Converting Farmland into NA Plots in Gujarat 2026: GujRERA Registration, Capital Gains or Business Income, GST on Plots and Cash Advance Rules

Larger NA plotting schemes in Gujarat need GujRERA registration, and the tax depends on whether you are selling land or running a business.

Mansukhbhai owns four acres of farmland on the edge of Junagadh, inherited in 2005. A local developer has suggested getting it converted to NA, laying roads and drainage, dividing it into 60 plots and selling them himself, and buyers are already offering booking amounts in cash. He wants to know what approvals he needs, how the sale will be taxed, and whether GST applies.

As towns in Saurashtra spread outwards, many farming families are turning land near city limits into residential plots. The approvals, RERA, income tax and GST each have their own rules, and the order in which things are done changes the tax. Here is how it works in 2026.

Short Answer: Converting farmland into plots in Gujarat needs NA permission, and plotting schemes on more than 500 square metres or with more than eight plots must be registered with GujRERA before any plot is advertised or sold. For income tax, selling plots can be capital gains or business income, depending on how much development and selling you do. If the land is turned into stock-in-trade, the gain up to that date is worked out on its market value then, and the rest is business profit. Plots are land, so their sale is outside GST, though development charges billed separately can attract it. Cash advances of Rs 20,000 or more for plots are not allowed.

Our team plans the tax before conversion, handles GujRERA filings, accounts and returns for plotting schemes. Call or WhatsApp +91 82005 28355, or see the details at the end of this guide.

Approvals before you sell

• NA permission: agricultural land must be converted to non-agricultural use with the Collector's permission, now applied for online.
• New tenure land: land held on new tenure usually needs a premium paid to the government before it can be converted or sold freely.
• Layout approval: the plot layout, roads and common plots must be approved by the planning authority.
• GujRERA: a plotting scheme on more than 500 square metres, or with more than eight plots, must be registered before advertising, booking or selling. See RERA Gujarat registration and filings.

Capital gains or business income

• Selling land as it is: rural agricultural land is not a capital asset, so its sale is not taxed. Land within the specified distance of a town is taxed as a capital gain. See selling agricultural land in Gujarat.
• Developing and selling plots: laying roads, selling many plots over time and advertising look like a business, and the profit can be taxed as business income.
• The conversion rule: when land you own is turned into stock-in-trade for a plotting business, the gain up to that date is worked out on its market value on the conversion date, and taxed only when the plots are sold. The rest of the profit is business income.
• Rural land: if the land was rural agricultural land when converted, the rise in value up to that date is not taxed, and only the later profit is business income.
• Get a valuation: a registered valuer's report on the conversion date supports the split.

Rates and exemptions

• Capital gains: land held for more than 24 months gives a long-term gain at 12.5%. For land bought before 23 July 2024, resident individuals and HUFs can choose 20% with indexation if that is lower.
• Inherited land: the cost is the previous owner's cost, or its value on 1 April 2001 if bought earlier.
• Exemptions: investing capital gains in a residential house or in specified bonds can reduce the tax, within limits. See saving capital gains tax.
• Business income: taxed at slab rates for individuals, after development costs, interest and selling expenses.

Sale price, TDS and cash

• Jantri value: if a plot is sold below the stamp duty value by more than 10%, the stamp duty value is taken as the sale price for tax.
• Buyer's TDS: a buyer deducts 1% on a plot where the price or stamp duty value is Rs 50 lakh or more. See TDS mistakes in property deals.
• Cash bookings: advances of Rs 20,000 or more for a plot cannot be taken in cash, and the penalty equals the amount. See cash transaction limits.

GST on plots

• Land is outside GST: the sale of a plot is a sale of land.
• Development charges: where roads, drainage or other development work is billed to buyers as a separate service, GST can apply, so draft the agreements carefully.
• Registration: needed only if such taxable charges cross the turnover limit.

Back to Mansukhbhai. His land is within the town's limit for capital gains, so a registered valuer values it on the day he converts it into stock for the plotting scheme. The gain up to that date, worked out on that value against its 2001 value, is taxed only as plots are sold, and the profit after that is business income, reduced by road and drainage costs. The scheme is registered with GujRERA before any booking, every booking amount comes by bank, and the development work is built into the plot price, with the GST position reviewed before the agreements are signed.

How we help

• Tax planning before NA conversion and plotting
• Valuation on conversion, through registered valuers
• GujRERA registration, quarterly updates and accounts
• Capital gains, business income and exemption planning
• TDS, cash rules and sale documentation
• Books, audit and returns for plotting schemes

Gadhia Associate has been in practice since 2007 and has handled work for over 7,000 clients, with a 5.0 Google rating from more than 100 reviews. Landowners and developers from Junagadh, Rajkot, Keshod, Gondal and Porbandar come to our Junagadh office, where same-day appointments are available. Work for clients elsewhere is handled online.

Planning to convert your farmland into plots? Get the tax and RERA plan in place before the first booking. Call or WhatsApp +91 82005 28355, or message us on WhatsApp. The first consultation is free.

Frequently asked questions

Does a plotting scheme need RERA registration in Gujarat?

Yes, if the land is more than 500 square metres or there are more than eight plots, before any advertising or booking.

Is the sale of NA plots taxed as capital gains or business income?

It depends on the facts. Developing and selling many plots usually points to business income, with the gain up to conversion taxed as capital gains.

Is GST payable on the sale of plots?

No, a plot is land. GST can apply to development charges billed separately.

Can I take a booking advance for a plot in cash?

Not Rs 20,000 or more. Such advances must come by bank or another permitted mode.

Is TDS deducted when a plot is sold?

Yes, 1% by the buyer where the price or stamp duty value is Rs 50 lakh or more.

What happens if I sell a plot below the jantri value?

If the difference is more than 10%, the stamp duty value is taken as the sale price for tax.

Position as of 1 November 2026, under the Income-tax Act, 2025, the RERA Act and Gujarat land rules as they stand. Land tenure and approvals vary from case to case, so take advice before you convert.