To calculate the taxable profit on the sale of the land and shares, we need to determine the cost of acquisition, the cost of improvement (if any), and the selling price of both assets.
In this case, Mr. D purchased the land in July 2018 for ₹3,50,000 and sold it for ₹5,30,000 in December 2020. Therefore, the long-term capital gain on the sale of the land is:
Selling price of land = ₹5,30,000
Less: Cost of acquisition of land = ₹3,50,000
Long-term capital gain = ₹1,80,000
As the land was held for more than 2 years, it qualifies as a long-term capital asset, and the applicable tax rate on long-term capital gains is 20% (plus applicable surcharge and cess, if any). Therefore, the tax liability on the long-term capital gain from the sale of land will be:
Tax on long-term capital gain = 20% of ₹1,80,000 = ₹36,000
Next, Mr. D purchased 500 shares of an Indian company on March 5, 2020 for ₹50,000 and sold them for ₹90,000 in December 2020. Therefore, the short-term capital gain on the sale of shares is:
Selling price of shares = ₹90,000
Less: Cost of acquisition of shares = ₹50,000
Short-term capital gain = ₹40,000
As the shares were held for less than 12 months, they qualify as short-term capital assets, and the applicable tax rate on short-term capital gains is the individual's applicable slab rate. Suppose Mr. D falls under the 30% tax bracket. In that case, the tax liability on the short-term capital gain from the sale of shares will be:
Tax on short-term capital gain = 30% of ₹40,000 = ₹12,000
Therefore, the total tax liability on the sale of both assets will be:
Total tax liability = ₹36,000 (on the sale of land) + ₹12,000 (on the sale of shares) = ₹48,000
Thus, Mr. D's taxable profit on the sale of land and shares during the assessment year 2022-23 will be ₹1,80,000 (long-term capital gain on land) + ₹40,000 (short-term capital gain on shares) = ₹2,20,000, and his tax liability will be ₹48,000.