Profit made on selling agricultural land? Know whether this information should be given in ITR or not

The profit of the land sold in rural areas is not recorded in the capital gains. But this is not the case with urban farming land. If there is any agricultural land in the city and there is profit on selling it, then it will come in capital gains.

ITR filing: Benefit of tax exemption on sale of agricultural land

The date for filing Income Tax Return (ITR) is 31st July. Today this date is ending. There is no chance that the government will extend the period of admission. So there are few hours left that you can take advantage of and Return can enter. Suppose you have sold agricultural land from which you have made profit, then should this information be given in ITR? This question can be important for many people because buying and selling of land is common in an agricultural country like India. Let us know about the tax rules related to it.

Agricultural land in rural areas does not have the status of capital asset. Therefore, the profit earned on selling such land is not included in the capital gains. However, despite this, there are some rules that have to be taken care of, then only tax exemption can be claimed on the profit made from the sale of land. In some cases, the profit made on sale of agricultural land is fully exempted under section 54B. That is, the benefit of tax will be given to the owner of the land without keeping it in the capital gains.

tax exemption condition

The condition related to this is that the profit of the land sold in rural areas is not recorded in the capital gains. But this is not the case with urban farming land. If there is any agricultural land in the city and there is profit on selling it, then it will come in capital gains. But if the farmer or land owner gets any compensation on the same urban land, then it gets tax exemption under section 10(37). Now let us know how one can take advantage of tax exemption on rural agricultural land under section 54B. With the help of this, you will be able to know what is the tax rule for selling agricultural land and how to use it.

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  • This exemption is given to an individual or HUF
  • The land should be used for cultivation immediately before two years from the date on which the land was sold
  • Within 2 years of selling agricultural land, new agricultural land has to be purchased with that money, then capital gains tax exemption will be available.
  • Lastly, if your land comes under rural status and you do purchase and sale following all the tax rules, it will not be considered as capital asset. As such, it will not attract any tax on sale or transfer.

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