Capital gain on compulsory acquisition of urban agricultural land is chargeable to tax unless it qualifies for exemption under Section 10(37).
This exemption is available only to individuals or HUFs and only when land was used for agricultural purposes for 2 years before acquisition.

Explanation in Simple Terms:

✅ Urban Agricultural Land = Capital Asset

• If it is in/near municipality (as per Sec 2(14)), it’s considered capital asset

• Hence, capital gain is chargeable

✅ But Exemption Possible Under Section 10(37) if:

1. Land was used for agricultural purposes in the 2 years before acquisition (by assessee or their parents)

2. Assessee is an individual or HUF

3. Compensation received on or after 1st April 2004

❌ If conditions NOT met, capital gains shall be taxable in the year of receipt of compensation (u/s 45(5))

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

• 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.

Leasing of trucks falls under the scope of “business”, as defined in Section 2(13) and 2(28C):”Business includes trade, commerce or manufacture or any adventure in the nature of trade…”

So, income from truck leasing is taxable under the head ‘Profits and Gains of Business or Profession’ [Section 28].

Two Methods of Computation:

1️⃣ Presumptive Taxation – Section 44AE (for small transporters)

Applicable only if the person owns ≤ 10 goods vehicles (including leased ones).

📘 Bare Act (Section 44AE):

“The income shall be deemed to be ₹1,000 per ton of gross vehicle weight (GVW) for heavy goods vehicles and ₹7,500 per month per vehicle for other goods vehicles.”

💡 Key Points:

• Applies to persons owning goods carriages, even if leased out

• Applicable only for goods vehicles, not passenger vehicles

• Income is presumed, no need to maintain books (Sec 44AA not required)

• Heavy goods vehicle = GVW > 12,000 kg

• No further deduction allowed (like depreciation, etc.)

✅ Example:

Mr. A owns 5 trucks (each <12,000 kg) and leases them.

→ Presumptive income = ₹7,500 × 5 trucks × 12 months = ₹4,50,000

This ₹4.5 lakh will be taxable under “Business Income” without further deductions.

2️⃣ Normal Taxation (Section 28 & 32) – If not opting 44AE or owning > 10 vehicles

If the assessee:

• Owns more than 10 trucks, or

• Chooses not to opt for Section 44AE,
  Then normal business provisions apply.

🔹 Income = Gross Receipts – Allowable Expenses

Allowable expenses include:

• Truck maintenance & fuel

• Driver wages, RTO fees, etc.

• Depreciation under Section 32 (usually 30% for trucks on WDV basis)

• Interest on loans for trucks

• Insurance and road tax

📒 Books of accounts must be maintained as per Section 44AA
🔍 Accounts may be audited if turnover exceeds limits in Section 44AB

Which is Better?

Under the Income Tax Act, 1961, as amended by the Finance Act, 2025, the following categories of taxpayers are mandatorily required to get their accounts audited under Section 44AB for the Financial Year (FY) 2024–25 (Assessment Year 2025–26):​

🔹 1. Businesses

• Turnover exceeding ₹1 crore: If the total sales, turnover, or gross receipts exceed ₹1 crore in a financial year, a tax audit is mandatory.​

• Turnover between ₹1 crore and ₹10 crore: If the turnover is up to ₹10 crore and cash transactions do not exceed 5% of the total receipts and payments, a tax audit is not required. This promotes digital transactions and reduces compliance for businesses operating primarily through banking channels.

• Turnover exceeding ₹10 crore: Regardless of the mode of transactions, if the turnover exceeds ₹10 crore, a tax audit is compulsory.​

🔹 2. Professionals

• Gross receipts exceeding ₹50 lakh: Professionals such as doctors, lawyers, architects, etc., must undergo a tax audit if their gross receipts exceed ₹50 lakh in a financial year.​

• Enhanced threshold to ₹75 lakh: If cash receipts do not exceed 5% of the total gross receipts, the threshold for mandatory tax audit is increased to ₹75 lakh. ​

🔹 3. Presumptive Taxation Scheme Optants

• Section 44AD (Businesses): If a taxpayer declares profits lower than the prescribed rate (8% or 6% for digital transactions) and their total income exceeds the basic exemption limit, a tax audit is required.​

• Section 44ADA (Professionals): Professionals opting for presumptive taxation under this section must get their accounts audited if they declare profits lower than 50% of gross receipts and their total income exceeds the basic exemption limit.​

🔹 4. Other Specific Cases

• Section 44AE, 44BB, or 44BBB: Taxpayers declaring income lower than the deemed profits under these sections and whose total income exceeds the basic exemption limit are required to get their accounts audited.​

⚠️ Penalty for Non-Compliance

Failure to comply with the tax audit provisions can attract a penalty under Section 271B, which is the lesser of:​

• 0.5% of the total sales, turnover, or gross receipts, or​

• ₹1,50,000.​

However, if the taxpayer can demonstrate a reasonable cause for the failure, the penalty may be waived.