Add agricultural income in tax return

S.C. Vasudeva

Q.I am a state government employee and am paying Income Tax as per rules. We are four brothers and my father owns agricultural land. The entire agricultural land holding (approx. 5 acres) exists in the name of my father. Till date my brothers and parents use to look after this land. But, now onwards on account of partition, I shall be getting my share of agricultural income. 

I know that agricultural income is not taxable. Could you please advise me under which Section the agricultural income which shall be around Rs 50,000 per annum will be accounted for while filing ITR, so that I can show it as my income and get income tax relief on this  payment. Also advise which documents I must possess in support of this payment (like Form'J' issued by Commission agents in Hayana for selling the crop). 

— Anand singh Bahniwal

A.Your queries are replied hereunder:

a) Agricultural income is exempt under Section 10(1) of the Income Tax Act 1961 (The Act). It should therefore, be reflected in the schedule wherein the details of income exempt from tax are required to be specified e.g. Schedule E1 in case of ITR-2.

b) Though the agricultural income is exempt from the chargeability of income-tax, yet the amount of such income is added to the other income for the purposes of ascertaining the slab rate of tax which should be applicable to the total income of an assessee.

c) It would be advisable to keep supportives for the purchase of seeds, pesticides, payment to labour for ploughing the land, tractor hire charges if any, cost of diesel for pumps, electricity charges and other expenses which are incurred for the purposes of bringing the crop to a stage where it is ready for sale.  The records should also be kept for the crop which is grown as also particulars of sale of crop along with supportive for the sale proceeds of the crop.

Do we have to pay tax on share in ancestral property  sale ?

Q.We own an ancestral property at Ludhiana which is in the name of our mother. We are four brothers. The property has been put on sale.  If the property is sold, the proceeds will be distributed equally in five shares i.e. four sons and a mother. My queries are:

1) Whether  there is any tax liability on ancestral property?

2)Whether there is any tax liability on our mother who is senior citizen?

3)Whether there is any tax liability on the each son individually who gets the share, including  our mother’s share?

4)What are the provisions to save the tax liability on proceeds from sale of  property, and how can it be saved?

— Avtar singh

A.It seems from the facts given in the query that the property was in the nature of a residential house and was inherited by your mother from your father on account of which it stands mutated in the name of your mother.  Replies given hereunder are therefore based on the said presumption:

a) Any profit or gain arising on the sale of a property, whether ancestral or self- acquired, is chargeable to income tax.

b) Income tax would be chargeable on such gain in the hands of your mother as she is the owner of the property as per the facts given in the query. A senior citizen is also liable to pay income-tax, however, a concession is allowed in the shape of a higher slab upto which tax is not payable by a senior or super senior citizen.

c) The entire tax would be borne by your mother and therefore, there  would be no liability of tax on the four brothers.  The distribution of the sale proceeds after the payment of tax shall be in the nature of a gift by your mother to her sons and there would be  no further tax liability in respect thereof.

d) Your mother can save the amount of tax payable on the amount of capital gain, in case following options are exercised:

(i) the amount of capital gain is  utilised for the purchase of a residential house within one year before  or two years after the sale of the property; or

(ii) the amount of capital gain is utilised for construction of a residential house within three years after the date of the sale of the property;

(iii) The amount of capital gain is utilised towards the purchase of tax-saving bonds within six months of the date of sale of property which bonds can be purchased for a sum not exceeding Rs 50 lakh.  

The amount of capital gain which is not utilised for any of the purposes specified in (i) and (ii) above, before the due date of filing of the tax return for the assessment year  is required to be deposited with a bank under capital gain scheme.

Can I invest capital gain to purchase a plot?

Q.I had purchased a 10 marla residential plot in April 2007 for Rs 5,50,000 and have sold the same recently for Rs 40,00,000. What will be the amount of long-term capital gain on this sale.  

I have LTCL of amount Rs 1 ,05,000 in shares. Can I deduct this amount from the LTC of above plots?

To save this LTCG do I need to invest in another residential house or can I purchase another plot also?

— Gian sharma 

A.Your queries are replied hereunder:

a)The indexed cost of plot on the basis of index applicable for financial year 2007-08 would be Rs 11,22,958 and   long-term capital gain would work out at Rs 28,77,042.

b)Long-term capital loss of Rs 1,05,000 incurred on sale of shares of an unlisted/private limited company can be adjusted against the long-term capital gain arising on the sale of plot. Long -term capital loss arising on the sale of shares of a listed company can also be adjusted provided the same  is in respect of an off  market transaction. 

c)Applicable rate of tax on long-term capital gain is 20% plus education cess of 3% thereon.

d)You can save tax on long-term capital gain in case the net consideration is utilised towards purchase or construction of a residential house within the specified period. You can also save tax if the amount of long-term capital gain is invested in the acquisition of tax-saving bonds within six months of the date of sale. Such bonds can be purchased to the extent of Rs 50,00,000.  

e)You would not be able to save tax in respect of such a capital gain if the same is utilised for purchasing another plot.

Is an unregistered Will legal?

Q.My wife owns a house of 100 sq yard in Amritsar and the sale deed is registered in her favour. The latest  Zamabadi (2011-12) has been got issued on 13/10/2016 where her name is existing in the revenue records. She has executed a Will on a plain paper duly witnessed by two young major  un-related persons. But she has not got it entered in the registers of deed writers who are charging Rs 1,000 for  a single page will as against officially prescribed charges of Rs100

She has also not got it registered with the sub registrar, who is having his office in District Court Complex . The total expense for getting the Will registered is coming out to be around Rs 6000-7,000.  Since  the Will  can be changed any time during the lifetime of the writer hence time and again spending money for registration and undergoing  the cumbersome registration  procedure is not motivating her to get it registered. 

She has mentioned in her Will that after her death the property will vest with her husband and after death of her husband the same will go to  both of his married sons in equal proportion.

My query is whether this is as per the Registration Act 1908 provisions as it has been properly drafted, signed and duly witnessed? 

Please clarify whether this is in order, legal and safe. 

— lLajpat Rai Thakral

A.On the basis of facts given in the query, Will executed by your wife is valid as there is no legal requirement for mutation of the Will as well as for the registration  thereof with the Sub-Registrar.  Registration Act 1908 provides that a Will may be  registered. Therefore, it is judicially recognised that an unregistered Will is valid so long as it can be proved that it was signed by the testator in a perfect state of mind and her signatures were attested by two or more witnesses each of whom had seen the testator sign the Will. 

Any person questioning the validity of such a Will, will have to prove  that the making of Will was caused by fraud or coercion or by such inoportunity  which  took away the free agency of the testator. 

In the present case all the parameters of a valid Will are in existence and therefore, the Will executed by your wife is in order, legal and safe.