How to Show Sale of Agricultural Land in ITR?

Here is the step by step guide for where to show sale of rural agricultural land in income tax return

:

• First, determine whether the land is genuinely agricultural in nature.

• If the land is situated in a rural area, you are eligible for an exemption under Section 10(37) of the Income Tax Act.

• If exemption under Section 10(37) is not qualified, calculate your capital gains on the sale of agricultural land.

• If you have a taxable capital gain, report it in your Income Tax Return (ITR).

• Mention the details of the land, the sale price, and the cost of acquisition.

• You can claim deductions under Sections 54 or 54B of the Income Tax Act if you invest the sale proceeds in another property or agricultural land.

This is all about

sale of rural agricultural land exempt under which section

.

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Here is the step by step guide for where to show sale of rural agricultural land in income tax return

:

• First, determine whether the land is genuinely agricultural in nature.

• If the land is situated in a rural area, you are eligible for an exemption under Section 10(37) of the Income Tax Act.

• If exemption under Section 10(37) is not qualified, calculate your capital gains on the sale of agricultural land.

• If you have a taxable capital gain, report it in your Income Tax Return (ITR).

• Mention the details of the land, the sale price, and the cost of acquisition.

• You can claim deductions under Sections 54 or 54B of the Income Tax Act if you invest the sale proceeds in another property or agricultural land.

This is all about

sale of rural agricultural land exempt under which section

.

Read more

Post the death of my father, I came to know that he had left many land parcels in my name. So, I sold a few of them to finish off my loans. But when I had to file ITR for the preceding year, I realised that I had no idea how to show sale of agricultural land in ITR. I have a friend who is a CA. So, I contacted her to find out about it. I will share with you what she told me.

Where to show sale of agricultural land in ITR?

According to Section 2(14) of the Income Tax Act of 1961, rural agricultural land is not considered a capital asset, hence there is no capital gain tax imposed on its sale. Since rural agricultural land is not a capital asset, the proceeds from its sale are tax-free.

You must complete Form ITR-2 and include all proceeds under "Schedule EI" under item 4. In India, there is no income tax imposed on the sale of rural agricultural land, so you are not required to file a return. But make sure that it satisfies the criteria for rural agricultural land. If it falls under the category of urban agricultural land, you must file a tax return in India to be excluded from capital gains tax.

No that you know sale of rural agricultural land where to show in ITR, I must tell you that there are specific requirements that must be completed for the exemption to apply even though agricultural land in India's rural areas is not regarded as a capital asset and any earnings from its sale are not taxed under the title Capital Gains.

Sale of agricultural land where to show in ITR: When is the sale of agricultural land exempt?

According to section 54B of the Income Tax Act, the sale of agricultural land may occasionally be completely exempt from income tax, or it may not be subject to capital gains tax.

• If the farmland is located in a rural area, it is not regarded as a capital asset as well as any profits from its sales are not subject to capital gains tax.

• If it belongs to urban agricultural land, capital gains will be used to tax it.

• Nevertheless, according to Section 10(37) of the Income Tax Act, capital gains on remuneration obtained for the forcible seizure of urban agricultural land (such as an acquisition by the government) are not subject to taxation.

The following prerequisites must be satisfied in order to claim an exclusion from capital gains under Section 54B:

• Either a person or a Hindu United Family is eligible for the tax exemption (HUF).

• The property being sold should have been utilised for agricultural uses for the two years before the date of sale, and the proceeds from the sale must be used to purchase additional land for agricultural use within two years of the transfer date. Within three years of its purchase, new agricultural land cannot be sold in order to claim a capital gains exemption.

• Therefore, your agricultural land is not considered a capital asset for tax purposes if it satisfies the description of rural agricultural land and you fulfil the requirements set forth in the income tax legislation. 

I hope now you know how to show sale of agricultural land in ITR.