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Capital gains on agricultural land

11 March 2015

Kindly tell if a Agricultural Land in Urban locality (not sure) was purchased in Mar 2010 at 2 Lakhs and Sold in Apr 2015 say for 15 Lakhs what is the Capital Gain Payable. secondly whether with indexation or without indexation computation it will be beneficial. Thirdly if the Money is kept in a separate savings account ( not opening a Capital Gain Account) and is utilized in paying within one year on following usage i) partly to end the Top up Loan against a Property ii) Partly but more than Capital Gain amount on under construction property installment say a Flat. In such case do I have to pay any Capital Gains Tax to Income Tax department?. Whether such setoff of capital gain is allowable , and how to reflect such transactions in income tax returns.

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9 Replies

CMA Poornima Madhava (CMA) (13112 Points)
Replied 12 March 2015

First of all, if the land is situated in rural area (as you say you are not sure), then it is not a capital asset and hence no capital gain and tax liability.

Assuming it to be in urban area, of course, indexed cost of acquisition is only beneficial and moreover it is a long term capital asset.

Capital gain = sale consideration - indexed cost of acquisition - expenses on transfer

In order to claim exemption by investing in other assets you can claim exemption u/s 54F provided you invest in CG deposit a/c scheme or else acquire the new asset before filing of ITR. Else exemption is not available.

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K Nagraj Bhat (CM) (40 Points)
Replied 12 March 2015

Just wanted to check ...

a) Capital Gain with Indexation if calculated

Indexed cost of acquisition is 2 L X April 15 say index 1050/ March 2010 index 632 i.e Rs. 332000

Capital Gains= 15 L-3.32L= 11.67 L - Tax @ 20% = 2.34 Lakhs

b) Capital Gain without Indexation

Capital Gains= 15-2= 13 lakhs @ 10% =1.3 Lakhs

Now whether 1.3 Lakhs can be paid in new asset EMI for CG Tax exemption???

Shiv prakash (000) (87 Points)
Replied 12 March 2015

Only option (a) Capital Gain with Indexation is available to you.

As per proviso to section 112(1) option (b) is only for the Long term Listed Securities or bond or Zero coupn bond

and for Exemption in 54F you have to Invest whole Net Considaration ( 15 Lakhs in your case )

CMA Poornima Madhava (CMA) (13112 Points)
Replied 12 March 2015

Tax @ 10% without indexation is not available for gain on sale of agricultural land (it is applicable only for shares/securities etc). For more details about claiming exemption u/s 54F, please refer

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K Nagraj Bhat (CM) (40 Points)
Replied 16 March 2015

Thanks to both the member. Just wanted to confirm as Mr Shivprakash has opined that full consideration value needs to be invested. Kindly let me know whether payment of the Registration charges and other charges for under construction property can be qualified as Investment. Also whether pat of 15 L if paid to repay top up loan qualify as Investment. Further as understood exemption = investment in new asset say 7 lakhs/net consideration i.e. 15 lakhs x capital gain after indexation i.e Rs. 2.34 L = 1.092 L . Kindly let me know whether I have to pay Rs. 1.24 Lakhs as Income Tax under Capital gains? Also Whether another 8 lakhs if I repay top up loan against home loan will qualify as Investment?

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CMA Poornima Madhava (CMA) (13112 Points)
Replied 16 March 2015

Yes, registration charges,stamp duty etc are part of investment cost.

Repayment of loan is not an investment. Hence no exemption from CG.

Yes, you have to pay 1.24 lacs if you invest 7 lacs. In order to claim full exemption from CG, you need to invest entire sale consideration, as already said by Shiv prakash.

K Nagraj Bhat (CM) (40 Points)
Replied 17 March 2015

Thanks for guidance. One last thing. ..I am presently paying Pre EMI and shall be paying EMIs whether such payment qualify as investment as ultimately its for purchase of asset against home loan

CMA Poornima Madhava (CMA) (13112 Points)
Replied 17 March 2015

As I already said repayment of loan is not an investment. EMI or Pre-EMI is also repayment of loan only. But the property that you purchased against such loan is the investment. Hope this is clear.

Interest portion of such EMIs is eligible for deduction u/s 24 up to ₹2 lacs a year if the residential property is self occupied and if let out, without any limit.