How is sale of agricultural land taxed?
How is sale of agricultural land taxed? | Mint Mint
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Tax Implications of Selling Ancestral Agricultural Land in India
Question:
We are a family of four, including my parents and my elder brother. My father is planning to sell five acres of ancestral agricultural land in our native place, a village that is around 2-5km from the nearest municipality and share the proceeds equally among all four of us. What are the tax implications of the above sale? In what proportion should the proceeds be divided? My father intends to transfer the proceeds to each of our bank accounts. Are any documents necessary for such bank transfers so that all family members have proper proof to explain the source of this income if this is raised by the income tax department?
—Name withheld on request
Answer:
Agricultural land in India does not qualify as a capital asset (Section 2(14)), unless it is situated as follows:
- In any area within the jurisdiction of a municipality/ cantonment board, with a population* of 10,000 or more; or
- In any area (distance measured aerially):
- Within 2km of the local limits of any municipality/ cantonment board with a population of more than 10,000 but within 100,000;
- Within 6km of the local limits of any municipality/ cantonment board with a population of more than 100,000 but within 10,00,000;
- Within 8km of the local limits of any municipality/ cantonment board with a population of more than 10,00,000.
The term population for this purpose means the population according to the last preceding census of which the relevant figures have been published before the first day of the previous year.
In case the land referred to in your query qualifies to be agricultural land in India which is not a capital asset as defined above, any gain/ loss from the transfer of such land shall not be taxable under the Income Tax Act.
However, in case the land qualifies to be a capital asset, the entire gain/ loss from the transfer of such land will be subject to capital gains tax in your father’s hands as he is the owner of the land and all related provisions shall apply. In such a case, since the land is held for more than 24 months, the same shall be considered to be the sale of a long-term capital asset and any gain shall classify as long-term capital gain (LTCG).
The subsequent transfer of the proceeds received by your father from the sale of the land to the family members (being spouse and two children) shall not be taxable in the hands of the recipients, as the same would qualify to be receipts from a ‘relative’, as defined under Section 56 of the Act (irrespective of the proportion of the share).
Documents such as registered purchase deed, registered sale deed, gift deed, copy of bank statements, etc. may be maintained for income-tax purposes. From a legal perspective, it would be advisable to evaluate the requirement separately with an expert legal practitioner.
Parizad Sirwalla is partner and head, global mobility services, tax, KPMG in India.
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Updated: 13 Aug 2023, 10:48 PM IST
SDGs, Targets, and Indicators
1. Which SDGs are addressed or connected to the issues highlighted in the article?
- SDG 1: No Poverty
- SDG 8: Decent Work and Economic Growth
- SDG 10: Reduced Inequalities
- SDG 16: Peace, Justice, and Strong Institutions
2. What specific targets under those SDGs can be identified based on the article’s content?
- Target 1.4: By 2030, ensure that all men and women, in particular the poor and the vulnerable, have equal rights to economic resources, as well as access to basic services, ownership, and control over land and other forms of property.
- Target 8.10: Strengthen the capacity of domestic financial institutions to encourage and expand access to banking, insurance, and financial services for all.
- Target 10.2: By 2030, empower and promote the social, economic, and political inclusion of all, irrespective of age, sex, disability, race, ethnicity, origin, religion or economic or other status.
- Target 16.5: Substantially reduce corruption and bribery in all their forms.
3. Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?
- Indicator for Target 1.4: Proportion of total adult population with secure tenure rights to land, with legally recognized documentation and who perceive their rights to land as secure, by sex and by type of tenure.
- Indicator for Target 8.10: Proportion of adults (15 years and older) with an account at a bank or other financial institution or with a mobile-money-service provider.
- Indicator for Target 10.2: Proportion of people living below 50 percent of median income, by age, sex, and disability.
- Indicator for Target 16.5: Proportion of persons who had at least one contact with a public official and who paid a bribe to a public official, or were asked for a bribe by those public officials, during the previous 12 months.
SDGs, Targets, and Indicators Table
| SDGs | Targets | Indicators |
|---|---|---|
| SDG 1: No Poverty | Target 1.4: By 2030, ensure that all men and women, in particular the poor and the vulnerable, have equal rights to economic resources, as well as access to basic services, ownership, and control over land and other forms of property. | Proportion of total adult population with secure tenure rights to land, with legally recognized documentation and who perceive their rights to land as secure, by sex and by type of tenure. |
| SDG 8: Decent Work and Economic Growth | Target 8.10: Strengthen the capacity of domestic financial institutions to encourage and expand access to banking, insurance, and financial services for all. | Proportion of adults (15 years and older) with an account at a bank or other financial institution or with a mobile-money-service provider. |
| SDG 10: Reduced Inequalities | Target 10.2: By 2030, empower and promote the social, economic, and political inclusion of all, irrespective of age, sex, disability, race, ethnicity, origin, religion or economic or other status. | Proportion of people living below 50 percent of median income, by age, sex, and disability. |
| SDG 16: Peace, Justice, and Strong Institutions | Target 16.5: Substantially reduce corruption and bribery in all their forms. | Proportion of persons who had at least one contact with a public official and who paid a bribe to a public official, or were asked for a bribe by those public officials, during the previous 12 months. |
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Source: livemint.com
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