Haryana to exempt agricultural land sale from capital gains tax

Written by Preeti Parashar | Chandigarh | Updated: Jan 18 2011, 07:47am hrs
Haryana farmers who part with their land may no more have to pay capital gains tax on the amount of compensation received from the buyer. It comes as a recommendation of the revised land acquisition policy of the state that came into effect from November 2010. If all goes as per plans the total amount paid to the farmers shall not come under the capital gains tax ambit. Sources in industries department informed FE that the state government has already forwarded the recommendation to the Centre for exempting the compensation amount from the purview of the capital gains tax.

YS Malik, financial commissioner and principal secretary, Haryana industries and commerce, said, We had approached the Centre even before the policy was revised and have received a reply from the finance ministry as well. We are still processing it and working out the modalities. As such the agricultural land situated outside 8 km of the municipalities limits is exempted from capital gains tax but we have proposed to exempt that land which falls within 8 km of municipalities limits. Since taxation is central issue we have approached the Centre for this decision. But this will be applicable in cases where the land is either Dadalahi or acquired in the name of the father or the existing landowner for a period of more than 10 years.

Haryana government has taken up the issue of absolving those farmers, whose land was acquired by the Centre, from capital gain tax purview.

Agriculture, being reserved for the states under the Indian Constitution, the Centre is not entitled to tax the agricultural income. Agricultural income is, therefore, exempt under income-tax laws. Profit on the sale of agricultural land is also exempt from capital gains under income-tax laws. But two types of agricultural land does not come under the capital gains tax ambit one that is located within municipal or cantonment board limits, where the population of the municipality/cantonment board is at least 10,000 and the second is land which is within certain notified distance (of up to 8 km) from the limits of notified municipalities/cantonment boards. Agricultural land that is situated in these areas would be a capital asset and the sale of such land would, therefore, be subject to capital gains tax. It is only in the case of agricultural land located outside these areas that capital gains tax liability would not arise on sale.

However 2% of land acquisition compensation amount will be set apart by HUDA/HSIIDC/HSAMB for expending on creation of community development /infrastructure works in the respective villages and 1% of the amount will be set apart and expended on skill development initiatives for the dependents of oustees and other landless persons.

Apart from the capital gains tax, the affected farmers will also be exempted from the stamp duty for purchase of land in the state. If a landowner, whose land is acquired, purchases alternate agricultural land in Haryana within a period of two years of the award, he would be entitled to claim exemption from payment of stamp duty and registration charges on such purchase of agricultural land. The exemption would be given only up to the amount awarded and if the land is purchased for a higher amount the balance shall attract stamp duty and registration charges.