My grandfather who is around 80 years old selling agricultural land that he has acquired from his forefathers in Aligarh (Uttar Pradesh). He would the selling the land for 13 lakhs. Is this taxable. He intends to receive the funds by Demand Draft credited to his son's bank account that is in Delhi.


As your is a very specific case, please get an advice of CA. It should not cost you much and make it easier.

The sale of agriculture land is taxable in certain conditions and exempt from tax in other cases.

Sale of agricultural land is subject to capital gains tax. But there are certain exemptions under Section 54B, subject to conditions, which are as follows:

  1. The land is used for agricultural purpose by the assessee or his parents two years before the sale
  2. The proceeds from the sale is used to purchase new agricultural land. If the capital gain is less than or equal to the cost of acquiring new land, no capital gain can be charged under Section 45. If the capital gain is greater than the cost of acquiring new land, the difference between the capital gain and the cost shall be treated as income subject to tax.
  3. According to extant laws, agricultural land should not be situated within 8km of municipal limit. However, this year’s budget has proposed that the transfer of agricultural land within 2km of municipal limit having a population of 10,000 to 1 lakh, or land situated within 6km with a population of 1 lakh to 10 lakh should be subject to tax.

If deemed taxable, you can avail indexation, ie the price at which you grandfather got [the date when he inherited it as per indexation] and pay 10% on the difference. If the price is not known, you can take the govt prescribed rate.

As there is a large deposit in your fathers account, there can be tax queries and need to be answered. Technically there is no tax liable even if your grandfather gifts the money to your father.

More details at http://www.telegraphindia.com/1130401/jsp/business/story_16733007.jsp and http://www.incometaxindia.gov.in/publications/4_compute_your_capital_gains/chapter2.asp

Your Answer

