| Question And Answer | |
|---|---|
| Subject: | Sale of ancestral agricultural land after converting in to NA , how to compute the capital gains ? |
| Category: | Income-Tax |
| Querist: | ca vinay v. kawdia |
| Answered by: | Advocate Shashi Ashok Bekal |
| Tags: | Agricultural land, Capital Gains, cost of acquisition |
| Date: | May 19, 2021 |
Assessee sold ancestral agricultural land after converting it to NA in 20-21. Agricultural Land was converted to NA plots in 2016-17. All the plots were sold in one go. For the purpose of calculation of capital gain, while taking cost of acquisition as on 01.04.2001 as per S. 55(2)(b)(i), which SDV is to be taken – applicable to agri. land or NA land as on 01.04.2001? Is it possible to take cost of acquisition as on date when the land was converted to NA?
Section 55 and the head of capital gains refers to the transfer of a capital asset. An agricultural land is not a capital asset under the scheme of Income-tax Act, 1961.
Therefore, FMV of NA on the date of conversion may be taken into consideration, also the period of holding will be considered from the date of conversion. It may be desirable to get the valuation report from the Authorized Valuer .
What if the Land in question was Rural Land and converted into NA Land 4 years back and the said NA land was sold in Jul 2021?
It will be same as stated above…
As it is converted four years ago means in 2017-18, FMV on date of conversion will be taken and for period of holding also -from date of conversion to date of sale…
As it is held for more than 36 months it will taxable as LTCG u/s112
What if the land was converted by the government and not by individual
If agriculture land is converted in NA will the conversion can be considered as long term capital gain?
The FMV based on valuation report of registered valuer on the date of converting Rural Agricultural land into NA plot may be claimed as exempt as such Rural Agricultural land had not been falling in the catagory of Capital Asset. The FMV of NA Plots(erstwile Rural Agricultural Land on the date of conversion) should be claimed as deductible cost of NA plots which is capital asset and period of holding after NA conversion shall be considered for determining whether it is sale of short term capital asset or long term for chargeability under head Capital Gains and if the land owner claims that he had converted Rural agricultural land as stock in trade then FMV as on date of conversion shall be out side ambit of capital gain tax and gain from the money realised on sale of NA plots after deducting cost of Stock in trade (i.e FMV of Rural Agri land converted in NA plots) and other eligible business expenses may be claimed as deduction from sales realization or stamp duty value u/s 43CA which ever is higher. However, before taking call one needs to make research on case laws and consult an expert.