Agricultural land taxable

Dear Madam,

For an property (land) to be exempt from definition of Capital Asset should be the land assessed that is situated beyond the Specified Area.

Specified Area means:

a) Any area which is comprised within the jurisdiction of a municipality or a Cantonment Board AND which has a population of not less than 10,000; or

b) Any area within the distance specified hereunder measured AERIALLY from the limits of such municipality or Cantonment Board:

• Population more than 10,000 upto 1 lakh, distance from limits is 2 kms.
• Population more than 1 lakh upto 10 lakh, distance from limits is 6 kms.
• Population more than 10 lakh, distance from limits is 8 kms.

Thus, is your case as the population is between 1 lakh to upto 10 lakhs and the distance is more than 6 kms, the said land is rural agricultural land and thus not a capital asset. Hence, net profit arisen on sale of such land is not assessible under Income Tax Act, 1961.

Thank You!