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Capital gain

Sonal Chavda (student) (125 Points)

26 November 2016

Whether capital gain is levied on sell of Agricultural land in rural area? And after selling agri land my uncle is purchased another house? Is it Exempt or taxable? I am confused that Gain on Agricultural land is exempt only if another land is purchased..and I know it also that Agricultural land is not fall in the definition of capital Asset.. Please guide someone to clear my confusion.. thanking you in advance

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Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (178169 Points)
Replied 26 November 2016

Rural agricultural land does not fall in the defination of Capital Assets. No capital gains.

But (non-rural) agricultural land within specified (as per notification mentioned below) is a Capital Asset and attract capital gains, if any.

(https://indiabudget.nic.in/budget2013-2014/ub2013-14/mem/mem1.pdf)

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Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (178169 Points)
Replied 26 November 2016

Following land is agriculture land in non- rural area and is capital asset:

Land situated in area within municipality or juridiction where population is less than 10000.
Where distance of land from municipality and populaiton limit is as under:

Distance from municipality	Population
Within 2 kilometers	10,000 to 1,00,000
2 km to 6 km	1,00,000 to 10,00,000
6 km to 8 km	More than 10 lakhs

Such distance should be decided as per distance on straight line aerially as crow file.

Sonal Chavda (student) (125 Points)
Replied 26 November 2016

Sir, As per me

whatever you have given above limits, if land is fall under that criteria then it will be urban land..and is considered as capital asset..as i have just right now read the defination from the link you have given above for reference..

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Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (178169 Points)
Replied 26 November 2016

Yes You are correct, rectifying the mistake.

Sonal Chavda (student) (125 Points)
Replied 26 November 2016

Sir, Whether it is to show in return of Income about sell of Agricultural Land?

If yes then where it should be shown?

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Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (178169 Points)
Replied 26 November 2016

For Rural Agricultural land, any gains may be shown under Exempted Income.

For non-rural agricultural land it comes under Capital Gains.

Amit Kanunga (Article Assistant and Post Gradute) (644 Points)
Replied 30 November 2016

Tax circular no. 1302 was issued on December 28, 1999 and is related to agricultural property. Definition of capital asset is given under Income Tax Section 2(14). We know that one has to pay tax on long-term and short-term capital gains, coming from the sale of a capital asset. Under this section, there are clear guidelines differentiating between urban and rural agricultural land. Capital gains tax will be applicable on urban land, even if it has been registered as agricultural land. But if the land falls in a rural area, you are not required to pay income tax on it. This circular is especially useful for those who are selling agricultural land and want it to be considered as a rural land. It elaborates on the urban area limit and has a list of all such places. Villages that fall within eight-kilometers distance of a municipality are considered part of the urban area only. And if you are selling a land plot, that falls within that area, it qualifies for income tax. If the land you are selling is located beyond eight kilometers from a municipality, no tax will be levied on the sale of the land. This circular also has names of the places, where the distance at which the land is situated is less than eight kilometers.