Under the Income Tax Act, 1961, agricultural income is exempt from tax if it is derived from land used for agricultural purposes in a rural area. This means that if you sell agricultural land that qualifies as rural, any capital gains from the sale are generally not taxable. Key Points to Consider ERead more
Under the Income Tax Act, 1961, agricultural income is exempt from tax if it is derived from land used for agricultural purposes in a rural area. This means that if you sell agricultural land that qualifies as rural, any capital gains from the sale are generally not taxable.
Key Points to Consider
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Exemption Basis:
The exemption is provided under Section 10(1) of the Income Tax Act. If the agricultural land meets the criteria (used for agriculture and situated in a rural area), the gains on its sale are not included in taxable income. -
Definition of Rural Agricultural Land:
To qualify as rural, the land should be located outside the jurisdiction of a municipality or a cantonment board. Proper land use and title documents are necessary to confirm its status. -
Documentation:
Keep all relevant documents, such as land records and usage certificates, to support the claim that the property is agricultural land in a rural area.
Conclusion
If your agricultural land qualifies as rural under the criteria set out in Section 10(1) of the Income Tax Act, any capital gains on its sale will be tax-exempt. This benefit is aimed at supporting the agricultural sector and rural development.
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Capital assets are classified as short-term or long-term based on their holding period. The taxation rules for both categories differ under the Income Tax Act, 1961. 1️⃣ Short-Term Capital Assets (STCA) ✔️ Assets held for ≤ 36 months (≤ 3 years) before transfer.✔️ For listed shares, equity mutual fuRead more
Capital assets are classified as short-term or long-term based on their holding period. The taxation rules for both categories differ under the Income Tax Act, 1961.
1️⃣ Short-Term Capital Assets (STCA)
✔️ Assets held for ≤ 36 months (≤ 3 years) before transfer.
✔️ For listed shares, equity mutual funds, and certain securities – holding period ≤ 12 months is considered short-term.
✔️ Gains taxed as per slab rates (for individuals) or flat 15% (for equities under Section 111A).
✔️ No indexation benefit available.
2️⃣ Long-Term Capital Assets (LTCA)
✔️ Assets held for > 36 months (or > 12 months for equities & specified assets).
✔️ Taxed at 20% with indexation (except equities, which are taxed at 10% without indexation if gains exceed ₹1 lakh under Section 112A).
✔️ Eligible for exemptions under Sections 54, 54F, 54EC, etc.
🚨 Key Budget 2024 Updates Considered
📌 Debt Mutual Funds – Always taxed as short-term, no LTCG benefit.
See less📌 Market-Linked Debentures (MLDs) – Always short-term, regardless of holding period.
📌 REITs & InvITs – Capital repayment now taxable.