My uncle has an agricultural land measuring 3 acres, bought in October 2012. He wants to divide it into 1000 sq ft plots and sell off without land use change (hoping that buyers will get it done themselves).
(i) What may be the tax treatment on such transactions ?
(ii) Will it make any difference in tax treatment if he obtains Certificate of Land Use Change and then sell the plots as residential plots ?
(iii) In what ways tax liability may be minimized ?
Profit from the sale of land is assessable under the head CAPITAL GAINS.
A Capital Gain arises on transfer of a capital asset. However an Agricultural land situated in rural area is not a capital asset and hence there is no tax on it.
U can reduce the tax liability in other cases by availing exemptions u/s 54 B depending on conditions stipulated by said section.
If your uncle intends to sell the land by plotting it, the plots will get converted into stock-in-trade.
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