Will there be capital gains tax if I sell my agriculture land & repay my home loan with that amount

Hi

The tax treatment shall depend on where the agricultural land is situated.

Rural agricultural land is not a capital asset and hence not chargeable to tax.

On the other hand, capital gain shall be applicable on sale of urban agricultural land.

Repayment of loan shall provide no Exemption.

First of all is your land rural agricultural land or urban agricultural land.

If it's an rural agricultural land then there will be no capital gain and you can use it as you want.

If it's an urban agricultural land then there will be capital gain however you can't save capital gain by repaying home. You can save capital gain tax either by purchasing another agricultural land or house property or bonds u/s 54EC.

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Thank you

Hi,

Tax liability will depend on whether the land is rural agricultural land or urban agricultural land. Rural Agricultural land is not considered as Capital asset and hence there is no tax liability on selling the same. On the other hand, sale of  urban agricultural land will lead to taxes on the capital gains

Repayment of loans will not help you from tax exemption and you can save capital gain tax by reinvesting in capital gain bonds u/s 54EC.

Regards,

Nikhil.

Dear Sir,

Hope you are doing well !!

Home loan and Capital Gains Exemption are two separate things. You can claim the Capital gain exemption only if you use the money from the sale of the property to buy another house (Assuming it is an urban agricultural land). 

The purchase of new house has to be done one year before the sale of the house or  2 years after the sale of the house or construct one in three years.The property should be bought in the name of the seller.  

"Income tax department is not concerned if you used the sale money for repaying the home loan or not".

Thanks & Regards,

Payal Chhajed

TO analyse the taxability, it is important to understand the location and purpose of agricultural land prior to its sale. 

IN case “Capital gains” arising from the transfer of agricultural land, where such land was used during the past two years immediately preceding the date of transfer for agricultural purposes by you or your parents, then the gain may be exempt.  Also, gain from sale of rural agriculture land may be exempt.

In case it’s an urban agriculture land, then entire gains are taxable.  The income-tax law provides separate mechanics of computing capital gains for taxability. There are separate means to save tax – like investing in bonds, house property etc to save the tax. 

Merely, utilization the fund to repay the home loan won’t give you any exemption.  However, in case you have purchased a house just before one year of sale, then some analysis may be done to see if it can be categorized as investment on which tax exemption is available. 

Hi,

You are not eligible for exemption.

You are not buying a new property, which is necessary criteria for availing exemption.

Hi,

- Rural agricultural land is totally exempt from capital gain tax.

- Urban agricultural land is taxable. Repayment of loan is not eligible for exemption.

- For capital gain exemption, you need to invest either in new agricultural land, new residential house or bonds.

Thanks

Dear Sir

Selling of Agriculture land doesn't attract Capital gain as rural Agriculture Land exclude from the Definition of Capital asset.

If your land falls under definition of Agriculture property(rural land) than capital gains from it is exempt.

Incase it is not rural land than it will be taxable., you can even claim exemption u/s 54B or 54F.

Repayment of home loan with it will still keep it as taxable capital gain.