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Agricultural Land for Income Tax Purposes:


Agricultural Land is excluded from the definition of capital asset as per Section 2(14)(iii) of the Income Tax Act. We can also say that agricultural Land is not a capital asset under Income Tax hence any profit/gain on sale of such land is not chargeable to Income Tax.

How to decide about a particular land being agricultural land or not? Lets find out.

Income Tax Act defines Agricultural land as:
  1. Any land which is not situated in any area with in the jurisdiction of any municipality, municipal corporation, notified area committee, town area committee, town committee or a municipality known with any other name or a cantonment board and which has a population of atleast ten thousand; or
  1. Any land which is not situated in any area within the disatance measured aerially:
    • not more than two kilometres from the local limits of a municipality or cantonment board (as referred in point (a) above) and which has a population of more than ten thousands but not more than one lacs; or

    • not more than six kilometres from the local limits of a municipality or cantonment board (as referred in point (a) above) and which has a population of more than one lacs but not more than ten lacs; or

    • not more than eight kilometres from the local limits of a municipality or cantonment board (as referred in point (a) above) and which has a population of more than ten lacs.
Population: Here population means population as per the last preceding census figures of which have published before the first day of previous year.

Note: The aerial measuring of distance of agricultural land from the municipality limits was implemented in the Act from AY 2014-15, there are confusions regarding distance measurement in prior periods.

CBDT vide its circular issued on 6th October 2015 has cleared now that measurement of distance for determining agricultural land for the period before AY 2014-15 shall be the shortest road distance between municipal limit and the land.


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Some Quick Links:
What is Capital Gain and tax on capital gains
Short Term Capital Gain on sale/redemption of Shares & Mutual Funds
Capital gain on sale of house property
How to calculate LTCG & Indexed Cost of Acquisition
Long term capital gain on sale of house property-how to save
Various exemptions under Income Tax Act from LTCG


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