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Capital Gains Exemption On Sale of Agricultural Land
Capital Gains Exemption On Sale of Agricultural Land
Any gain or loss arising from transfer of Capital Asset shall be considered as a Capital Gain or loss as the case may be. Now , in this blog we
will understand the taxability on sale of Agriculture land
Now, it is very important to understand the meaning of Rural Agriculture land and Urban Agriculture land.
1. Rural Agricultural land It means an agricultural land in India -
• (a). If situated in any area which is comprised within the jurisdiction of a municipality and its population is less than 10, 000, or
• (b). If situated outside the limits of municipality,then situated at a distance measured -
1. more than 2 kms, from local limits of municipality and which has a population of more than 10,000 but not exceeding 1,00,000
2. more than 6 kms, from local limits of municipality and which has a population of more than 1,00,000 but not exceeding 10,00,0 00
3. more than 8 kms,from local limits of municipality and which has a population of more than 10,00,000.
2. Urban Agricultural land: Urban agricultural is a land located in specified location and used for agricultural purposes.
• a.) If situated in any area which is comprised within the jurisdiction of a municipality and its population is upto 10,000, o r
• b.)If situated outside the limits of municipality,then situated at a distance measured-
1. upto 2 kms, from local limits of municipality and which has a population of more than 10,000 but not exceeding 1,00,000
2. upto 6 kms, from local limits of municipality and which has a population of more than 1,00,000 but not exceeding 10,00,000
3. upto 8 kms,from local limits of municipality and which has a population of more than 10,00,000.
Shortest distance from jurisdiction of a municipality Population Type of Agriculture Land Shortest distance from jurisdiction of a
municipality Population Type of Agriculture Land
Within the municipality Less than 10,000 Rural land Within the municipality Less than 10,000 Urban land
More than 2 Kms >10,000 upto 1,00,000 Rural land upto 2 Kms >10,000 upto 1,00,000 Urban land
More than 6 Kms >1,00,000 upto 10,00,000 Rural land upto 6 Kms >1,00,000 upto 10,00,000 Urban land
More than 8 Kms >10,00,000 Rural land upto 8 Kms >10,00,000 Urban land
1. Nature of capital gain like long term or short term will depend upon the no. of years asset is held by the assessee.
2. If the period of holding is more than 2 years then the capital gain arising will be termed as long term capital gain. If the holding
period is shorter than 2 years, then the gain arising is termed as short term capital gain.
Long term capital gain shall be taxable at 20% whereas short term capital gain is chargeable at slab rate.
• Where the amount deposited in capital gains accounts scheme is not utilised for the purchase of the agricultural land within specified
period then the amount not so utilised shall be charged as capital gains of the previous year in which the period of 2 years from the
date of transfer of the original asset expires.
• Where the new agricultural land is transferred within a period of 3 years of its purchase, then the capital gains which was e xempt
earlier shall be reduced from the cost of the new agricultural land for the purpose of computation of capital gains in respec t of the new
agricultural land and it will be a short term capital gain .
• On the other hand , if the agricultural land acquired by the assessee is rural agricultural land,there will be no capital gai n even if it is
sold within a period of 3 years because rural agricultural land is not a ‘capital asset’.
Frequently Asked Questions
Q- What is the exemption u/s 54 B ?
Section 54B provides exemption of capital gain arise on sale of urban agriculture land (Long term / short term).
Rural agriculture land is not a capital asset hence no capital gains arise on sale of rural agriculture land.