|Purchase of rural agricultural land below stamp duty value is not liable for notional taxation|
TAX TALK-12.12.2016-THE HITAVADA
CA. NARESH JAKHOTIA
Purchase of rural agricultural land below stamp duty value is not liable for notional taxation
You would be receiving the gift from your son. It would not carry any tax implications. Subsequent income from the gifted amount would be taxable as your income alone and would not be subject to the clubbing provision in the hands of your son.
Gift of a plot by your mother to her grandson (9 year old & not having PAN) is not taxable. It would be tax free as the recipient is receiving it from the relative as specified in section 56(2)(vii) of the Income Tax Act-1961. Income arising from the gifted plot (till he attains the age of 18 years) would be subject to clubbing provision in the hands of the parent.
I have read in earlier issues of Tax Talk that if the property is purchased below the ready reckoner value, then the difference would be taxable in the hands of the purchaser. Any exception like few defects in title, immediate payment situation, etc? Whether it will be taxable even if the purchase is of agricultural land also? [KLS- firstname.lastname@example.org]
a] In normal course, income-tax is payable on real income only. But there are provisions in income tax Act whereby citizens are required to pay the tax without actual income also. One such instance is purchasing the property below stamp duty valuation.
b]) Section 56(2): If any individual/HUF purchases any immoveable property for an inadequate consideration (i.e., if the stamp duty valuation of the property is more than the actual purchase price) and the difference between stamp duty valuation and actual purchase price is more than Rs.50,000/-, then such difference shall be taxable in the hands of the individual or HUF as “Income from Other Source”. For this purpose, stamp duty valuation as on the date of agreement to sale could be considered if any part of the consideration is paid by the purchaser otherwise than in cash.
c] Amount would be taxable irrespective of the fact that the transaction is genuine, or the purchase was due to few defects in the property or it was a distress sale on the part of the seller etc.
d] Difference is taxable only in respect of purchase of any immoveable property which is a “capital assets” under the Income Tax Act. It may be noted that rural agricultural land is not recognized as “Capital Assets” under the Income Tax Act-1961 and hence difference in purchase of rural agricultural land would not be subject to notional taxation as mentioned above.
An agricultural land is considered as rural agricultural land only if it is not situated in any area within the distance (measured aerially) of not more than:
a] 2 Kms, from the local limits of any municipality or cantonment board and which has a population of more than 10,000 but not exceeding 1,00,000; or
b] 6 Kms, from the local limits of any municipality or cantonment board and which has a population of more than 1,00,000 but not exceeding 10,00,000; or
c] 8 Kms, from the local limits of any municipality or cantonment board and which has a population of more than 10,00,000.
In my IT returns for AY 2016-17, I had submitted income from other sources corresponding to bank interest and paid tax accordingly i.e., tax corresponding to excess of Rs. 10,000/- interest and 30% tax as per my slab. I paid the same in challan No. 282, with major head 024 (interest tax) and minor head 300 (Self Assessment). But, I have received intimation from income tax mentioning outstanding demand of the same amount (as paid by me) and asking me to pay in challan No-280, with major head 021 (income tax , other than companies) and minor head 400 (tax on regular assessment). Shall I pay as per IT demand? If yes then what about the amount already paid? Please guide me in the above matter as how to respond to the IT query. [Nilay A. Mahajan- email@example.com
Opinion:One has to be very careful while making the tax payment to the Government Treasury as payment in wrong challan or with wrong assessment year or with details often results in unwanted demands & notices. Various Challan normally available for payment are as under:
[The author is a practicing Chartered Accountant from Nagpur. Readers may send their direct tax related queries at
SSRPN & Co
10, Laxmi Vyankatesh Apartment
C.A. Road, Telephone Exch. Square
or email it at firstname.lastname@example.org]