Tax Liability on Sale of Agricultural Land or Plot.

In normal course, any income from transfer of agricultural land, which is being used for agricultural purpose, shall be tax free if the agricultural land is not situated in any area within the distance (measured aerially) of not more than:

• 2 kms, from the local limits of any municipality or cantonment board and which has a population of more than 10,000 but not exceeding 1,00,000; or
• 6 kms, from the local limits of any municipality or cantonment board and which has a population of more than 1,00,000 but not exceeding 10,00,000; or
• 8 kms, from the local limits of any municipality or cantonment board and which has a population of more than 10,00,000.

If the agricultural land is situated within the radius of 2 kms/ 6 kms / 8 kms as mentioned above, then depending upon the period of holding, the profit arising on sale of agricultural land will be taxable as Long Term or Short Term Capital Gain.

If the Agricultural Land is not covered in the situation mentioned in (1) above then the profit arising on sale of agricultural land would be taxable as Long term Capital Gain as the agricultural land is having a holding period of more than 36 months. In absence of the exact reference of the date/financial year of acquisition in the query, Stamp Duty valuation of the land at the time of sale & also the non availability of the Cost Inflation Index (CII) for the FY 2013-14, the amount of Long Term Capital Gain could not be worked out. The CII for the FY 2013-14 has not yet been notified by the CBDT & it is expected that the same may be notified in this month itself.

If the profit on sale of Plot would be a Long Term Capital Gain, it is sold after a holding period of more than 36 months. If the plot is sold within a period of 36 months, the profit would be treated as Short Term Capital Gain and for tax purpose, would be treated like your other regular income. It would be taxable as per the applicable tax slab to your income. Since you are ultimately planning to utilize sale proceeds for purchase of a residential house property, it is advisable to sell the plot after completing the holding period of 36 months so as to claim tax benefit conferred by section 54F.

In absence of the exact reference of the date/financial year of acquisition in the query, Stamp Duty valuation of the plot at the time of sale etc, the amount of Capital Gain could not be worked out.