What a seller should know before filing ITR
Ramesh owned agricultural land in a village, outside the Nagarparishad limits. After holding it for more than 25 years, he agreed to sell it and received earnest money from the buyer. He then asked the most practical question: should this amount be shown in the Income Tax Return? For rural agricultural land, the answer is usually no, because such land is not treated as a capital asset under section 2(14) of the Income Tax Act.
The important point is that the legal character of the land matters more than the label in the agreement. If the land is genuinely rural agricultural land and the documents support that position, the sale generally falls outside capital gains tax, and the advance received under the agreement is not taxable merely because it was received.
