Calculate the capital gain on sale of agriculture lands by Mr. Rohit during the year. What are the tax implications of the amount received by him…

Computation of Capital Gains on sale of urban agricultural land by Rohit for A.Y.2025-26 Particulars ₹ Actual sale consideration 1,90,00,000 Less: Cost of acquisition [No indexation benefit since it is transferred on or after 23.7.2024] 36,60,000 1,53,40,000 Less: Exemption u/s 54B¹ – In respect of agricultural land purchased on 31.8.2024 which is a rural agricultural land, Mr. Rohit is eligible to claim exemption u/s 54B. [See Note for alternative answer] 80,00,000 Long term capital gain 73,40,000 Note [Alternative answer] – Mr. Rohit transferred urban agricultural land on 20.08.2024 and purchased rural agricultural land on 31.8.2024 which is sold on 28.2.2025. Since the rural agricultural land is sold within the same previous year in which original asset was transferred i.e., P.Y. 2024-25, a view can be taken that the exemption under section 54B would not be available as at the time of filing return of income such acquired land does not exist. In such case, long term capital gain would be - 1,53,40,000. Capital gain on sale of rural agricultural land As per section 54B, if the new agricultural land is transferred within 3 years from the date of its purchase, while computing the capital gains on transfer of such new agricultural land, the cost of acquisition of such land would be reduced by the amount of capital gain claimed as exempted. However, since rural agricultural is not a capital asset, no capital gain would arise on sale of such land even though it is transferred within 3 years from the date of its purchase. ¹ Assuming such agricultural land is used for agricultural purposes by the assessee or his parents in the 2 years immediately preceding the date of transfer. Tax implications on buy-back of shares The sum paid by X Ltd., a domestic company for purchase of its own shares would be treated as dividend and taxable under the head "Income from Other Sources" in the hands of Mr. Rohit. No deduction for expenses would be available against such dividend income. As per section 46A, value of consideration received by Mr. Rohit on buy back of shares by X Ltd. would be Nil and the difference between the cost of acquisition and the value of consideration received by Mr. Rohit will be capital loss. Accordingly,10 lakhs [9lakh/(100-10)%] would be taxable as dividend income and there will be long term capital loss of 1,50,000 (6,000 shares x 25), being the cost of acquisition of shares, in the hands of Mr. Rohit. Hence, income from other sources would be 10lakhs and long-term capital loss would be - 1,50,000 from buy back of shares. Such long-term capital loss of 1,50,000 can be set off against long term capital gain on sale of agricultural land.