13 July 2023
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) of the Income Tax Act, 1961 Capital Assets does not include- “agricultural land in India, not being land situate- (a) In an area which is comprised within the jurisdiction of a municipality (whether known as a 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 then thousand; or (b) In any area within the distance, measured aerially- (i) Not being more than two kilometres, 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 kilometres, 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 kilometres, from the local limits of any municipality or cantonment board refereed to in item (a) and which has a population of more than ten lakh.
Reply to the notice citing in which area your land falls and say your land sale is exempt from income tax as it's sale of rural agricultural land. You also say you were doing agriculture in the land before sale of the land.
CAclubindia
