Exemption on Agriculture land

1. Rural agriculture land is not considered as Capital Assets, So, there is no capital gain on sale of rural agriculture land, it's Exempt..

2. Urban agriculture land is Capital Assets, So, there will be a Capital Gain on sale of urban agriculture land but;

a) if urban agriculture land is compulsory acquired by government than there is no tax on Capital Gain, because whole Capital Gain on compulsory acquisition of urban agriculture land is Exempt u/s 10(37) of Income tax Act, 1961.

b) if it's sale of urban agriculture land (not compulsory acquisition), than capital Gain is taxable, but that capital Gain also you can save by investing in other agricultural land subject to fulfilling conditions u/s 54B

I would like to add few points in addition to Mr. sagar's post. in respect of compulsory acquisition of urban agricultural land and in order to qualify for exemption under section 10(37) the following conditions are required to be satisfied
i] such land, during the period of two years immediately preceding the date of transfer, was being used for agricultural purposes by such Hindu undivided family or individual or a parent of his;

[ii] such transfer is by way of compulsory acquisition under any law, or a transfer the consideration for which is determined or approved by the Central Government or the Reserve Bank of India;

[iii] such income has arisen from the compensation or consideration for such transfer received by such assessee on or after the 1st day of April, 2004.

Sagar sir what does this "compulsory acquired by government" means? Please explain.
'Rama Krishnan' I didn't get your 2nd and 3rd point please explain in simple way.

Compulsory acquired means land acquisioned by state or central govt for purpose of govt projects. in short, even if you don't have intention to sale, you'll be forced to sell the land.

2nd point - as discussed above, the transfer should be in the nature of compulsory acquisition

3rd point - the sale consideration vis-a-vis compensation should have received by the assessee on or after 1st April 2004

Thanks I got it.
I have more querry on this that how will assessee come to know that his land is in rural area or urban area?

As per the definition only rural agricultural land is excluded from the purview of capital asset ..
So bifurcation is important.. The provisions have described the land which is treated as urban agricultural land.
so any land described in a and b below are URBAN AGRICULTURAL LAND and will attract CAPITAL GAIN TAX...
(a)agri land in any area within jurisdiction of a municipality or cantonment board having population not less than 10,000
or
(b)agri land in any area within such distance and having such population
Distance from municipality. Population as per
or so. last prec. census
<=2 km. >10000<=1,00,000
<=6km. >1,00,0000<=10,00,000
<=8km. >10,00,000
So to sum up if the above condition is satisfied it is urban otherwise rural..

OK thanks
From whom should assessee concern to know whether his land is in rural or urban as normally person can not decide whether his land is in rural or urban