What taxes apply to the sale of industrial land?

1. Capital Gains Tax

When industrial land is sold, the seller becomes liable to pay capital gains tax under the Income Tax Act, as the transaction involves the transfer of a capital asset.

• Short-Term Capital Gains (STCG):
  Applicable if the land is sold within 24 months of acquisition. The gain is added to the seller’s income and taxed as per the applicable income tax slab rates.
  
• Long-Term Capital Gains (LTCG):
  Applicable if the land is held for more than 24 months. Taxed at 20% with indexation benefit, allowing adjustment of the purchase price against inflation.
  
• Exemptions Available:
  Under Sections 54F, 54EC, and 115F, the seller may claim exemptions by investing the proceeds in specified instruments such as:
  
  • Residential property.
    
  • Capital gains bonds (REC, NHAI).
    
  • Specified infrastructure or startup assets.
    

2. Goods and Services Tax (GST) – Conditional Applicability

Generally, the sale of land is not subject to GST, as per Schedule III of the CGST Act, which classifies the sale of land as neither a supply of goods nor services.

However, GST may apply in certain conditions:

• If the industrial land is sold as part of a composite supply, such as land plus development services or with built-up sheds or warehouses, GST may apply on the service/component portion.
  
• If sold by a real estate developer or builder, and includes construction services or pre-fabricated industrial units, GST may apply at rates ranging from 5% to 18% depending on the nature of the supply.
  

3. Stamp Duty

Stamp Duty is a state-level transaction tax paid by the buyer during registration of the sale deed.

• It is calculated as a percentage of the sale consideration or market value, whichever is higher.
  
• Rates vary by state, ranging typically from 4% to 8% for industrial land.
  
• Some states provide concessions or rebates to promote industrial investment, such as in industrial zones or for MSMEs.
  

Stamp duty is mandatory and must be paid before or during the registration of the property.

4. Registration Charges

In addition to stamp duty, registration charges are also levied on the buyer for officially registering the sale deed.

• Generally fixed or based on a percentage (commonly around 1% of the sale value).
  
• Collected by the Sub-Registrar’s Office during the deed registration process.
  
• It is a separate cost from stamp duty but essential for validating the transaction.
  

5. TDS (Tax Deducted at Source) Under Section 194-IA

When the sale value of industrial land exceeds ₹50 lakhs, the buyer is required to:

• Deduct 1% of the sale consideration as TDS.
  
• Deposit it with the government using Form 26QB.
  
• Provide the seller with Form 16B as proof of deduction.
  

This applies to transactions between residents and is mandatory for tax compliance. In case of non-resident sellers, TDS under Section 195 is applicable at different rates.

6. Property Tax Clearance

Though not a direct tax on the sale, the seller must ensure that all property taxes (municipal, industrial zone, etc.) are cleared before the sale. Pending dues may be adjusted in the transaction or create legal hurdles during registration.