Tax Payment Postponed, ₹30 Lakh Earned – All Thanks to a Smartly Timed Sale
Query 1:
When Your Agricultural Land Is Urban – No exemption:
I have a query with regard to capital gain taxation on sale of an urban agricultural land situated within the city limit. The detail of the same is as under:
1. Sale of Urban Agricultural land – Sale Deed Executed in April-25 for Rs. 31 Cr.
2. Cost of land purchased in 1970- Rs. 17,000/-.
3. Fair Market Value of the property as on 01.04.2001 as provided by the Government approved valuer – Rs. 190,54,825/-.
4. Long Term Capital Gain – LTCG – (i.e., 1-3) – Rs. 29,09,45,175/-.
5. Tax @12.50% (Rs. 2909,45,175 *12.50%) – Rs. 3,63,68,147/-.
6. Surcharge @15% (Rs. 363,68,147*15%). – Rs. 54,55,222/-
7. Cess @4%on Tax & Surcharge [(3,63,68,147+54,55,222)*4%]. – Rs. 16,72,934/-
8.Net Tax Payable (5+6+7) – Rs. 434,96,304/-
I have following queries
1. Whether the calculation of tax is correct?
2. Whether any liability to pay advance tax is there or entire tax payment can be done in July -2026, considering the fact that the owner is a 90 year old senior citizen?
3. Whether indexation benefits can be availed in our case? Whether the earlier tax rate of 20% has any implication in our case?
4. Whether the surcharge rate is 15% or 25% in our case?
Opinion:
1. Immunity from Advance Tax Liability for Senior Citizen:
Senior citizens have full immunity from payment of advance tax if they don’t have any income chargeable to tax as “Income from Business & Profession”. The due date for filing the income tax return for the financial year 2025-26 (relevant to this sale) for general taxpayers will be July 31st, 2026. In your case, the entire tax payment can be done at the time of filing the ITR in July-26.
2. Tax Timing Masterstroke:
Whether you’re selling urban jungles disguised as agricultural land or just surviving the salary-tax maze, remember: in tax – timing and options matter. A little attention (and the right advice) can save you Lakhs — or at least some sanity. Selling in April 2025 (and not March!) means your tax payment isn’t due until July 2026. Genius move — intentional or not, you’ve bought yourself a 15-month breather. So enjoy your retirement while the I-T Department waits. So yes, you’ve legally deferred a tax payment of ₹4.35 crore for over 15 months.
Now here’s the fun (and lucrative) part: if you park that ₹4.35 crore in a safe instrument earning around 7% per annum, that’s roughly ₹30 lakh in interest — all because of shifting the sale by just one month! So, what looks like a minor calendar shuffle is actually a smart money move that quietly earns you a tidy sum — and we love to see it.
3. FMV vs Stamp Duty Showdown:
Though the calculation appears to be arithmetically okay, there is one important point which every taxpayer may note. Since the property was acquired prior to 01.04.2001, the taxpayer has an option to replace the cost with its fair Market Value (FMV) as on 01.04.2001 and you have correctly done so. You have adopted the FMV as per Government approved valuer’s report. However, remember this golden rule: FMV adopted cannot exceed the stamp duty value (Ready Reckoner rate) as on 01.04.2001. If your ₹ 1.90 crore exceeds that, the taxman might bring out his red pen. Better double-check this with your valuer’s report and RR chart. If the value as per RR chart is lower than Rs. 1.90 Cr, re-work out your tax liability by taking such a lower value.
4. Tax Rate Twist – Choose Your Fighter:
In respect of all the Land & Purchased acquired before 23rd July 2024 & Sold after this date, taxpayers can pay the tax at lower of following two options:
a) 12.50% tax rate without any indexation benefit or
b) 20% tax rate with indexation benefit
You’ve chosen the 12.5% route, which seems smart as the 20% indexation option might shoot your liability to around ₹5.72 crore on the same set of figures! So yes, your math is solid, and your choice is smarter than most WhatsApp forwards. As such, you can continue to opt for the first option. However, if you are planning for some tax exemption under section 54F or 54B, you may compare the tax impact again with indexation @ 20% as well as without indexation @ 12.50%.
5. Surcharge:
Surcharge is levied on the income tax based on the total income of the individual. For individuals, the surcharge rates for the financial year 2025-26 opting for the NTR are as follows:
1. Nil, if total income is up to ₹50 lakh
2. 10%, if total income is between ₹50 lakh and ₹ 1 crore
3. 15%, if total income is between ₹1 crore and ₹ 2 crore
4. 25%, if total income exceeds ₹2 crore.
However, the surcharge rate is capped at 15% for LTCG income. You have correctly applied the surcharge rate in your working above.
Query 2:
Salary Slip Slip-Up:
I am a salaried individual. Last year, I had opted for the Old Tax Regime (OTR), and my company deducted taxes accordingly. However, this year, while selecting the tax regime, I realized that due to ignorance, I had chosen the wrong regime as last year, resulting in a loss of approximately Rs. 40,000/-. I would like to know if there is still an option to claim that amount while filing the return by opting for the new tax regime.
Opinion:
1. It appears that Your tax liability for the FY 2024-25 under OTR is higher as compared to the same under New Tax Regime (NTR) by Rs. 40,000/-. Your employer has done the Tax Deduction at Source (TDS) on the basis of OTR as you have given the declaration to opt this regime.
2. No worries! Even though your employer used the Old Regime for TDS based on your declaration, you can switch to the New Regime while filing your return.
3. Salaried individuals can freely switch regimes at the time of filing income tax return.There’s no restriction year-on-year for salaried taxpayers, unlike for business/ profession taxpayers. Even if you have opted for OTR in earlier years, you can opt for NTR in the current year.
[Views expressed are the personal view of the author. Readers are advised to seek professional advice before taking any decisions. Readers may forward their feedback & queries at nareshjakhotia@gmail.com. Other articles & response to queries are available at www.theTAXtalk.com]
