Mr. Mani, a resident individual aged about 45 years, acquired a plot of land in March 2002 for 12,25,000 and paid stamp duty of 1,00,000 on registry…

Computation of tax liability of Mr. Mani for the A.Y. 2025-26 as per the default tax regime Particulars Particulars ₹ Capital Gain Actual sale consideration 80,00,000 Valuation as per Stamp duty Authority on the date of agreement (Since the stamp duty value does not exceed 110% of the actual sale consideration, the actual sales consideration shall be taken to be the full value of consideration as per section 50C) 83,50,000 80,00,000 Less: Cost of acquisition of Plot (₹ 12,25,000 +1,00,000) (13,25,000) Long Term Capital Gain/ Total Income 66,75,000 Tax on LTCG u/s 112 Since land is acquired before 23.7.2024 and transferred on or after 23.7.2024, Mr. Mani has an option to pay tax @12.5% on LTCG computed without indexation benefit or @20% on LTCG computed with indexation benefit. Capital Gain without Indexation (Tax @12.5%) [₹ 80,00,000 -13,25,000] = 66,75,000 Tax = [₹ 66,75,000 -3,00,000, being unexhausted basic exemption limit] x 12.5% = 7,96,875 (A) Capital Gain with Indexation (Tax @20%) [₹ 80,00,000 - (₹ 13,25,000 x 363/100)] = 31,90,250 Tax = [₹ 31,90,250 -3,00,000, being unexhausted basic exemption limit] x 20% = 5,78,050 (B) Lower of (A) or (B) 5,78,050 Add: Surcharge @10% [Since the total income exceeds - 50,00,000 but does not exceed 1crore] 57,805 6,35,855 Add: HEC@4% 25,434 Tax liability 6,61,289 Tax liability (Rounded off) 6,61,290 Note: Indexation option is more beneficial to the assessee Alternative solution - As per second proviso to section 112(1)(a), in the case of transfer of a long-term capital asset, being land or building or both, which is acquired before the 23.7.2024, where the income-tax computed under item (B) exceeds the income-tax computed in accordance with the provisions of this Act, as they stood immediately before their amendment by the Finance (No. 2) Act, 2024, such excess shall be ignored. As per item (B), long-term capital gains arising from transfer on or after 23.7.2024 are taxed @12.5%. Such tax is to be computed considering the first proviso to section 112(1)(a), which provide for utilization of unexhausted basic exemption limit. On literal interpretation of the provisions of section 112(1)(a), the excess of tax will be determined after adjusting the unexhausted basic exemption limit while computing tax @12.5% on LTCG computed without indexation and tax @20% on LTCG computed with indexation. Accordingly, the main solution is given. However, alternative solution is possible considering the manner followed in ITR utility for computation of tax on long-term capital gains in case of transfer of land acquired on or before 23.7.2024 but transferred thereafter. Computation of tax liability of Mr. Mani for the A.Y. 2025-26 as per the default tax regime Particulars Particulars ₹ Capital Gain Actual sale consideration 80,00,000 Valuation as per Stamp duty Authority on the date of agreement (Since the stamp duty value does not exceed 110% of the actual sale consideration, the actual sales consideration shall be taken to be the full value of consideration as per section 50C) 83,50,000 80,00,000 Less: Cost of acquisition of Plot (₹ 12,25,000 +1,00,000) (13,25,000) Long Term Capital Gain/ Total Income 66,75,000 Tax on LTCG u/s 112 Since land is acquired before 23.7.2024 and transferred on or after 23.7.2024, Mr. Mani has an option to pay tax @12.5% on LTCG computed without indexation benefit or @20% on LTCG computed with indexation benefit. Capital Gain without Indexation (Tax @12.5%) [₹ 80,00,000-13,25,000] = 66,75,000 Tax = 66,75,000 x 12.5% = 8,34,375 (A) Capital Gain with Indexation (Tax @20%) [₹ 80,00,000- (₹ 13,25,000 x 363/100)] = 31,90,250 Tax = 31,90,250 x 20% = 6,38,050 (B) Excess of (A) over (B) to be ignored 1,96,325 Tax @ 12.5% on 63,75,000 [₹ 66,75,000 - 3,00,000, being unexhausted basic exemption limit] 7,96,875 Less: Amount to be ignored 1,96,325 6,00,550 Add: Surcharge @10% [Since the total income exceeds - 50,00,000 but does not exceed 1crore] 60,055 6,60,605 Add: HEC @4% 26,424 Tax liability 6,87,029 Tax liability (Rounded off) 6,87,030 Note: Indexation option is more beneficial to the assessee