SALE OF AGRICULTURAL LAND: TAX IMPLICATIONS & TAX SAVING OPTIONS

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Query 1]

I am a Government employee and paying income tax in 30% tax slab.  My question is as under:

My father purchased agriculture land @ Rs. 80,000/- per Acer in the year 1980 and distributed this land to our 4 brothers @ 0.75 Acers each in the year 2005 and I had purchased one of my brother’s share @ Rs. 1,35,000/- per acre in the year 2006. The total land of 1.50 Acre is proposed to be sold for Rs. 8,22,500/- Please clarify the tax implications, when and how much to be paid or how can I save it? [Shankar Swamy Manda- mshankarswamy@yahoo.com]

Opinion:

Tax Liability on Agricultural Land Sold on or After 01.04.2013:

  1. In normal course, any income from transfer of agricultural land, which is being used for agricultural purpose, shall be tax free if the agricultural land is not situated in any area within the distance (measured aerially) of not more than:
    a] 2 kms, from the local limits of any municipality or cantonment board and which has a population of more than 10,000 but not exceeding 1,00,000; or
    b] 6 kms, from the local limits of any municipality or cantonment board and which has a population of more than 1,00,000 but not exceeding 10,00,000; or
    c] 8 kms, from the local limits of any municipality or cantonment board and which has a population of more than 10,00,000.
  2. If the agricultural land is situated within the radius of 2 kms/ 6 kms / 8 kms as mentioned above, then depending upon the period of holding, the profit arising on sale of agricultural land will be taxable as Long Term or Short Term Capital Gain.
  3. In your specific case, if the agricultural land is not covered in the situation mentioned in (1) above then the profit arising on sale of agricultural land would be taxable as Long term Capital Gain as the agricultural land is having a holding period of more than 36 months. The capital gain would be required to be computed in two parts separately i.e., for 0.75 Acres distributed to you by your father by way of gift & 0.75 Acres of land purchased by you from your brother. The capital gain would be computed separately as under:
    a] Fair Market value of the original 0.75 Acres of land distributed to you by your father by way of gift as on 01.04.1981 could be considered as cost of acquisition in your hands. The cost of acquisition would be indexed to arrive at the indexed cost of acquisition. The difference between the actual sale consideration (or stamp duty valuation, if it is higher) would be taxable long term capital gain from sale of this 0.75 Acres of land.
    b] The cost of acquisition of 0.75 Acres of land purchased by you from your brother could further be increased by the amount of stamp duty & other expenses incurred while purchasing the land. The cost of acquisition would then be indexed to arrive at the indexed cost of acquisition. The difference between the actual sale consideration (or stamp duty valuation, if it is higher) would be taxable long term capital gain from sale of this 0.75 Acres of land.
    c] Long term capital gain as calculated above is taxable @ 20%.
    d] Saving Long term capital gain:
  4. The long term capital gain arising to an Individual on transfer of agricultural land could be saved by claiming an exemption u/s 54B, 54EC or u/s 54F as under:
    i) Exemption Under Section 54B:
    The main stipulations incorporated in section 54B are as under: –
    a) Capital gain arises on transfer of Agricultural Land.
    b) The Agricultural Land is used by the tax payer or his parents for agricultural purpose for a period of two years immediately preceding the date of transfer.
    c) The taxpayer has purchased another land for agricultural purposes within a period of two years from the date of transfer.
    ii) Exemption Under Section 54EC:
    To save tax u/s 54EC, One can invest the amount of LTCG in the Specified bonds REC/ NHAI within a period of 6 months from the date of transfer. [There is a maximum investment ceiling of Rs. 50 Lacs only in a financial year in the 54EC Bonds.] ii) Exemption Under Section 54F:
    For exemption u/s 54F, subject to various other terms / stipulations, you have to invest the amount of net sale consideration for purchase of a residential house property within a prescribed period.

 

Query 2]

How to get registered in the income tax department website for viewing form 26AS? How to record the email id for resetting the password etc?

[U.C.Sahu –uttamindustries@sify.com ] 

Opinion:

The process is very simple and every taxpayer must use this facility to verify the credit of TDS/ Tax payment in their account. For registration, just log in at the website of income tax department at www.incometaxindiaefiling.gov.in wherein you will come across a feature titled “Register yourself”. After completing the basic data feeding, you will get registered with the income tax department and would be able to view Form No. 26AS and various other records & informations.

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