Section 10(37) Exemption Towards Capital Gain Arising on Compulsory Acquisition of Urban Agricultural Land

Provisions of section 10(37) of the Income Tax Act lays down certain conditions which need to be satisfied in order to avail exemption towards capital gain arising on account of compulsory acquisition of an urban agricultural land.

The present article tries to explain the said exemption provisions of section 10(37).

Conditions for availing exemption under section 10(37)

The exemption under section 10(37) is available only on account of compulsory acquisition of urban agricultural land. However, all the following conditions are mandatorily required to be satisfied, in order to claim an exemption under section 10(37) of the Income Tax Act

1. An exemption under section 10(37) is available only to an individual or a Hindu Undivided Family.

2. The exemption is available towards capital gain arisen on the transfer of agricultural land.

3. The said agricultural land should be situated within the area mentioned below-

    • The agricultural land should be situated within the jurisdiction of a municipality; municipal corporation; notified area committee or town area committee or town committee having a population of more than 10,000; or
    • The agricultural land should be situated within the following distance, measured aerially-
Distance limit Population limit
Up to 2 kilometers from local limits of any municipality More than 10,000 but not exceeding 1 Lakhs
Up to 6 kilometers from local limits of any municipality More than 1 Lakhs but not exceeding 10 Lakhs
Up to 8 kilometers from local limits of any municipality More than 10 Lakhs

4. The said agricultural land should have been used, for a period of two years immediately before the date of transfer, for the agricultural purpose by-

    • An individual or his parent; or
    • A Hindu Undivided Family.

5. The transfer of capital gain is on account compulsory acquisition under any law or the transfer consideration for which is determined / approved by the Central Government or the Reserve Bank of India.

6. The consideration or compensation from the transfer should have been received on or after 1st April 2004.

In case all the above conditions are fulfilled, the capital gain arising on compulsory acquisition of an urban agricultural land would be exempted under section 10(37) of the Income Tax Act.

Amount of exemption available under section 10(37)

If all the above mentioned conditions are satisfied, entire capital gain arising on transfer of urban agricultural land is exempted under section 10(37). There is no maximum limit prescribed under the law.

Table – Articles on Section 10 Exemptions

Sr. No. Particulars
1 Section 10(1)– Exemption to Agricultural Income
2 Section 10(2) Exemption to amount received by co-parcener from HUF
3 Section 10(2A) Exemption towards share of income from firm/LLP
4 Exemptions towards interest to non-residents | Section 10(4) & 10(4B)
5 Exemption on Tax paid by Govt or Indian concern on certain income of a foreign company
6 Section 10(7) Perquisites/allowances exemption to Govt employees serving outside India
7 Exemption- Section 10(8A) & section 10(8B) of Income Tax Act
8 Exemption towards commuted value of pension Section 10(10A)
9 Exemption towards retrenchment compensation received by workman Section 10(10B)
10 Section 10(10BC) Exemption towards compensation received on account of any disaster
11 Section 10(10C) Exemption of amount received on voluntary retirement
12 Exemption towards tax paid by employer on non-monetary perquisites: Section 10(10CC)
13 Section 10(10D) Exemption towards amount received under a Life Insurance Policy
14 Exemption for amount received from Statutory & Recognized PF
15 Exemption for payment from approved superannuation fund Section 10(13)
16 Income Tax Exemption on prescribed allowances/ benefits | Section 10(14)
17 Section 10(15) Exemption- Interest on Bonds, Debentures, Securities
18 Scholarship exemption | Section 10(16) | Income Tax Act 1961
19 Exemption towards income for administration of Charitable or Religious Institution
20 Section 10(32) Exemption | Income of minor clubbed with parent
21 Exemption for dividend income received from Indian Company | Section 10(34)
22 Section 10(34A) Exemption towards income received by a shareholder on buy back of shares
23 Section 10(35) Exemption towards income received from units
24 Section 10(37) Exemption towards Capital Gain arising on Compulsory Acquisition of Urban Agricultural Land

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