selling Land.

Others 193 views 4 replies
dear sir
my friend sold his agricultural land which is situated in rural area means village . from city 20KM. Actually he purchased that land cost was 13 lakh.rupees, and he spend 40 lakh rupees for irrigation pipe line, power supply, building roads after development he sold it to 87 lakh rupees.
my question is whether this amount can be make FD in bank, or investment in share market. some people are telling that we have to purchase agriculture land compulsory otherwise IT department will impoe tax. please give me suggestions .
thanku you.
Replies (4)
If your friend sold this agricultural land after conversion and lawfully. Then the earnings belongs to him only. Who will force him to purchase this or that?

Agricultural land in Rural Area in India is not considered a capital asset. Therefore any gains from its sale are not taxable under the head Capital Gains.

As per section 2 ( 14),

Capital asset means property of any kind held by assessee whether or not connected with his business or profession, but does not include Agriculture land in India not being a land situated

a) In any area which is comprised within the jurisdiction of a municipality (whether known as municipality, municipal corporation, notified area committee, town area committee, town committee, or by any other name) or a cantonment board and which has a population of not less than ten thousand [according to the last preceding census of which the relevant figures have been published before the first day of the previous year]; or

b) In any area within the distance, measured aerially,–

(I) Not being more than two kilometers, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than ten thousand but not exceeding one lakh; or

(II) Not being more than six kilometers, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than one lakh but not exceeding ten lakh; or

(III) Not being more than eight kilometers, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than ten lakh.

Explanation.—For the purposes of this sub-clause, “population” means the population according to the last preceding census of which the relevant figures have been published before the first day of the previous year.

So check with Zila Adhikari to get precise information on the distance and population. As long as the land is beyond the prescribed limits, no tax is payable.

But better to file return and declare the income as exempt income.

 
Sir, sorry am not clear with above reply. Can you please clarify shortly.. that 'some people are telling that he have to purchase agriculture land compulsory otherwise IT department will impoe tax.' is it right.
NO, THERE IS NO NEED TO PURCHASE AGRICULTURAL LAND AGAINST THE SALE OF RURAL AGRICULTURE LAND......CAPITAL GAIN TAX IS ONLY IMPOSED ON CAPITAL GOODS ...BUT RURAL AGRICULTURE LAND IS NOT A CAPITAL ASSET


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