17-07-2012, 02:29 PM
FACTORS WHICH DECIDES AGRICULTURE LAND IS CAPITAL ASSETS OR NOT
FACTORS WHICH DECIDES AGRICULTURE LAND IS CAPITAL ASSETS OR NOT.docx (Size: 14.95 KB / Downloads: 23)
As you know the profit from transferring the capital assets is taxable from the view of income tax under capital gains. It is also known by all that transfer of agricultural land is also chargeable of the tax as per income tax rule. But to decide that particular land is agriculture land is not is very hard. People always seems to confuse about this. There are some factors which tell us that particular land is agriculture land is not.
Land will be agriculture land if it is not in these area:-
1- Municipality area:- land which comes in municipality area, a cantonment board and the town committee .
2- Population:- the area which does not have the population of 10000 or more according to the preceding cencus.
3- Area:- the land is not situated less than 8 kilometers from local municipality limit.
4- In any area specified by the Government vide Notification NO. 9447, dated January 6, 1994
To see the notification of the government look this table.
To download the notification 9447 dt 06-01-1994 in pdf format go to
Before calculating the capital gain tax one should determine whether it is agriculture land or not, and if it is not an agriculture land, there will be no capital gain tax.
If the land situated in a village which comes in a municipality area then the population will decide whether the land is agriculture land or not, not the village. In this case if the population in excess of 10000, the land is agriculture land.
Some others factores to decide that the land is agriculture land or not
1- Whether the land is classified to the revenue record.
2- Whether land is used for agriculture purpose or not with a being of time.
3- Whether the income from the land has some factor to make purchase to such land.
4- Whether the land, on the relevant date, had ceased to be put to the agricultural use; if so, whether it was put to an alternative use; whether, such cesser and /or alternative user was of a permanent or temporary nature.
5- Whether there is a portion of land sold as non- agriculture land.
As we know the capital gains are applicable only when you are selling the capital assets. When you are selling the agricultural land, first you have to decide if it is falling under the capital assets, if it is capital assets then you have to pay the tax for the capital gains as we mentioned in this article.
• The following points are important to consider while deciding whether the agricultural land is coming under the capital assets:In any area which is comprised within the jurisdiction of a municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee, or by any other name) or a cantonment board and which has a population of not less than ten thousand according to the last preceding census of which the relevant figures have been published before the first day of the previous year ; or
• In any area within such distance, not being more than eight kilometers, from the local limits of any municipality or cantonment board referred to in item (a), as the Central Government may, having regard to the extent of, and scope for, urbanization of that area and other relevant considerations, specify in this behalf by notification in the Official Gazette.
In simple terms the above statement means,
If the land is situated under municipalty area where the population is above 10000 or the distance from the municiplaty to the specified land is less than 8 KM, then the land is not agricultural land.
Once if the above conditions met, you have decided that the land is agricultural land. Then you need not pay any tax for the sale on your agricultural land. The profit from the agricultural land is completely tax free. Because the land is not falling under the capital assets as the law defines the acpital assets.