Capital gain or b8usiness income ?

Dear Sir,

Hope you are doing well.

Based on the facts provided, the profit arising from the sale of the land should not be assessed under the head "Income from Other Sources."

Since the agricultural land was purchased in 2007 and held for nearly 19 years as an investment, and the owners are not engaged in the regular business of real estate development or trading, the profit can generally be treated as Long-Term Capital Gain (LTCG).

Although DTCP and RERA approvals were obtained and the land was converted into residential plots before sale, these actions, by themselves, do not necessarily convert the transaction into a business activity. The long holding period and the intention to hold the land as an investment are important factors supporting capital gains treatment.

Thanks & Regards,

Payal Chhajed

Dear Querist,

Merely because you are not regularly engaged in the real estate business does not automatically make the profit taxable as Capital Gains. Since the agricultural land is being converted into house sites after obtaining DTCP/RERA approvals, the Income Tax Department may treat the activity as Business Income based on the nature and extent of development.

Also, 10% tax on capital gains is generally not applicable to the sale of land. The correct tax treatment should be determined after examining the complete facts and documents.

For a more detailed review of your case, you may book a phone consultation.

CA Shubham Goyal