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Documents needed to prove plot sold is agricultural land to avoid capital gains tax : Shivpurinews.in

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In every ET Wealth edition, our panel of experts answers questions related to any aspect of personal finance. If you have a query, mail it to us right away at etwealth@timesgroup.com.

I bought a piece of agricultural land near Mohali in 1995 for approximately Rs 20 lakh. The plot is currently worth over Rs 2.5 crore. I understand that subject to certain conditions of location, agricultural land is not considered as a Capital Asset for the purpose of capital gains. Please advise the applicability of capital gains tax, and if exempt, documentation necessary for presentation to the assessing officer.

Amit Maheshwari, Partner, AKM Global replies: To prove that the land is agricultural, the taxpayer needs to get the records with the concerned Land Revenue Office for the classification of land and concerned municipal records for other information like population, area within municipality, etc. If the land does not qualify as agricultural land, the capital gains thereon shall be taxable. The fair market value of land as on 1 April 2001 will be considered the cost which shall be indexed to the year of sale to adjust for inflation and the gains arrived at after deducting the such cost from the sales consideration shall be taxed @ 20% plus applicable surcharge and cess.

My query is related to my equity investments with a holding period of six months to 20 years. I plan to gift all to my 20-year-old son. On liquidation of investments, will the capital gains be taxable in his hands? Will the duration of holding of shares as applicable to me be applicable to him also?

Amit Maheshwari, Partner, AKM Global, replies: Section 56(2)(x) of the Income-tax Act, 1961 provides that, any gift received from a relative is not taxable in the hands of the taxpayer, irrespective of the quantum. Hence, the gift by you to your son will not be taxed in his hands, nor will there be any clubbing of income in your hands. On further sale of a capital asset, capital gains shall be taxable in the hands of the seller on the basis of the period of holding. Cost of acquisition and date of acquisition of the asset shall be the cost and date of the previous owner respectively. Hence, capital gains arising on the transfer of such investment would be taxable in the hands of your son, and the period of holding of shares would be calculated from the date of acquisition by you.

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