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capital gain tax on agriculture land

nimesh (Executive) (33 Points)

01 February 2011

the capital gain tax is not levied on transfer of agriculture land which is not situated inside / within periphery of 8 km of municipality limits of notified areas / cities with population of 10000. my question is that if part of the land is situated within 8 km of such municipality / notified area, and part of land is situated outside 8 kms, and the ENTIRE LAND is sold as one unit, what would be tax implications? plz reply. thnx in advance.

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8 Replies

Member (Management) (325 Points)
Replied 01 February 2011

Interesting. If somebody owns such a land, then he will have to meticulously measure the land and find out what portion falls within the limit and what falls without and work out CG proportionately.

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nimesh (Executive) (33 Points)
Replied 02 February 2011

Originally posted by : Member
	Interesting. If somebody owns such a land, then he will have to meticulously measure the land and find out what portion falls within the limit and what falls without and work out CG proportionately.

thnx a lot for ur reply. is there any ircular / case law where it is clear that proportionate capital gain is to be calculated? the income tax act is silent about this.

CA PARAS BAFNA (Practising CA ) (33423 Points)
Replied 02 February 2011

Dear Nimesh Bhai,

Income Tax Act specifies the dual treatment itself by prscribing the measures for rural land and urban land.

Your case is interesting and to resolve the issue permanently (keeping in view the the prospective buyer, also), you may sell the land in two parts, by entering into 2 sale deeds, one for rural land and the other for urban land .

nimesh (Executive) (33 Points)
Replied 02 February 2011

Originally posted by : Paras Bafna
	Dear Nimesh Bhai, Income Tax Act specifies the dual treatment itself by prscribing the measures for rural land and urban land. Your case is interesting and to resolve the issue permanently (keeping in view the the prospective buyer, also), you may sell the land in two parts, by entering into 2 sale deeds, one for rural land and the other for urban land.

thanx a lot parasji, but the catch is that the deal has already been made, consideration has been passed, deed has been registered. i am asking for ascertaining my advance tax liability. any further clarification will be most welcome.

CA PARAS BAFNA (Practising CA ) (33423 Points)
Replied 02 February 2011

1. If the sale deed has already been registered , if possible prepare an agreement of prior date in between the parties , showing the measurements and rates agreed per Acre/Hectare. This will support your calculations.

2. The factual position as regards measurement may be obtained from the government officer (Patwari or hakim)

3. You may show your capital gains in two parts covering the full value of consideration and cost.

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siri (CFO) (174 Points)
Replied 03 February 2011

u can calculate tax only for the part of land situated in the more than 8 km away, and u should also take the cost of land propertonatly for that part of that land only.