Tax Consultant
790 Points
Posted on 12 June 2026
The ITR form you need depends on whether the agricultural land was rural (exempt) or urban (taxable).
Case 1: Rural agricultural land (outside distance limits from municipality)
This is NOT a capital asset. No capital gains tax applies. You do not fill Schedule CG.
- File ITR-1 if your only other income is salary or pension (and total income is within limits)
- File ITR-2 if you have other capital gains, more than one house property, or foreign assets
- Declare the sale amount under Schedule EI (Exempt Income) in your ITR so the income tax portal sees you have acknowledged it
- In AIS, mark the transaction as correct so there is no mismatch flagged
Case 2: Urban agricultural land (within municipality distance limits)
This IS a capital asset. Capital gains are taxable.
- File ITR-2 (mandatory for capital gains)
- Report in Schedule CG , long-term if held more than 24 months (12.5% flat rate), short-term if within 24 months (slab rate)
For the full breakdown of which ITR form to use for different income combinations in AY 2026-27 , including salary, capital gains, house property, and agricultural income , this [ITR form selection guide](https://taxgarden.in/blog/which-itr-form-ay-2026-27-key-changes) has the decision tree.