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Query regarding long term capital gain on sale of agriculture land

BHARAT (EXECUTIVE) (46 Points)

24 July 2019

WHETHER LONG TERM CAPITAL GAIN ON SELL OF AGRICULTURE LAND IS EXEMPT EVEN THOUGH THERE IS NO AGRICULTURE INCOME SINCE LAST 5 YEARS

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5 Replies

rama krishnan (12239 Points)
Replied 24 July 2019

when no agricultural activities were carried out, how could you say that it's an agricultural land? I this is my doubt, inviting opinions from stalwarts

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CA ABHAY GUPTA (Practice) (3230 Points)
Replied 24 July 2019

In case, the land is held as an investment and not as stock in trade, then it is necessary
to determine that whether the land sold is agricultural land or not. This is important
because as per Section 2(14) of the I.T. Act, agricultural lands which are not situated in
specified areas are not Capital assets. On sale of such agricultural land, no capital gain
arises. However, on sale of any other land including the agricultural land situated in
specified areas, capital gain arises which is liable for tax under the I.T Act, 1961.
Section 2(14) of the Income Tax Act, 1961 defines Capital Asset. This section provides
that capital asset does not include agricultural land in India. However, the following
agricultural land are considered as capital asset:-
(a) agricultural land situated within the jurisdiction of municipality or cantonment board
and having a population of 10,000 or more
(b) agricultural land situated within the following distance from the local limits of
Municipality or Cantonment Board to be measured aeriallyDistance of agricultural land from
Municipality or Cantonment Board to be
measured aerially
Population of the Area
Upto 2 kilometres Between 10,001 to 1,00,000
Upto 6 kilometres Between 1,00,001 to 10,00,000
Upto 8 kilometres Exceeding 10,00,000 For the purpose of this subclause “population” is defined to mean population according
to the last preceding census of which the relevant figures have been published before
the first day of the financial year.
 The distance from municipality is required to be measured aerially i.e. by crow’s flies
and not by approach road. Therefore, even if by approach road the distance is more
than specified limit but when measured aerially it is less than the specified limit, it will
be treated as agricultural land.
 Therefore, any agricultural land situated within the above area and held as investment
is a capital asset liable for capital gain tax.

BHARAT (EXECUTIVE) (46 Points)
Replied 27 July 2019

Respected Sir,

First of all, I would like to thank all for their reply to my query.

My question is that Land is purely agricultue land within limit specified as per I Tax Act, but there is no crop taken or there is no agriculture income shown in income tax return, then in such case, what are tax implication on sale of such purely agriculture land ?

Thanking you,

With regards,

Yours faithfully,

BHARAT

RAMAKRISHNAN R (INCOME TAX OFFICER) (1736 Points)
Replied 27 July 2019

A land will be determined as agricultural land only if agricultural activities and if it's qualified as agricultural land then comes the determination of capital asset based on the location of the agricultural land

Suresh Thiyagarajan (Student) (3986 Points)
Replied 27 July 2019

1. We all know the sale of agriculture land is exempted from capital gains. To be more precise sale of agricultural rural (outside the city) land will only be exempt from payment of capital gains tax.
2. It is important to note that the sale of agricultural land situated in rural land even if no agricultural activity is carried out, the land still remains to be agricultural land.
3. Government notifies certain land as agricultural rural land and till they change the same, it remains to be agricultural land irrespective of whether the agricultural activity is carried out in that land or not.
4. Because it is sensible for the government to protect the sanctity of the land and habitable for the purpose of agricultural activity even if the same could not be carried out by the landowner.
5. The government will not sanction for any activity other than for the purpose of agriculture, which is specific to that land.
6. To answer the above question even if no agricultural activity is carried out in such land it will still remain to be agricultural land and sale of such land will not attract capital gain tax.
Please correct me if the above interpretation has an alternative view.