Land Tax Rules India: In India, people often have to sell their agricultural land at the time of marriage, construction of a house or any medical emergency. The Income Tax Department keeps an eye on the money received from selling land, but in the absence of correct information, people pay unnecessary taxes. If you are also planning to sell your agricultural land, then definitely understand these important rules of income tax.
Whether there will be tax on selling agricultural land or not depends entirely on whether your land is rural or urban. According to Income Tax law, if your land falls within the village limits, then it is not considered a capital asset and no tax is levied on its sale. At the same time, if the land falls in an urban area, then it becomes absolutely mandatory to pay tax on the profit made on selling the land.
How will urban or rural land be determined?
It is important to understand in which category your land falls, so that you can follow the tax rules. If the land is in a municipality that has a population of 10,000 or more, it is considered urban land. The land falling within a radius of 2 to 8 kilometers from the city limits is also counted as urban area. In such cases, the profit made from selling urban land is called capital gain.
The profit made on selling urban agricultural land within 2 years of purchasing it is called Short Term Capital Gain (STCG). Income tax is imposed on this profit according to your total income and existing tax slab. If you sell land after holding it for more than 2 years, it is called Long Term Capital Gain (LTCG). Long term gains are taxed at 20% and you also get the huge benefit of indexation.
Tax exemption from section 54B and 54F
The Income Tax Department has given many legal and easy options to avoid heavy tax on selling land. If you sell your old land and buy another agricultural land within 2 years, you get the benefit of Section 54B. At the same time, if you want to buy a house with the money received from selling land, then tax exemption can also be availed under Section 54F. By using these options properly, you can legally make significant savings.
Also read: Pune’s giant Adinath Agro now becomes Adinova; New identity with Surabhi and Vin sauce will create a stir in the market
Another great way to save tax is to invest your profits in secured government bonds under Section 54EC. You can take full advantage of tax exemption by investing money in selected government bonds like NHAI or REC. You can easily get huge tax exemption on investment up to a maximum of Rs 50 lakh in these bonds. But you have to remember that the time period for this investment is at least 5 years.
Comments are closed.