Sale of agricultural land

Tax queries 376 views 8 replies

Vivek Devarajan

Others

37 Points Joined May 2015

My friend needs to sell a piece of agricultural land that he owns. I have a couple of questions related to agricultural land sale:--

1. Is the rate of Capital gains taxation for agri lands same as that of other residential properties? There is no construction in the present land that my friend intends to sell.

2. The buyer is in a hurry to complete the registration in anticipation of certain regulatory changes in the agri land buying process, and the buyer says he will make the payment later, as per a drafted legal agreement. In such a case what will be the tax implications for the seller? Because the land transfer would have already happened when the seller receives payment, how will the seller be able to account for the source of payment received? Can he quote the agreement that was drafted earlier to prove that the payment was for the sale of the earlier land?

Replies (8)

Dhirajlal Rambhia

SEO Sai Gr. Hosp.

209849 Points Joined July 2016

First get clarity about the location of the Agricultural land. Whether it is rural area or urban land?

Girish Trivedi

None

315 Points Joined January 2018

Yes, no tax liability if its rural agricultural land.

Dimple Mahatre

Professional

247 Points Joined January 2018

As per IT act, Rural agricultural land is not a capital asset, so any gains obtained is not taxable.

manoj

student

5205 Points Joined February 2009

agree with above

Vivek Devarajan

Others

37 Points Joined May 2015

Dear Govind, MAnoj, Dimple, Sachin and Dhirajlal,

Thanks a lot for the clarification, so it appears that my friend need not pay capital gains tax, as it is a rural agricultural land !!

To answer Sachin's query, the land is located in Udupi District, Hebri Taluk.

Now coming to my second query, suppose the land registration happens first and the buyer pays later, as per a legal sale agreement, then will the seller be able to use the sale agreement drafted earlier to account for the source of the funds flowing into his account later?

In case my query is not clear, please do ask for any clarification, if needed.

Best Regards,

Vivek.

Antrika Sinha

student

315 Points Joined January 2018

Make sale agreement with just token advance, & balance amount as receivable

manoj

student

5205 Points Joined February 2009

please be more specific

Vivek Devarajan

Others

37 Points Joined May 2015

Ok, I will try to make my query a little more clear:--

Suppose there is a sale agreement as per which the buyer pays a token advance and the registration happens... and then later the buyer pays the remaining amount as per the agreement - it is like buy first and pay later, as per the agreement.

I want to know the tax implications of this. Even though sale from agricultural land is not taxable as many of you explained earlier, in this case, the property registration would have happened and the buyer would be receiving funds later for a piece of land which is not his anymore !!

Now, will he be able to explain the source of these funds to the IT department as coming from the sale of agricultural land ? (as the land does not belong to him anymore !!

Please do ask for clarification if the question is still not clear.