Chartered Accountant

1. Rural Agricultural Land:
   As far as rural agricultural land is concerned, it may be noted that it is not a capital assets and the surplus arising on its transfer is also tax free in the hands of taxpayer.
   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.
2. Urban Agricultural Land:
   In case of Urban agricultural land, any Capital gain arising to an Individual/ HUF out of the compulsory acquisition is exempt from income tax u/s 10(37) of the Income Tax Act-1961 provided:
   a] It is received after 31.03.2004 &
   b] The said agricultural land was used by the assessee or his parents for agricultural purpose during the preceding 2 years prior to its transfer.

1. In case of compulsory acquisition of agricultural land, entire amount would be exempt. If urban agricultural land then amount would be exempt u/s 10(37) as mentioned in point No.(2) above. If rural agricultural land then also it would be exempt as rural agricultural land is not treated as a capital assets at all.
2. Interest received on compensation of compulsory acquisition of land is taxable. It is “Income from Other Source” u/s 56(2)(viii) of the Income Tax Act-1961.
3. Interest on such compensation is taxable on cash basis by virtue of specific provision incorporated u/s 145A(b) of the Income Tax Act-1961.
4. Against interest income, one can claim deduction u/s 80C by making an investment in LIC/PFF/NSC etc up to Rs. 1.50 Lacs. Further, deduction towards mediclaim u/s 80D can also be claimed in such cases. Further, an additional deduction of Rs 50,000/- u/s 80CCD (1B) towards investment in National Pension Scheme (NPS) is also available from the FY 2015-16.

1. Loss from one source under any one particular head of income, as mentioned above, can be adjusted against other income in the same head of income. It is referred to as “Intra-head set off”.
2. If after intra-head adjustment, still there is a loss then such loss can be adjusted against Income under other Heads. It is called as “Inter-head Set Off”.

1. Loss from speculation business cannot be set of against profit from non speculation business. However, reverse is not true & loss from non speculative business can be set-off against speculation income.
2. Long term Capital Loss (LTCL) can only be set off only against LTCG. LTCL cannot be set off against STCG.
3. No loss can be set-off against casual income i.e. Income from lotteries, crossword puzzles, race including horse race, card game, and any other game of any sort or from gambling or betting of any form or nature. No expenses can be claimed against casual income.
4. Loss from the business of owning and maintaining race horses cannot be set off against any income other than income from the business of owning and maintaining race horses.
5. Loss from an exempted source cannot be set off against taxable Income- If income from a particular source is exempt from tax, then loss from such source cannot be set off against any other income which is chargeable to tax. E.g., Agricultural income or capital gain on sale of shares sold through a stock exchange after a holding period of more than 12 months is exempt from tax. Hence, if the taxpayer incurs loss in such activity, then such loss cannot be adjusted against any other taxable income.
6. Loss from business specified u/s 35AD cannot be set off against any other income except income from specified business. section 35AD is applicable in respect of certain specified businesses like setting up a cold chain facility, setting up and operating warehousing facility for storage of agricultural produce, developing and building a housing projects, etc.

1. Before making inter-head adjustment, the taxpayer has to first make intra-head adjustment.
2. Loss from speculative business cannot be set off against any other income. Interestingly, non-speculative business loss can be set off against income from speculative business. For Example: House property loss can be set-off against Speculative Incomes but speculation loss cannot be set off against House property income.
3. Business loss cannot be set-off against salary income. It can be set-off against income under other heads.
4. Loss under the head Capital Gains (LTCL or STCL) cannot be set-off against any other head. However, Loss from other heads can be set-off against Capital Gains income.
5. No loss can be set off against Casual income from winnings from lotteries, crossword puzzles, race including horse race, card game, and any other game of any sort or from gambling or betting of any form or nature. No expenses can be claimed against casual income.
6. Loss from the business of owning and maintaining race horses cannot be set off against any other income.
7. Loss from an exempted source cannot be set off against any other income. (e.g. Shares/Agricultural income as mentioned above).
8. Loss from business specified under section 35AD cannot be set off against any other income (section 35AD is applicable in respect of certain specified businesses like setting up a cold chain facility, setting up and operating warehousing facility for storage of agricultural produce, developing and building housing projects, etc.)