Agricultural land ownership in India comes with specific tax considerations that every investor should understand.
Income Tax Exemptions
Agricultural income is exempt from income tax under Section 10(1) of the Income Tax Act. However, certain conditions must be met, including the property's distance from municipal limits.
Capital Gains
When selling agricultural land, capital gains tax treatment depends on whether the land is classified as rural or urban. Rural agricultural land sales are exempt from capital gains tax.
Property Tax
Agricultural land typically attracts lower property taxes compared to residential properties. However, if the farmhouse is used for non-agricultural purposes, different rates may apply.
Record Keeping
Maintain comprehensive documentation: purchase deeds, mutation records, tax receipts, and any agricultural activity records. Proper documentation is crucial for claiming exemptions.
Understanding these tax aspects helps you make informed decisions and maximize the financial benefits of agricultural property ownership.
