Agricultural Land Tax Rule: Many rules related to agricultural land tax apply. There will be no tax on selling rural agricultural land, but capital gain tax will have to be paid on urban agricultural land. The category of land will be decided on the basis of population and distance. In some states, permission of the local administration will be required for selling agricultural land to non-farmers.
Agricultural Land Tax Rule: On February 13, Finance Minister Nirmala Sitharaman introduced the Income Tax Bill 2025. In this new bill, many old sections have been amended and some new sections have been added. The aim of the government is to make the income tax law simple and transparent, so that it is easy to understand. Many changes related to agricultural income have been made in this bill. Now dairy, poultry and fish farming will be considered as non-agricultural income and will be taxed.
After the change in the rules related to the income from agriculture in the Income Tax Bill, many people want to know about the tax on agricultural land, so let us understand the provisions related to the tax on agricultural land in detail. Generally, there is a belief that there is no tax on the sale of agricultural land in the country, but many conditions apply to it. If you are planning to buy or sell any agricultural land, then it is important to understand these conditions, otherwise you may suffer financial loss. Tax exemption is not available on all agricultural land, there are many agricultural lands on which tax is levied on sale. Let us know on which type of agricultural land there is no tax and on which land tax has to be paid.
How many types of agricultural land are there?
Actually there are two types of agricultural land, first rural agricultural land and second urban agricultural land. So let us first know what is rural agricultural land. Rural Agricultural Land is the land which does not fall within the limits of Municipality or Cantonment Board. Apart from this, the population scale has been fixed for the agricultural land of the village. Under this, rules for distance from Cantonment and Municipality have also been fixed. Let us know what are the rules based on distance and population…
Distance formula based on population
If the population of the Municipality or Cantonment Board is between 10,000 to 1 lakh, then the agricultural land should be at least 2 km away. Only then it will be considered as rural agricultural land.
- Similarly, if the population is between 1 lakh to 10 lakh, then the agricultural land should be at least 6 km away.
- On the other hand, if the population is more than 10 lakh, then the land should be at least 8 km away.
- And there is no tax liability on the income earned by selling only rural agricultural land.
How is the distance measured?
This distance is measured in a straight line, the length of the road is not taken into account, because roads are often winding. If the road is not properly connected, the land may mistakenly fall in the urban boundary, so the rule of straight distance applies.
Tax will be levied on urban agricultural land
The agricultural land which does not fall in the category of rural agricultural land is called urban agricultural land. The rules for this are fixed on the basis of population. Which is mentioned above.
If a land falls under the category of Urban Agricultural Land, then Capital Gains Tax will have to be paid on its sale. If the land is sold within 2 years. The profit earned from this will be considered as Short Term Capital Gain (STCG) and it will be taxable as per the income tax slab rate of the land owner.
If the land is sold after 2 years. The profit earned from this will be considered as Long Term Capital Gain (LTCG) and 12.5% tax will be levied on it. (Indexation will not be applicable in this. If indexation is applicable then 20% tax will have to be paid)
State laws
State laws are effective
In all states, selling agricultural land to non-farmers is not allowed, unless permission is taken from the local administration.
For example, in Maharashtra and Gujarat, selling agricultural land to non-farmers is prohibited under certain conditions. Approval of the local administration is required to sell it. Land ceiling: Every state has a maximum limit on holding agricultural land, that is, a person cannot purchase agricultural land beyond a certain limit.
