Does sale of agricultural land need to be disclosed in ITR?

Tax rules for agricultural land

The sale of rural agricultural land is not treated as a capital asset under income tax laws, so profit from such a sale is not considered income. Today's Ask Wallet Wise query answers if taxpayers are required to disclose it in their income tax return (ITR). 

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I am 62 years old and retired from the private sector. I have been filing my returns using ITR-1, as I receive Rs 5,00,000 annually as annuity from LIC and have no other income. Recently, I sold agricultural land in my village in a remote area, and the proceeds were deposited in the bank. I wish to know which ITR form I should use.

Expert advice: Any profit from the sale of a capital asset is taxable as capital gains under the income-tax law. However, agricultural land in a rural area is not considered a capital asset. Therefore, the profit from the sale of your rural agricultural land is not taxable as capital gains.

It is important to distinguish between exempt income and income that is not treated as income at all. Since the profits from the sale of rural agricultural land are not regarded as income under the law, you are not required to disclose them in your ITR. Such amounts are neither taxable nor to be reported as exempt income.

You may continue to use ITR-1 this year as well. However, if you wish to avoid any possible inquiry in the future, you can disclose the amount under the “exempt income” section of ITR-1, though this is not mandatory.

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