Is TDS Applicable on Sale of Agricultural Land?

In the simplest of words, I can tell you that a piece of land used for agriculture is known as agricultural land. But if I am being honest, I was not aware of applications of TDS on sale of agricultural land. So, I researched about the tax on capital gains resulting from the sale of agricultural land in India, and I will share with you what I realised through my research.

TDS on agricultural land

A piece of agricultural land may be located either in a rural or non-rural region. Both scenarios will have different tax ramifications. Rural Agricultural Land has now been expressly excluded from the Section 2 definition of Capital Asset (14). Tax will not be assessed on the sale of rural agricultural land since it is not regarded as a capital asset; only capital assets are subject to this assessment. Due to the fact that rural agricultural land is not considered a capital asset, capital gains tax also isn't assessed on its sale. This will be the case regardless of the amount of the transaction, and there will never be a capital gains tax assessed on the sale of agricultural land. Which land would be labelled rural and which area would be considered non-rural is unclear in this situation. The government has specified which agricultural property will be recognised as rural land as well as which agricultural land might be regarded as non-rural land in order to clear up any ambiguities.

Is TDS applicable on sale of agricultural land?

The sale of agricultural land located in a non-rural area would be subject to capital gains tax since agricultural land located in an urban area will be regarded as a capital asset. In such a scenario, capital gains tax would be calculated similarly to how it is calculated when selling any other type of property. To determine the capital gains, the Sale Price would be subtracted from the Acquisition and Improvement Costs.

TDS on sale of agricultural land

Beginning on July 1, 2013, TDS of 1% must be withheld from any sale or purchase of real estate properties when the transaction value exceeds 50 lakhs. However, the sale or purchase of agricultural land is not covered by Section 194IA for TDS on Property. On the sale or purchase of agricultural land, TDS on Property shall not be applicable, regardless of whether the transaction value exceeds Rs. 50 lakhs. I hope this explains TDS on sale of agricultural land. Contact the legal experts of NoBroker to get assistance in all the legal matters related to real estate. Read More: How to Claim TDS in GST Online: Easy Steps?  Does Sale of Agricultural Land Attract Capital Gains Tax? How to Show Sale of Agricultural Land in ITR?

TDS on sale of agricultural land is not applicable in India.

As per the Income Tax Act in India, agricultural income is exempt from income tax. Agricultural land is a capital asset under the Income Tax Act. The gains from the sale of agricultural land are classified as agricultural income. Therefore, they are usually not subject to capital gains tax or TDS.

However, there are certain conditions for tax on sale of agricultural land:

1. Non-Agricultural Land

   : If the land that is sold is not classified as agricultural land and its location is in an urban area, it will be subject to capital gains tax. The buyer needs to deduct TDS at the applicable rate before making the payment to the seller.

2. Developed Land

   : If the agricultural land is converted for non-agricultural use and is sold after development, it will be treated as a capital asset and subject to capital gains tax.

3. Income from Agriculture

   : If the seller generates regular income from agricultural activities and its sale is a part of their business activities rather than the sale of agricultural land, tax implications will apply.

4. Local Regulations

   : State governments in India can also determine whether certain land transactions are subject to tax or TDS.

It's important to keep in mind that TDS

on agricultural land sale

can be complex, and agricultural land transactions can depend on various circumstances.

Want to sell your plot? Post free property ad here Need help with property documentation and verification? Contact experts Read more How to lease agriculture land near Bangalore?  How to Convert Agriculture to Industrial Land Conversion in Tamilnadu?

I was recently curious about ‘Is TDS applicable on purchase of agricultural land’. After conducting some research, I discovered that generally, TDS is not applicable on the purchase of agricultural land. However, if the sale value of the land exceeds Rs. 50 lakhs, then the buyer is required to deduct TDS at a rate of 1% from the total sale value of the land. This is only applicable if the seller is an individual or a Hindu Undivided Family (HUF).

Consult NoBroker’s Legal Experts if You Face Legal Issues in Selling/Buying Property!

I was relieved to learn that I wouldn't be subject to TDS upon purchasing agricultural land. However, if I were to sell the land in the future,I would have to pay tax on rural agricultural land sale. TDS would be applicable if the sale value exceeded Rs. 50 lakhs.

Indian Citizen :

I further researched why sellers have to pay  TDS agricultural land sale. I learned that it's a way for the government to ensure that taxes are paid on rural agricultural land sales. In the past, people would avoid paying taxes on such sales by undervaluing the sale price or not reporting it at all.

Is TDS applicable on agricultural land for NRI ?

I was curious about TDS on sale of agricultural land by NRI. It turns out that if an NRI sells agricultural land in India, TDS is applicable at a rate of 30% on the sale value.

If I come across any more information on ‘Is TDS applicable on purchase of agricultural land’, I will add it here.

Go for NoBroker’s tailored home loan solutions and buy your dream home Read more: How to calculate TDS on rent with example How do you deduct TDS on purchase of property from NRI? What is TDS on sale of property by NRI?