Exemption from wealth tax to agricultural land situated in urban area
1). Finance Act, 1992 amended the provisions of Wealth-tax Act with effect from 1st April, 1993 to provide that wealth tax shall be levied only on certain specified assets. The definition of assets on which wealth tax is leviable inter alia includes urban land. As per this definition urban land means land situated in the jurisdiction of municipality or cantonment board or land situated in notified area. However, certain categories of urban land such as land on which construction of a building is not permissible, land held for industrial purpose, land held as stock in trade, have been excluded from the definition of urban land. Normally on agricultural land, either no construction is allowed or allowed only for a specific purpose (mainly for agricultural needs), but no specific exemption has been provided to the agricultural land. Recently it has been held by the Hon’ble Supreme Court that agricultural land situated in urban area is liable for wealth tax. As the wealth tax is levied only on unproductive assets, there was no intention to levy wealth tax on the agricultural land which cannot be termed as unproductive assets.
2). In view of the above, the definition of urban land in the Wealth-tax Act, 1957 has been amended vide Finance Act, 2013 to specifically provide that wealth tax is not leviable on urban land which is,
(i) Classified as agricultural land in the records of the Government; and
(ii) Used for agricultural purposes.
3). Applicability: – This amendment takes effect retrospectively from 1st April, 1993.