Acting on a promise made after much hue and cry by political parties in Punjab and Haryana, the central government has amended the Wealth Tax Act to ensure that agricultural land remains out of its ambit.
Section 2 (ea) of the Act which dealt with the definition of urban land has been amended to bring in a disclaimer that says urban land "does not include land classified as agricultural land in the records of the government and used for agricultural purposes or land on which construction of a building is not permitted under any law for the time being in force." Also, the Finance Act 2013 says this amendment shall be in effect from April 1, 1993.
The original definition of urban land for wealth tax was inserted with effect from April 1, 1993 and formed the core of the recent storm over the imposition of wealth tax on farmland. It said that urban land means land situated in municipal areas with population of not less than 10,000, or within 8km of it, besides that notified by the central government.
Last month, after the government sought to tweak this definition to peg it more closely with the criterion of population, parties woke up to the farmland issue after two decades. Thus, union finance minister P Chidambaram told the Lok Sabha on April 30 the UPA government would ensure farmland is out of the wealth tax ambit.
Interestingly, the much-criticised amendment of the 'urban' land definition actually did not expressly bring farmland into tax purview; farmland had been in the purview since 1993, when the older definition of urban land was inserted in the Wealth Tax Act via the Finance Act of 1992.That amendment has been retained in the Finance Act 2013, having no effect on farmland as such. The new amendment takes care of the issue now.