Income Tax is Applicable on Land Sale, but the rates are different for different cases as per Income Tax Act, 1961. All these categories of Sales come under head ‘Capital Gains’. Here is one type of question on which they want detailed information about the sale of their agriculture land. As per Income Tax Act, 1961 Income from Agriculture Land is not Taxable. Capital Gains arising from the transfer of land used for the agricultural purpose is defined under Section 54B. If in the case in your condition section 54B is applicable then only you are exempted from Tax.
Section 54B is available to an Individual. From the assessment year 2013-2014 it is also applicable to HUF (Hindu Undivided Family). Here it is clearly defined that capital gains from the transfer of land which is being used by an individual or his parents or Hindu undived family for agricultural purposes for a period of 2 years immediately preceding the date of transfer are exempt from tax. If the assessee has purchased another land for an agricultural purpose within a period of 2 years from the date of Transfer.
Mr Santosh’s Father sold his agriculture land which received from his father. The land area is under the municipal corporation. The buyer has paid the stamp duty/ registration fee, and land value is 8 lakhs. His father is a farmer and with this 8 lakhs, he want to build a house in another land. Here Mr Santosh doubt is that does this amount taxable or not to his father?
Here the agriculture land is situated under a municipal corporation, and it is considered as Capital Asset for the purpose of calculating Capital Gains. As defined above under Section 54B exemption is only is available only if ‘An agricultural land should be purchased within 2 years and should not be sold within 3 years of purchase’ (or the previous exemption becomes taxable again). As his father is planning to construct a new house and not buying an agriculture land again, then the income is taxable and not allowed to take exemption from the Long Term Capital Gains under Income Tax Act, 1961. If in the case with this 8 lakhs he is buying again a new agriculture land then the amount is exempted to tax.