The Hindu Business Line : Land in village up for sale

I OWN land in my village. This was inherited by me from my parents. I now propose to sell the land for about Rs 5 lakh. Will the gain on the sale be taxable? If taxable, under which head will it be taxed? Can I get any benefit by way of reinvestment of the gain? Also let me know what would be the situation if the land were agricultural and non-agricultural.

Ramu

Reply

If the land is agricultural and falls outside the definition of the term capital asset, as defined in Section 2(14) of the Act, the gain, if any, arising will not be charged to tax.

On the other hand, if it were not agricultural or if it were not one which falls outside the definition of the term capital asset, the gain would be chargeable to tax and the charge would be under the head capital gains. If it were agricultural land and if a charge does arise, exemption can be claimed under Section 54B. And if it were not agricultural land, an exemption can be claimed under Section 54F. The exemption under Section 54B would be available provided:

The assessee is an individual;

The gain arises from the transfer of agricultural land used for agricultural purpose in the immediately preceding two years by the transferor or his parents;

New agricultural land is acquired within two years from the date of transfer

The quantum exempt would be:

The whole of the capital gain, if the amount invested is more than or equal to the capital gain;

To the extent invested, if the amount invested is less than the capital gain;

Eexemption under Section 54F would be available if:

The assessee is an individual or HUF;

The gain arises from the transfer of a long-term capital asset not being a residential house;

The assessee does not within a period of two years purchase or three years construct any residential house other than the new house;

The assessee is not the owner of more than one residential house (other than the new asset) on the date of transfer of the original asset;

A new house should have been purchased, one year before or two years after the date of transfer, or constructed, the construction of which should be completed within three years from the date of transfer.

The quantum exempt would be:

The entire capital gain, if the amount invested is more than or equal to the net consideration; and

The amount invested x capital gain / net consideration, if the amount invested is less than the net consideration.

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