New Delhi, June 30 -- Taxpayers often assume that the sale of agricultural land is completely exempt from income tax, though that's not always the case. Whether tax is payable or not depends on factors such as the location of the land and whether it qualifies as a capital assets under the income tax law.

As a result, some agricultural land sales are full tax-free, while others attract capital gains tax. Both taxable and tax-free agricultural land sales are required to be reported while filing income tax return (ITR) but under different heads.

The sale of only rural agricultural land is exempt from capital gains tax. Under Section 2(14)(iii) of the Income Tax Act, 1961, rural agricultural land is not treated as a capital asset, making it...