The Hindu Business Line : Tax liability on sale of agricultural land

I had purchased 1 acre of agricultural land in 1983 for Rs 10,000. I got 2.7 acres of agricultural land through partition of ancestral properties. During November 2007, I sold the 3.7 acres for Rs 45 lakh. What would be the tax implication on sale of the property? — Muthukrishnan

Agricultural land is not a capital asset if the land is ituated in any area not comprising within the jurisdiction of a municipality (whether known as a 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 10,000 or more according to the last census of which the relevant figures have been published before the first day of the previous year; or in any area in a distance of eight km or more from the local limits of any municipality or cantonment board referred to in item (a), as the Central Government may, having regard to the extent of and scope for, urbanisation of that area and other relevant considerations, specify in this behalf by notification in the Official Gazette. Only if the agricultural land does not fall within the above category, the gain there from will be chargeable to tax. Your query does not indicate whether the agricultural land will be classified as a capital asset u/s 2(14). If it were outside the meaning of the term capital asset, there will be no liability to tax on its sale. If it is within the meaning of the term capital asset, it would be chargeable to tax at 20 per cent (as increased by the appropriate surcharge and additional surcharge). The cost of acquisition of an acre purchased by you will be taken as Rs 10,000 and of the 2.7 acres would be the cost for which it was originally acquired or the fair market value as on 01.04.1981, at your option.

If I invest in an equity share/mutual fund on cum dividend basis and sell it on the ex-dividend date, the period of holding being one day or more, what will be my income-tax liability? — M.R. Prabhu

The loss as a result of such sale of equity shares and units of mutual funds to the extent of such dividend or income from units of mutual funds would be ignored in such cases. This is provided for in section 94(7) of the Act.

I am a senior citizen and have income from dividends of shares and mutual funds, which is less than the maximum amount not chargeable to tax, i.e. less than Rs 1,95,000. Do I have to file a return of income? — L.R. Venkataraman

You will not have to file return of income as your gross total income is less than the maximum amount not chargeable to tax.

Can the EMI paid on a housing loan for buying a flat, which is self-occupied, be claimed as deduction against the rental income from another flat owned by the borrower and which has no loan outstanding against it. If so, how much of the principal and interest can be claimed as deduction against the rental income received? — P.S. Gohil

You may in effect be able to claim the principal repayment and interest as a deduction against the income from the property against which no loan is outstanding. The annual value of the property which is self occupied will be taken as NIL and a deduction in respect of interest on loan taken for such property can be claimed up to Rs 1,50,000.

The net effect would therefore be that the income from the self-occupied property would be negative. The income from the other property, which is let out, would be computed and by virtue of section 70 which provides for an inter source adjustment; the loss from the self-occupied property can be set off against the income from the property which is let out. From your gross total income you can also claim a deduction under section 80C. Section 80C provides for a deduction in respect of certain payments and investments up to a maximum of Rs 1,00,000. This section also permits the claim of deduction in respect of principal repayment of housing loan within the ceiling limit provided the loan is taken from a bank, financial institution or certain employers.

(Mail your queries to taxtalk@thehindu.co.in or by post to `Tax Talk', Business Line, Kasturi Buildings, 859, Anna Salai, Chennai-600002)

More Stories on : Income Tax | Tax Talk

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page