Learn the intricacies of capital gains tax on the sale of agricultural land, including conditions for exemptions and vital action points to ensure compliance and minimize tax liabilities.
Please all professional friends take care in advising to your clients at different time or part of his/her life or if you are assessee then take utmost care on regular basis – in case of Agricultural Income – Revenue or Capital.
Why this message is – Mumbai & Pune ITAT have give mostly similar judgments on “Capital Gain Tax on sale of Agricultural Land” – where exemptions denied by both Authorities, grounds are as under:
1. Condition – The land must be in use as Agricultural Land for at least till 2 years before the sale of agri land. It means land which is of course a Agri Land but not being used for Agri land – may be idle or used for Mandap or using as gathering of people / festivals etc. will be out of ambit of Agri Land.
2. Condition – Not only proof of income derived from Agri Land are enough – like assessee generally preserved Mandi Receipts of crop selling. That will not alone help you.
3. Condition – There must be proof of expenses incurred to earn Agri income on Agri Land in question. For, example Mumbai ITAT observed that the land in question was primarily annex to the sea side – and sea water can not be used for irrigating crops hence your land is difficult to prove as Agri produce land.
4. Condition – Only income showing in ITR as Agri Income is not sufficient or claiming exemption on capital gain tax on sale of Agri Land but no Agri income reported in ITR even before two years of land sale will also go against you.
These type of observations have been taken by both ITAT of Maharshtra and of course it will be a paradigm for other authorities. So, if you are an advisor then do not advise wrongly to your client and if you are an assessee then please keep proper record of Agri Activity Income & Expenses otherwise you or your client will be in serious trouble – because with the development of highways / peripheral roads many Agri lands are now valued at very high rates and at the time of selling heavy Capital Gain Tax arises which will be taxed at 20% straight if your preparation is not up to the mark.
*Action Points* – Start Immediately –
1. To keep proper receipts of crop selling with the commensurate with the size of land.
2. To keep expenses’ records of producing the crop which was sold – say seeds, fertilizers, labour, water, electricity, rentals, cartage, agri equipment, godown cost etc.
3. Show in ITR proper income at proper place.
4. Get proper receipt from Mandi Shulk
5. Get Crop Insurance
6. Get inspected by some Institutes for Agricultural with certificate.
Please pay correct tax and take a deep and tension free sleep.
Regards Rajiv Nigam, Your Friend
Author Bio
Sir , The property to be sold belongs to three petrsons 1) seethalakshmi venkatraman 50℅ share 2) gomathi 25℅3) santhi 25℅
Inherited through family partition .
The property extent is
1 hectare and 70 ares(4acre 22 cents) About 165
Mango trees are grown The Age of the trees are more than 40 yrs. It is situated in pudhur village which is about 7 kms from the near by shencottah Municipality Tamil Nadu. The population of shencottah Municipality is less than one laksh around 50000 only. So far capital gain purpose we assume that this a rural agri land and it will not attract capital gain tax. The patta is in sellers name
. Coming to the main point sir The ACTUAL SALE VALUE is60 lacs( sixtylaks) . The GUIDE LINE value is only 20 lcs ( twenty lacs) . The BUYER has agreed to give ENTIRE SALE amount in account by cheqes but he said he will Register for Only GUDIE LINEvalue.
Now it is suggested that BY ENTERING INTO AGREEMENT WITH BOTH sellers and buyer for the entire amount of 60 lacs by taking 40 lacs as advance ₹20 lacs ₹ 10 lacs ₹10 lacs respectively and later on accepting cheque for ₹ 10 lacs ₹ 5 lcas ₹ 5lacs which will be acknowledged in the agreement and alsoin the sale deed while completing theSale deed. Put it in not shell for the Enite saale value₹ 60 lacs ₹ ₹40 lacs is acknowledge d only in the sale agreement and remaining ₹20 lacs is acknowledged in the Both sale Agreement and Sale deed. The amount excess of guide line value is accepted through cheque in the sale Agreement only but the guide line value is accepted through cheque acknowledged in the sale agreement andalso Sale deed. We are retaining the sale agreement and buyer also agreed for this arrangements . Shall we proceed with this arrangements
I am ready to pay a reasonable consultation for ur suggestion and your proposal
Yours truly
s. rajagopal
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