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Tax implication on sale of agricultiral land

jagadeesh (student) (51 Points)

05 January 2018

Dear Experts,

Please clarify my Dought,

A Farmer sold his Agricultural land for Rs.1.5CR and He received amount RS.50lacks only from buyyer (25 lacks directly to the Bank and 25 lacks through cheque) And the farmer buy an aggricultural land for RS.65 lacks, What is the Tax implication for this Transaction.

Thank you

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4 Replies

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (167611 Points)
Replied 05 January 2018

"A Farmer sold his Agricultural land for Rs.1.5CR ............."

Clarify the status of the agricultural land sold........ whether Rural or Urban?

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Anurag lohiya (Bara bazar) (262 Points)
Replied 05 January 2018

Mr. Jagadeesh,
In answer to your query, there may be 2 Situations.
Situation 1:
The agricultural land is situated in the rural area and does not fall in the defination of capital asset as per proviso to Section 2(14) (i.e. not within muncipal area whise population is less than 10000/not within 2 KM of muncipal area whose population is less than 100000/ not within 6 KM of Muncipal area whose population is greather than 100000 but less than 1000000/ or not within 8 KM in any other case).
In such case, there is no question of capital gain as it does not fall into the defination of capital asset. And income shall be exempt u/s 10(1) i.e. Agricultural Income (Subject to taxation of Agricultural income concept).

Situation 2:
Your agricultural land is covered by defination of capital asset u/s 2(14) and not covered by proviso to it.
In such case your capital gain shall be computed in accordance with Section 48.
In your case Sale consideration shall be 1.5 Crore.
Less: Apply second proviso to section 48 i.e. Indexation to the cost of acquisition.
Less: Indexed cost of improvement if any.
Capital Gain Amount.

Note:
1. It is assumed your Agricultural land is situated in India.
2. In case, Your Agricultural land is inherited:
* COA of previous owner shall ne COA in hands of assessee ( Subject to FMV of 2000-01).
* Amount forfieted by the assessee after 1.4.2014 shalk be deducted while computing COA (Section 51 read with Section 56(2)(viii).
* If agricultutral land is compulsorily acquired, Capital gain shall be exempt by virtue of section 10(37).
* Case of RM Arunachalam (SC) may be relevant for you.

In your Case , Deduction u/s 54B can be claimed if the Capital gain is utilised in purchasing new agricultural land within 1 year prior to the sale of within 2 years after the sale.
Deductiom shall be lower of Capital gain amount or amount invested. ( Subject to section 54B).

Hope this will meet your requirement.
Thanks.

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