Capital Gains in Case of Sale of Agricutural land
1) Agricultural land are classified into two category
A) Rural Agricultural land
b) Urban Agricultural land
2) What is Rural agricultural Land?
Any piece of land which is situated in municipal limit whose population is limited upto 10000 people is classified as Rural agricultural land agricultural. However if population of such municipal or cantonment is more than 10000 people then agricultural land in such limit is classified as urban agricultural land.
However there is a extension in this point as follow
a) If population is more than 10000 but upto 100000 then not only such area but area lying within the range of 2 km from its municipal limit will also become urban agricultural land.
b) If population is more than 100000 but upto 1000000 then not only such area but area lying within the range of 6 km from its municipal limit will also become urban agricultural land.
c) If population is more than 1000000 then not only such area but area lying within the range of 8km from its municipal limit will also become urban agricultural land.
d) Such area will be computed through “bird fly distance” or Ariel measure.
3) define the taxability criteria in case of agricultural land?
In case of Rural Agricultural land Income tax act provides 100% or complete exemption. But in case of urban agricultural land if land is being sold before the time period of 24 months then nature of capital gain will be S.T.C.G. otherwise it will be L.T.C.G. However if person adopts the regular activity of purchase or sale of land then it will be classified as his income of P.G.B.P.
4) If there is a compulsory acquition of land then there will be no taxability on compensation received( as per section 10(37) .however such land must had been used for agricultural purpose before the date of acquition.