Capital gain on rural agricultural land

[manoj gupta]

A businessman purchases a rural land which is outside the presribed limits of a municipality for qualifying as rural land. Before selling, the seller used the land for agricultural operations for many years. But the businessman or his parents have not done agriculture either on this land or any other land throughout their life. The businessman sells the land within 1 year of purchase. Is capital gain arising on this sale is exempt for this land being not a capial asset. Is this land a rural agricultural land.

AI Summary

Tax Implications of Selling Rural Agricultural Land: Understanding Capital Gains Exemption Criteria and Business Transaction Classification A businessman purchased rural land outside municipal limits, previously used for agriculture by the seller, and sold it within a year. The query is whether the capital gain from this sale is exempt, considering the land as non-capital agricultural land. Respondents agree that actual cultivation by the businessman is not necessary for the land to qualify as agricultural, provided it hasn't been used for non-agricultural purposes. However, if the land was acquired as stock-in-trade or developed for non-agricultural use, it may be considered a business transaction, affecting tax treatment. Proper classification in financial records is advised.