How to calculate capital gain tax - selling inherited land

Hi,

Capital Gain Tax is applicable on sale of Capital Assets as defined u/s 2(14) of the Income Tax Act. Agricultural Land is not considered as a Capital asset if it satisfies the conditions prescribed in Clause (iii) of Section 2(14) of the Income Tax Act. So, in your case, if the Land qualifies for Exemption, then there will not be any Capital Gains.

However, if the land is treated as a Capital Asset, then there will be Capital Gain Tax. In your case, it will be Long-term Capital Gains. If you don't know the Cost and date of acquisition, same can be fetched from the revenue authorities of the concerned village where the Land is located.

Even if the Land is treated as a Capital Asset and there is a Capital Gain Tax Liability, the same can be avoided by claiming exemption u/s 54B (Buying another Agriculture Land) or u/s 54F (Buying or Constructing another Residential House) or by Buying Capital Gain Bonds u/s 54EC subject to the conditions prescribed under respective sections.

Yes sir you need to pay capital gains tax. It is long term capital gains.

From the sale proceeds you need to deduct the indexed cost of acquisition . You need to take Government value from Registration office as on 01-04-1981and apply indexation as given in Income tax act to arrive at indexed cost of acquisition.

You need to pay tax @20.6% on the profit arrived. You can submit it in IT Returns at the time of filing.

Hello Sir,

1. You may take the value from the government records as on 01-04-1981.

2. Indexation can be claimed on the same.

3. Long Term Capital Gain.

4. Yes, you may be exempted if you invest the proceeds under any tax saving option.

5. It is not necessary to inform your office.

Trust this clarifies your query.

Feel free to call / get back in case of further clarifications.

Thanking You.

Regards,

Rohit R Sharma

BCOM, ACA, LLB-GEN, CERT. FAFP

Dear Sir,

It will be a long term capital gain tax. However if it is an rural agricultural land then it is not a capital asset and no tax is required to be paid.

Further long term capital gain will be sales value minus indexed cost of acqusition. You can pull out the details of the land from records of the registration department.

Yes, you can get exemption, if you invest the sale proceeds in another property or bonds of NHAI/REC etc.

Please feel free to revert in case of any doubts

Thanks and Regards

Abhishek Dugar

CA CS B.Com

It appears that your agricultural land is now in urban area, as the village, in which you have the lands, is now a Nagar Panchayat. In such case, it may not be possible to treat it as agricultural land for claiming exemption of Capital Gains. However, a proper conclusion can be drawn only after knowing the exact geographical location of your land and the population of the Nagar Panchayat based upon last census.

Now if the land is an agricultural land but within urban area, it should have been used for agricultural purposes for the last two years. If so, you may reinvest the sale proceeds on purchase of another agricultural land.

As the sale amount is only Rs 9 Lakhs, you may conveniently invest in Long Term Capital Gains Bonds and save taxes. The bonds can be redeemed after 3 years without any tax liability.

As you are a government servant, you need to inform your office under code of conduct normally applicable to all government servants.