Profit on Sale of Agricultural Land within one year

I have 2 doubts : -

1.   I recently bought an Agricultural Land (which is all by definations is agricultural) around 1 month back for 2,00,000 now I am plannong to sell it someone else for 5,00,000. Is this gain is taxableor expemt and if taxable then under what rate and head?

Please explain the same


2. I have a commercial land which i bought 2 years back for 3,00,000 and now I entered into an agreement with someone to sell it for 20,00,000 for which I have received an advance money of 4,50,000. But the buyer has denied to purchase it as the land prices have gone down and has asked me to forfiet the money. Is this money taxable, or what other treatment needs to be done.

Thnxx

Replies (5)

Agricultural land not taxable.

Forfeiture of money not taxable now. But your purchase price will be reduced by 4.5L. Suppose u had purchase the commercial property for Rs. 5L. Now when u sell it COA shall be 50,000.

What if the forfeiture amount is higher than the amount of Asset, for ex if land value was Rs.3,00,00 and Advance was 5,00,000?

then also do we writeoff it from the value of asset or add it  to the capital?

rural agricultural land is not an capital asset

See in your 2nd doubt The cost of commercial property - 3 lac and the forfieted amount - 4.5 lac.

When you subsequently sell that commercial asset, this must be the application:

First your COA of that asset i.e., 3 lac will totally get exhausted in that forfieted amount.

And for the remaining 1.5 lac COA stands at opposite sign which is nothing but that is added along with the sale consideration and the net effect is you will be suffering tax burden for the Net sale consideration + 1.5 lac.

The crux of this provision is to have a check that no income gets untaxed. So for sure that additional forfieted amount cant escape tax liability.

If forfeiture amount is higher than the COA, then the whole sale consideration is taxable. The remaining amount is not taxable.

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