3 siblings inherited an agricultural property but were told that due to the fact that it is land, they need to register a company because land cannot be owned by more than one individual. As result they formed a company and sold the property which obviously created CGT as well as STC.
Is the Hindu Succession Act 1956 applicable to agricultural lands?
It may be stated in the passing that our Court has decided hundreds and thousands of matters during all these years on the footing that the Hindu Succession Act, 1956 is applicable to agricultural lands save and except to the extent provided in Section 4 (2) of the Act.
When to apply for IHT agricultural property relief?
The agricultural value is usually lower than market value in these circumstances so APR may not apply to the whole value of the land. IHT Business Property Relief (BPR) may need to be considered instead. There are special rules which apply where property which qualifies for APR is replaced within the two years before death.
Can a farm be passed down to the next generation?
However, farmers are notoriously poor at keeping records and there are a number of pitfalls which need to be avoided if the farm is to be passed smoothly down to the next generation without adverse IHT or CGT consequences.
Is there capital gain on sale of agricultural land in India?
No capital gain is applicable to the sale of agriculture land in the rural areas of India and the agricultural land in rural areas is not considered as a capital asset. In case an individual uses the entire sale proceeds of the capital asset to purchase the house property they will not be taxed.
What kind of CGT do I need for a farm?
The farm had agreed strong Agricultural Property Relief (APR) and Business Property Relief (BPR) for inheritance tax and thus ironically a higher probate value would have mitigated the CGT liability arising from an increased sale price over the probate value.
Do you have to pay tax on sale of rural land in India?
Yes, you don’t need to pay tax on sale of rural agricultural land. Please feel free to call /revert in case you need more clarity. Yes, rural agricultural land is exempt from taxes in India. Trust this clarifies your query. Feel free to call / get back in case of further clarifications. Thanking You. BCOM, FCA, LLB, CERT. FAFP
