inherited. She also died 3/4 years back..

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Vinaya Kumara K H (Accounts Executive) (259 Points)
Replied 03 July 2018

If your agricultural land is in rural area, such land is not treated as Capital asset and hence no capital gain taxes are levied. Agricultural land in Rural Area India is not considered a capital asset. Therefore any gains from its sale are not taxable under the head Capital Gains.

Definition of Rural Area as per Income Tax Act – Any area which is outside the jurisdiction of a municipality or cantonment board having a population of 10,000 or more is considered Rural Area, if it does not fall within distance (to be measured aerially) given below;

2 kms from local limit of municipality or cantonment board and If the population of the municipality/cantonment board is more than 10,000 but not more than 1 lakh.
6 kms from local limit of municipality or cantonment board and If the population of the municipality/cantonment board is more than 1 lakh but not more than 10 lakh
8 kms from local limit of municipality or cantonment board and If the population of the municipality/cantonment board is more than 10 lakh.

So, if your agricultural land falls in Urban Area (non-rural area) then Capital Gain Tax is applicable.