Taxation on sale of Agricultural Land

·         As per section 45 of the Income tax act, 1961 (ACT) , transfer of any capital asset is subject to tax under the head capital gain.

   

·         Capital gain has been defined under section 2(14) of  ACT and same exclude the Agricultural land .  

·         The Agricultural land further defined in the sub clause (iii) of the section 2(14) of the ACT  and the conditions prescribed in the ACT for a land to be said as agricultural land  is given below in the tabular format.  

SN	Condition
1	Not being a land situated-  In any area which is comprised within the jurisdiction of a municipality (whether known as municipality, municipal corporation, notified area committee, town area committee, town committee, or by any other name) or a cantonment board and which has a population of not less than ten thousand [according to the last preceding census of which the relevant figures have been published before the first day of the previous year]	.
2	Not being a land situated-       Not being more than two kilometers, from the local limits of any municipality or cantonment board referred to in item (1) and which has a population of more than ten thousand but not exceeding one lakh
3	Not being a land situated- Not being more than six kilometers, from the local limits of any municipality or cantonment board referred to in item (1) and which has a population of more than one lakh but not exceeding ten lakh
4	Not being a land situated-  Not being more than eight kilometers, from the local limits of any municipality or cantonment board referred to in item (1) and which has a population of more than ten lakh

The distance from the Municipal Corporation measurement:

Such distance is to be measured on straight line aerially as crow flies. The shortest aerial distance has to be considered. Such shortest aerial distance is defined as “A straight line distance between two places.’’ A human would travel further to get from one point to another due to obstacles or lack of roads or trails, but a crow can go in a straight line between them. Humans have to follow roads which have their twists and turns. But, a crow does not have to face the barriers that humans face. Hence, we measure the straight line distance between two places.

“the distance as the crow flies is a way to describe  the distance between two locations without considering all the variable factors. As an example, traveling from California to maine involves a rather indirect route around, over and through mountain ranges and so forth. The driving distance might be about 3,500 miles, but the distance as the crow flies is about 2,800 miles.

Human                                                            By road

Crow’s flight                   straight line distance (aerial measurement

·         The Analysis of the above definition of Agricultural land is that it require to satisfy and one condition out of 4 and hence based on the population of the village  and distance of the land from the village, same will be termed as Agricultural Land.

Distance	Population
Within 2 kilometers	10,000-1,00,000
2 kilometers – 6 kilometers	1,00,000-10,00,000
6 kilometers – 8 kilometers	More than 10,00,000

·          Thus based on the facts of the land if same able to satisfy any above one condition then it will be treated as agricultural land and profit made from sale of any agricultural land is not taxable as section 45 of the Income tax act.