• NRI agriculture land

I am a NRI and have inherited that is classified as Agricultural wetland (nanja) in local village records. The land does come in a local municipality and classified as primary residential zone in CMDA (Chennai Metropolitan Development Authority) land use plan. We actually were doing agriculture in this land until a year ago. 

Considering these. Will sale of such land result in Capital Asset Tax for me or not?

Can you provide clarification and any details on specific laws pertaining this to support the response.

Thank you.
Asked 6 days ago in Capital Gains Tax

- Rural agriculture land is not a capital asset.  A land should satisfy both the conditions to be treated as Rural agriculture land i.e. it should fall into the rural area and used for agriculture activities only. Rural area is outside the jurisdiction limits of municipality/cantonment board. The land mentioned by you is an urban agriculture land and capital asset for the purposes of Income tax Act. Capital gain on such land would attract capital gain tax. 

Vivek Kumar Arora
CA, Delhi
4337 Answers
461 Consultations

5.0 on 5.0

Hi

 

Agricultural land in Rural Area in India is not considered a capital asset. Therefore any gains from its sale are not taxable under the head Capital GainsAs per Section 2(14) of the Income Tax Act, 1961 Capital Assets does not include-

 

“agricultural land in India, not being land situat

 

(a) In an 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 then thousand; 

 

(b) In any area within the distance, measured aerially-ore-

i) Not being more than two kilometres, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than ten thousand but not exceeding one lakhNot being more than six kilometres, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than one lakh but not exceeding ten lakh; or

 

(iii) Not being more than eight kilometres, from the local limits of any municipality or cantonment board refereed to in item (a) and which has a population of more than ten lak

 

Explanation- For the purposes of this sub-clause, “population” means the population according to the last preceding census of which the relevant figures have been published before the first day of the previous year.”h.

Rural Agricultural land.

 

It means an agricultural land in India –

 

(a) If situated in any area which is comprised within the jurisdiction of a municipality and its population is less than 10,000, or

If situated outside the limits of municipality, then situated at a distance measured-

 

(i) more than 2 kms, from local limits of municipality and which has a population of more than 10,000 but not exceeding 1,00,000; or

 

(ii) more than 6 kms, from local limits of municipality and which has a population of more than 1,00,000 but not exceeding 10,00,000; or

 

(iii) more than 8 kms, from local limits of municipality and which has a population of more than 10,00,000.

 

Please have a phone call for details discussion.

Karishma Chhajer
CA, Jodhpur
2444 Answers
27 Consultations

5.0 on 5.0

Ask a Chartered Accountant

Get tax answers from top-rated CAs in 1 hour. It's quick, easy, and anonymous!
  Ask a CA