Inclusion of old plot of land in the income tax file.

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Querist : Anonymous

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Querist : Anonymous (Querist)
15 September 2011 I have an old plot of land which was bought by my grandfather in 1958 and later on it was partitioned in the family in the year 1998. It is an agricultural land and was not included in the income tax return then. I want to include the same in my income tax file and want to declare agricultural income. could you please help me with regards to the same?

15 September 2011 Dr agricultural land
Cr Capital account
Put a figure near to FMV on the date on which u became owner of the same

CA MANOJ GUPTA
JODHPUR
09828510543

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Querist : Anonymous

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Querist : Anonymous (Querist)
16 September 2011 Thank you for such a quick response Mr. Gupta. The other thing is that will it make any difference if the property is registered or not? And I have been using the same land since I recieved it under partition and since then have not declared it in my Income Tax return and the only income that I have in my return is the share of profit from a partnership firm. So now if i include the land in the balance sheet will it attract suspicion of the IT authorities? and after inclusion in my personal balance sheet will it be possible for me, to transfer it to my Partnership firm at a later stage?


29 July 2024 ### Declaring an Old Plot of Land in Income Tax Returns

To include the old plot of land in your Income Tax Return and declare agricultural income, here’s what you need to consider:

#### **1. Declaration of Agricultural Income**

1. **Historical Context:**
- The plot of land bought in 1958 and partitioned in 1998 is considered a long-term asset. Its original cost basis would be considered for calculating any future capital gains if the land is sold.
- Agricultural income is exempt from tax under Section 10(1) of the Income Tax Act, provided it meets certain conditions, including that the income must be derived from agricultural operations.

2. **Including the Land in Your Return:**
- Since you are not currently showing any income from the land, you should start declaring the agricultural income in your income tax returns going forward. This means reporting any income derived from agricultural activities on this land.

3. **Documentation:**
- Maintain proper documentation and records of agricultural income, including sale receipts, farming expenses, and any other relevant details.

#### **2. Registration and Record-Keeping**

1. **Registration of Property:**
- Whether the property is registered or not can affect the legal aspects of ownership but does not necessarily affect the declaration of agricultural income. Ensure that all legal documentation and ownership records are in order.
- If the property is not registered, consider getting it registered to formalize the ownership and avoid potential disputes.

2. **Income Tax Returns:**
- Ensure that the land and the agricultural income are reflected in your balance sheet and income tax returns. Since the land has been used for agriculture, include any agricultural income derived from it in your return.

#### **3. Potential Issues and Considerations**

1. **Tax Filing and Suspicion:**
- The fact that you have not declared the land or agricultural income in previous years could attract attention. It is advisable to rectify this by accurately reflecting the income and assets in your current and future returns.
- Voluntary disclosure and consistent reporting will help mitigate issues. It's better to disclose all relevant details to avoid complications.

2. **Inclusion in Partnership Firm:**
- Transferring the land to a partnership firm involves specific legal and tax considerations. Such a transfer typically requires proper documentation and compliance with the Income Tax Act and the Registration Act.
- You may need to account for the transfer price, stamp duty, and possible capital gains tax implications.

3. **Record-Keeping:**
- Maintain records of the land’s acquisition, its use for agricultural purposes, and any income generated from it. This will be essential for both tax reporting and potential future transactions.

4. **Consultation with Tax Professionals:**
- Given the complexity and potential for historical issues, it is prudent to consult with a tax advisor or chartered accountant. They can provide personalized guidance based on your specific situation and ensure compliance with all legal requirements.

#### **Steps to Take:**

1. **Update Your Records:**
- Ensure that the land and any associated agricultural income are correctly reflected in your financial records and income tax returns.

2. **File Correct Returns:**
- Include agricultural income in your income tax returns for the years in which it was earned. If you need to rectify previous returns, consult a tax professional for guidance on how to proceed.

3. **Consider Registration:**
- If the land is not registered, consider registering it to formalize ownership and prevent any legal issues.

4. **Plan for Transfer:**
- If you plan to transfer the land to your partnership firm, ensure compliance with all legal and tax requirements. Seek professional advice for the correct procedure.

By following these guidelines, you can ensure that you handle the inclusion of the old plot of land and its income correctly and comply with tax regulations.



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