• Whether conversion of agricultural land into NA land attract capital gain

1) I had purchased agricultural land on 20th day of February 2021.

2) The agricultural land is situated within 6 Kms from the municipal limits.

3) Subsequent to purchase compound wall construction began.

4) Application for conversion of land into residential purpose was obtained on 24-3-2022.

5) Provisional approval for Residential layout was obtained on 13-6-2022

Query 1: Agri Land was purchased in fin year 20-21 and conversion of land into NA was made during fin year 21-22. Will conversion of land result in any taxation by way of capital gains or will taxation be applicable as income from business after development/sale of Layout sites.

Query 2: If taxation will apply by way of capital gains during fin year 21-22 by virtue of NA conversion, then what will be the basis of taxation i.e what will be the sale consideration and cost of acquisition. If taxation will apply under capital gains what will be the reason for the same.
Asked 6 months ago in Capital Gains Tax



The conversion won't be taxable. Capital gains would arise when you sell the non agricultural land.

Lakshita Bhandari
CA, Mumbai
5664 Answers
839 Consultations

5.0 on 5.0

Dear Sir,


Hope you are doing well.


No, conversion of agricultural land into NA land won't attract capital gain tax.


However, when you sale it in future then capital gain tax liability may arise subject to certain conditions.


Thanks & Regards,

Payal Chhajed 

Payal Chhajed
CA, Mumbai
5179 Answers
254 Consultations

5.0 on 5.0

No tax on conversion of AL into NA. Capital gain will be levied at the of sale of residential property. Retain proofs of all costs incurred.


Vivek Kumar Arora
CA, Delhi
4556 Answers
681 Consultations

5.0 on 5.0

If you are converting agricultural land making it into small residential plots then there are judgement which consider such plots as business stock in trade and in such case it will be liable for tax for conversion of fixed asset into stock in trade and tax will liable when you sell such plots.


Tax will be levied at DLC on date of conversion.


Hope you find the information helpful, if yes do rate if 5 and provide your valuable feedback for my improvement.

Thank you.

Naman Maloo
CA, Jaipur
4108 Answers
76 Consultations

5.0 on 5.0

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