Sale of agricultural land

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

Yes, no tax liability if its rural agricultural land.

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

agree with above

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.

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

please be more specific 

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.