Tax implications on the sale of agriculture land (urban area) and cg tax

1. Yes in your case 194IA applicable

2 property received via inherited then not considered as transfer so no capital gain liable but when we sold such property then its liable for capital gain

3 surcharge applicable if your GTI(gross total income) is between 50 laks to 1cr @ 10% and exceed 1cr then @ 15%. And surcharge is calculated on income tax amount.

4.As per section 208, every person whose estimated tax liability for the year is Rs. 10,000 or more but such limit if liability calculated after deducting TDS if any.

5. If he invested same amount within 2 years from the date of transfer in another agriculture land then claim deduction as per sec 54B but if agriculture land not available at the moment then he can make deposit of such amount under deposit scheme to avoid tax liability.

6. If any asset purchases before 1-4-2001 then FMV of 1-4-2001 required

Originally posted by : Mayur Patil
	1. Yes in your case 194IA applicable2 property received via inherited then not considered as transfer so no capital gain liable but when we sold such property then its liable for capital gain3 surcharge applicable if your GTI(gross total income) is between 50 laks to 1cr @ 10% and exceed 1cr then @ 15%. And surcharge is calculated on income tax amount.4.As per section 208, every person whose estimated tax liability for the year is Rs. 10,000 or more but such limit if liability calculated after deducting TDS if any.5. If he invested same amount within 2 years from the date of transfer in another agriculture land then claim deduction as per sec 54B but if agriculture land not available at the moment then he can make deposit of such amount under deposit scheme to avoid tax liability.6. If any asset purchases before 1-4-2001 then FMV of 1-4-2001 required.   Thank you mayur for the swift reply. A very valuable reply indeed. However some of the queries still need some clarification. 1) If the individual has to pay advanced tax then he has to pay from the same amount he received during sale of property which means he/she falls short of advanced tax paid. This means they cannot buy property worht for the full Capital gain. Is that how the rule is? or he/she can buy property before 31st March,2018 without paying advanced tax and show it in the returns. This is important because if my owner does not pay tax before 15th December, as per rule he supposed to pay 1% penalaty for each defaulted month. 2) since the buyer already deducted the 1% TDS, while paying final tax, shuld this amount (TDS) be deducted from the final tax payble or it should not be? 3) The capital gains tax account available with Nationalised banks (SBI,BOB, PNB etc). what amount should be deposited? CG value - advance tax paid or complete amount. Please see below example. Total value of sale = 1.5Cr cost of aqusition with indexation= 30L now the the total CG is 1.2Cr. is he suppoed to deposit 1.2Cr or full 1.5Cr or the amount that comes after the deduction of advanced tax (~20%1.2cr+surcharge+cess) 5) considering above math he is left with only (1.2cr - advance tax) amount. but he is supposed to buy agriculture land worth of 1.2cr to claim deduction which he cannot do as he already paid advanced tax from the same 1.2cr. Is this how the rule is?   Thank you, Ravi

 

1.Sec 208 advance tax liability arise when your net tax payable ( tax on gross total income - TDS) exceeds rs 10000. But if you invest such capital gain in any scheme where benefits of exemption available then tax will reduced and if it comes down below 10000 then liability of advance tax will not arise
Sec 54B you can invest capital gain within 2 years from the date of transfer(sold) of assest. But before filling the return you have to invest in agricultural land to take exemption benefits if the moment agricultural land not available then you can invest such capital gain under deposit scheme in nationalize bank

2. Income tax can be calculated as under.
Tax on GTI(gross total income)
Less : TDS
Less : TCS
Less : self assessment tax
Less : advance tax
So yes you can deduct such TDS from tax payable

3. Whatever you capital gain will comes invest such capital gain to claim claim full deduction
Suppose you capita gain 10 lakhs then invest 10lakhs in agriculture land to get full benefit but besure you shouldn't make resale of new purchased land upto 3 years otherwise exemption will withdrawn

On the cost of acquisition indexation will apply

Suppose if you acquire such asset in 2010-11 then you indexed cost will be
30L *272/167 = 48.80L approximately
Then your capital gain will be sales value - indexed cost
So
1.5cr - 48.80L = 101.2L
So invest 101.2L to acquire new agricultural land then your tax liability will be zero

Thanks again for the reply. I am more or less aware of the calculation.

Please consider the following example. Its hypothetical though but give me better picture

Assume total sale value = 1.5CR

cost of aquistion with indexation = 30L 

so net CG =1.2CR. 

Total tax payble is = 20%1.2CR+ 15% surcharge on tax+ 4% cess on total tax which will be ~ 28.7L

Assume sale of proerty happened on 20th September 2018.

if i am planning to buy agriculture land  i have to buy for worth of 1.2CR and if i buy this around around 20th Feb,2019 then i am liable to pay 75% advance tax which will be ~21.5L to be paid before dec15th. So even if i want to buy full 1.2CR i will be falling short of this 21.5L as i have paid it already by dec,15th,2018. 

Now i have to get this deficit somehow to get claim for full tax refund isn't it?

Is it how the income tax rule is ?

If my buying delays beyond march31st 2019 again i have to pay remaining 25% advance tax before 15th March. which means i will be have more money deficit.

Either i have to borrow money to fulfuill this income tax requirement and then claim for return. 

Is that how the rule is to claim exemption. If i pay advance tax i don't know how to buy the agriculture land with full 1.2Cr at later stage.

Please clarify and pls. stick to above example.

Thanks again

 

Yes sir, your CG is 1.2cr then you have to invest 1.2cr to buy new agricultural land and you've to invest before filing of return otherwise advance tax liability will arise.

If you going to buy beyond 31-3-18 then you've to pay advance tax as per specified %.

And i don't know about after paying advance tax how to claim for exemption.

Thanks much. i am still learning the trade of income tax returns. However what i didn't understand is, even if i plan to buy before 31-3-2018, do i still have to pay 75% advance tax before dec15th or i buy agriculture land before 31st march and do not pay any advance tax?

 

 

Yes you should pay 75% advance tax if you buy after 15th dec but as per my understanding you have to acquire before filling ITR.

As per your information you sold asset on sept 18 so you have to file ITR in subsequent assessment year so in case may be your due date will be 31-7-2019

so purchased new agricultural land before this due date to claim advance tax.
E.g you'll going to file ITR of 2018-19 before 31-7-19 and you purchase asset in time then you'll get benefit of exemption and your tax liability will be less so whatever advance tax you paid it can be claim after filling return
Because tax liability - advance tax - TDS = tax payable
If tax payable comes negative then it will be refunded

I appreciate for taking your valuable time and clarifying my doubts. i am more clear now. However isn't it unfair to pay advance tax before 31st March? Assuming that i wanted to buy for complete 1.2cr still i will fall short of funds to buy for full value of CG. It looks like unfair to me, but not sure if that is the rule of income tax

I'm also not sure about this and now I'm also in doubt because i asked my senior articles regarding this query as per their opinion

Sec 194IA applicable on transfer of immovable property (other than agricultural land)

And if we received full consideration then how can we fall in short of fund.

The short of funds is because of advanced tax. if i buy agriculture land in jan19th, by that time, i would have already paid ~21.7L as advanced tax by dec 15th. This i pay from the same 1.2cr (as said in above example) so, i will be left with 1.2cr-21.7L. and i buy after 31st march but before 31st july 19 it will be even more less (1.2cr - 27L). So i will be never be able to buy for full 1.2cr which is my CG. for our discussion purpose please forget about the 30L (the cost of aqusition).

Aslo what is the 194IA, is it about advanced tax or something else?

Yes your query looks fair. 194IA is about to TDS
If there's transfer of immovable property and worth(consideration) exceeds 50laks then 1%TDS required but there're words given immovable property other than agricultural land
Means this provision does not apply on agricultural land.
But my doubt you received 1.5cr as consideration and your CG is 1.2cr so 20%on CG is comes to 24L and you have to pay 75% advance tax before 15th dec. So your advance tax will be 18L(approximately) so available fund shall be (1.5cr - 18L) = 1.32cr. its enough to invest whole CG amount.

the advanced tax is not just 20%1.2cr. it is 20% of 1.2cr+15% of surchage on top of tax + 4% cess.

Does 194IA applies if the agriculture land value exceeds 50L? i remember seeing that 1% tds applicable if the value exceeds 50L

Agricultural land exempted from 194IA
And advance tax calculated on tax liability is 75% of Your tax liability.
And your tax liability will be 1.2cr *20% +15% surcharge on tax and 4% cess its comes to 28L (approximately) and advance will be 75% of tax so its comes 21.5L (approximately) so your available fund will be (1.5cr - 21.5L) 128.5L so applying this math you should have sufficient fund to invest CG

Agriculture Land (Urban Area) normally considered as normal Capital Asset. So normal provision of the IT Act will be applicable. As per the provisions of Advance Tax: The tax shall be payable in advance during any financial year, in accordance with the provision of sec 208 to 219, in respect of assessee's current income,i.e. income that would be chargeable to income tax for the current financial year.[sec 207] The obligation to pay advance tax arises only in the case where liability to pay tax is greater than Rs.10,000 [sec 208] Taking this view in your case, there would be no taxable income arising for the financial year 2017-18 if you take the exemption u/s 54B. to avoid unnecessary payment of Advance Tax liability there are two options: (i) The purchase shall be made on or before 31/03/2019 with the whole amount of Long-term Capital Gain. (ii) Deposit the whole amount under the capital gain deposit account scheme so that deposit will qualify exemption u/s 54B. with both of the aforesaid options, you will get qualify for the exemption u/s 54B of IT Act 1961, which will further result in normalcy in Gross Total Income and hence there would not be any liability arising with the virtue of advance tax provisions[sections 208-219].