This article simplifies the process of selling land in India offering clear insights on how to manage TDS deductions, understand the differences between urban and rural agricultural land, and calculate capital gains tax.
There are two main considerations while selling land from a taxation perspective:
If you are an NRI selling land in India, see this article instead: Complete Tax Guide for NRIs Selling Land in India.
Tax Deducted at Source (TDS) is the income tax deducted before the income is given to you
TDS is not applicable on rural agricultural land or if the deal value is below ₹50 lakhs. All other deals will have 1% TDS.
Some land deals by resident India sellers fall under the TDS rules as per Section 194 of the Income Tax Act:
Capital Gains Tax when resident Indians sell land in India depends on whether:
Urban agricultural land is situated close to a small population centre (shortest aerial distance and population as per the last census) as per the table below:
| Distance | Population |
|---|---|
| Less than 2 KM | More than 10,000 |
| More than 2 KM but Less than 6 KM | More than 1,00,000 |
| More than 6 KM but Less than 8 KM | More than 10,00,000 |
Any agricultural land which is not Urban agricultural land is classified as Rural agricultural land which is not a capital asset and therefore tax-free when sold.
Land records maintained by the municipality or equivalent body will give you the data for this distinction.
Once you know the type of land, the table below tells you what is the taxation applicable:
| Type | Urban Agri | Rural Agri | Non Agri |
|---|---|---|---|
| Capital Asset | Yes | No | Yes |
| LTCG Rate | 12.5% | No tax | 12.5% |
| STCG Rate | At Slab | No tax | At Slab |
Capital gains tax on land sales is calculated as per the holding period:
Short-term capital gains tax is 30% + cess for when sold within two years.
Long-term capital gains tax is 12.5% + cess for when sold after two years without indexation.
Union Budget 2024 revised the long-term capital gains tax rules for land:
Section 54 of the income tax allows tax to be saved if:
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Published: 20 October 2024
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This post titled Complete Tax Guide for Resident Indians Selling Land in India first appeared on 23 Oct 2024 at https://arthgyaan.com
