Treatment on Capital Gain arising on Compulsory acquisition of Agricultural Land
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Urban Agri Land
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Rural Agri land/other than urban
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If conditions are fulfilled then exemption u/s 10(37)
(discussed below)
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Otherwise taxable
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Not a Capital Asset so no question of Capital Gain.
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Section 10(37) reads as follows:
" (37) in the case of an assessee, being an individual or a Hindu undivided family, any income
chargeable under the head “Capital gains” arising from the transfer of agricultural land, where—
(i) such land is situate in any area referred to in item (a) or item (b) of sub-clause (iii) of clause (14) of section 2 ;
(ii) such land, during the period of two years immediately preceding the date of transfer, was being used for agricultural purposes by such Hindu undivided family or individual or a parent of his ;
(iii) such transfer is by way of compulsory acquisition under any law, or a transfer the consideration for which is determined or approved by the Central Government or the Reserve Bank of India ;
(iv) such income has arisen from the compensation or consideration for such transfer received by such assessee on or after the 1st day of April, 2004.
Explanation.—For the purposes of this clause, the expression “compensation or consideration” includes the compensation or consideration en-hanced or further enhanced by any court, tribunal or other authority;”
Thus, the above Section provides for exemption from Capital Gain arising on compulsory Transfer of Urban Agricultural Land.
The following conditions are to be satisfied:
(i) The land is situated within 8Km from the limits of municipality or cantonment Board
Or
The land is within the jurisdiction of municipality or cantonment board having population of 10,000 or more
(ii) The land was used for agricultural purpose during the period of 2 years immediately preceding the date of transfer by individual,huf or parent of the individual.
(iii) The transfer of land is pursuant to compulsory acquisition under any law or approved by CG or RBI