By Ms. Parizad Sirwalla,
KPMG
As per section 56 of
the Indian Income-tax (IT) Act, 1961, any immovable property received by an
individual without consideration, the stamp duty value of which exceeds
Rs.50,000, shall be taxable under the head “income from other sources”.
Exemption Available..!
However, exemption is
available if such property is received from a relative, including any lineal
ascendant or / descendant of the individual or / by way of inheritance.
The specific
definition of a relative is provided under section 56.
So there would be no
tax implication in your hands at the time of acquisition of the ancestral land
if the same is received from the person covered under the definition of
relative.
 |
| Ms. Parizad Sirwalla,, KPMG |
Wealth Tax.!
The other important
thing is the wealth tax implication. There is a specified list of assets that
attract wealth tax. One of the assets in the list which are liable for wealth
tax is urban land.
There are prescribed
valuation rules that apply for the purpose of computation of wealth tax.
Also, there are specific exemptions provided
such as urban land shall not include the land on which construction is not
possible or land on which building has been constructed with the approval of
the appropriate authority or unused land held by an individual for industrial purposes
for a period of two (2) years from the date of acquisition or / land held as
stock in trade for 10 (Ten) years from the date of acquisition for the purpose
of applicability of wealth tax.
Further, a plot of
land comprising an area of 500 square meter or / less shall not be subject to
wealth tax. Therefore, specific details would have to be seen to determine
whether wealth tax is payable on the land acquired.
Further, IT
(income-tax) liability with respect to such land would trigger if you propose to
sell it.
For tax purposes, it
has to be seen whether the land qualifies as a capital asset. If the farm land
is situated within certain specified areas as defined under section 2 (14), it
shall be classified as capital asset & would have tax implications.
Capital Gain Tax..!
For capital gain tax
purposes, it has to be seen whether the land qualifies as long term or short-term capital asset.
If the land is held
for at least 36 months (3 year) from the sale date, it shall be classified as a
long term capital asset.
Land held for less
than 36 months from the sale date would be classified as short-term capital
asset.
In case of
inheritance, the period of holding is counted from the date of purchase of
property by the original owner.
Long term capital
gains (LTCG), if any, shall be computed as per the specified provisions of the
Act. Further, you could claim LTCG as exempt from tax by reinvesting in
specified assets. Since it is an ancestral land, it is unlikely that the land
could be categorized as a short-term capital asset and would attract short-term
capital gains tax (STCGT).
About the author...!
Ms. Parizad Sirwalla is
Partner (Income Tax), KPMG
Contact:
Ms. Parizad Sirwalla, Partner, KPMG, Mumbai.
Email: psirwalla@kpmg.com.
Phone: +91 22 3090 2010
KPMG - Mumbai Office
KPMG, Lodha Excelus
Apollo Mills Compound, NM Joshi Marg,
Mahalaxmi, Mumbai - 400 011
Phone: +91 22 3989 6000
Fax: +91 22 3090 2210
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