Govt examines ways to expand tax base

The finance ministry is considering a proposal to levy capital gains tax on the sale of agriculture land for non-agricultural purposes within a radius of 20 to 30 km from a notified municipal area. The sale of agricultural land currently attracts capital gains tax if the land is within 8 km from the limits of a municipality or a cantonment board. Beyond that limit, farm land is not considered a capital asset, so it is not taxed. Capital gains tax on land is levied at progressive rates in the short term and at 20 per cent with indexation in the long term if the land is held for more than 36 months. The move is being considered against the background of large-scale land sales  around big and small cities owing to a boom in real estate prices that are stretching the definitions of urban limits. A finance ministry official said the need to revisit the law is being made in view of the increasing acquisition of land for non-farming purposes. Many farm land-owners around extended suburban areas such as Gurgaon and Noida in the National Capital Region have become millionaires by selling their land to real estate developers to make way for the development of residential colonies, resorts, hotels and farmhouses. The widening of the capital gains levy is expected to generate substantial tax revenue for the government, which is looking at ways to expand the tax base. – www.rediffnews.com