What Is Agricultural Land As Per Income Tax Act?

What is the tax treatment for sale of agricultural land?

Under Section 10(37) of the Income Tax Act, Capital Gains on compensation received on compulsory acquisition of urban agricultural land is exempt from tax..

How agricultural income tax is calculated?

Now we will compute income Tax on INR 3,50,000/- (Tax slab benefit 2,50,000 + Net Agricultural income 1,00,000). The amount of Tax shall be INR 10,000/-. Third, subtract the Tax computed in Second step from the Tax computed in First step = INR 72,500/-.

Is income from sale of land taxable in India?

Capital gains are income on sale of any capital asset in the hands of seller. … So, any gain on sale of land or building by the owner is taxable as capital gain. Sale consideration reduced by cost of acquisition (indexed cost of acquisition for land or building held for more than 24 months) is taxable as capital gain.

How do I avoid capital gains tax when selling farmland?

Two financial tools are commonly used to defer or avoid tax on the sale of highly appreciated (or depreciated) property: IRC Section 1031 Exchange and IRC Section 664 Charitable Remainder Trust (CRT). Using one or a combination of these tools with a sale will save tax.

What is the capital gains exemption for farmers?

The $1,000,000 Capital Gains Exemption is available to individuals on the sale of qualified farm property.

What are the types of agricultural income?

These types of agricultural incomes are :Any income received as rent or revenue from agricultural land. … Income derived from Agriculture. … Any income accruing to the person by the performance of any process to render the produce marketable.More items…

How do I avoid capital gains tax when selling land?

Tips For Reducing Taxes on a Vacant Land SaleHanging on until the gain qualifies for favorable long-term capital gains tax treatment if you’ve owned the property for less than a year. … Lowering your taxable income. … Receiving installments. … Exchanging instead of selling. … Donating the land to charity.More items…•

How much is capital gain tax on agricultural land?

Long term capital gain is taxable at 20% whereas short term capital gain is chargeable at slab rate. Rural agricultural land is not a capital asset and therefore gain arising from it will not be taxed.

What is agricultural land as per income tax?

In India, agricultural income refers to income earned or revenue derived from sources that include farming land, buildings on or identified with an agricultural land and commercial produce from a horticultural land. Agricultural income is defined under section 2(1A) of the Income Tax Act, 1961.

How is capital gains tax calculated on agricultural land?

Long term capital gain shall be taxable at 20% whereas short term capital gain is chargeable at slab rate….Such land should be an Urban Agricultural Land.Such land, during the period of two years immediately preceding the date of transfer, was being used for agricultural purposes by HUF or individual or his parent.More items…•

How much tax do you pay on agricultural income?

Agricultural income earned by a taxpayer in India is exempt under Section 10(1) of the Income Tax Act,1961. What is more shocking and surprising is that this so-called agricultural income is tax-free without any limit.

Is sale of land taxable?

The sale of land is a taxable event if you sell it for a profit. The taxes on land sales can be pretty steep if your land has greatly appreciated in value since you bought it. However, there are ways to reduce the amount of taxes that you pay.

How much agricultural income is tax free?

Agricultural income is not taxable under Section 10 (1) of the Income Tax Act as it is not counted as a part of an individual’s total income. However, the state government can levy tax on agricultural income if the amount exceeds Rs. 5,000 per year.

How is capital gain calculated?

This is the sale price minus any commissions or fees paid. Subtract your basis (what you paid) from the realized amount (how much you sold it for) to determine the difference. If you sold your assets for more than you paid, you have a capital gain.

What constitutes agricultural land?

Agricultural land is defined as the land area that is either arable, under permanent crops, or under permanent pastures. … Land under permanent crops is cultivated with crops that occupy the land for long periods and need not be replanted after each harvest, such as orchards and vineyards.

How can we show sale of agricultural land in income tax?

You need to file ITR-2 and show the entire proceeds under the “Schedule EI” under point 4. We may assist you in e-filing of ITR. If you are reinvesting the capital gains into another agricultural land, you shall be entitled to exemption of capital gain taxes under section 54B.

What is the limit of agriculture income?

Net agricultural income is greater than Rs. 5,000/- for the previous year. Total income, apart from net agricultural income, is higher than the basic exemption limit (Note – Base Exemption Limit for taxpayers up to 60 years of age is Rs. 2,50,000 and for taxpayers exceeding 60 years of age is Rs.

Is buying agricultural land tax deductible?

However, exemption can be claimed from such Capital Gains under Section 54B for investment in agricultural land. The new agricultural land purchased may either be Rural Land or Non Rural Land. Exemption under Section 54B can only be claimed by an Individual or by HUF. The asset transferred should be agricultural land.

What is rural agriculture land?

A land which is used for agricultural purposes and located in an area other than areas specified as Urban Land is known as rural agricultural land.

Can agricultural land be sold in cash?

The Assessee during the assessment proceedings explained the sources of cash by submitting that he has sold an agriculture land for Rs. 82 lacs only during the year. The sale consideration was received for the sale of agricultural land in a cheque as well as in cash.