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Capital gains tax exemption for agricultural land
19-Aug-2023 (In Property Law)
"Agricultural land in rural area in India is not considered as a capital asset and therefore no capital gains will be applicable on its sale."
Based on the above, if a person owning an agricultural land transfers the land through a gift deed to a registered company in which he/she is not a partner/director, is there any tax implication for either the person or the company?
Rural agricultural land is excluded from the definition of capital asset u/s 2(14) of the Income Tax Act. Also, under Section 47, transfer of capital asset by way of Gift Deed is not considered as transfer. Therefore, if a person gifts his capital asset to another, then no capital gain will arise for the donor.
However, if the person receiving the capital asset by gift transfers it subsequently, capital gains will arise. For such cases, when the recipient has received the land by way of gift or will, then the cost of acquisition of the asset would be the price at which the previous owner has acquired the land.
However, if the person receiving the capital asset by gift transfers it subsequently, capital gains will arise. For such cases, when the recipient has received the land by way of gift or will, then the cost of acquisition of the asset would be the price at which the previous owner has acquired the land.
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Adv. Prerana R Saraf
Mumbai | 25+ Answers
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