Taxability on Conversion of Inheritance Agri. land to Non agri and sale.

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incometax return

9 Points Joined May 2017

If Agriculturist hold 10000 sq m. inheritance Agriculture land since 1981 and he converted into Non agriculture land in june 2018 (6000 sq m for plot and 4000 sq m alloted for town planning and comman plot ).

In June 2019, he has Sold all the plot(6000 sq m) for 5 lakh.

Which type of tax liability (Business Income ,STCG or GTCG ) arise on Agriculturist if he has only agriculture income.

Replies (2)

prashant chaturvedi

11 Points Joined September 2019

As far I know deduction under section 54 is allowed to anyone only if he sale one and purchase another agricultural land but you have made transfer to non agricultural land which is considered transfer under income tax act hence taxable event is when you had transfer your agricultural land to non agriculture land.

Kapadia Pravin

17264 Points Joined December 2018

No capital gain arises at the time the conversion of Agri land into non-Agri takes place.

As and when sale of plots take place that time long term capital gain arises .

June 2019 will be sale date for Rs 5 lakhs.

Cost of acquisition will be taken at prevailing price as of 1-4-2001 and then indexation plus cost of conversion from Agri to NA.

Sale value 5 lakhs minus ( indexed cost + conversion cost ) will be taxable as LTCG

Agri income will be tax free and will be considered only for income tax rate purposes.

But LTCG will not be treated as Agri Income.