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CA Intermediate · Taxation · Capital Gains

Anita, a resident individual, sold a residential house held for six years for a net sale consideration of Rs 1,50,00,000. The long-term capital gain computed was Rs 80,00,000. Within one year after the sale she bought another residential house in India for Rs 60,00,000. Assuming all conditions for the residential-house exemption are met, what is her taxable long-term capital gain on the sale?

The taxable gain is Rs 20,00,000. When a residential house is sold and another is bought, and the new house costs less than the capital gain, the exemption equals the cost of the new house. Rs 60 lakh is exempt out of the Rs 80 lakh gain.

  1. ARs 20,00,000Correct
  2. BRs 48,00,000
  3. CRs 80,00,000
  4. DNil

Explanation

For reinvestment in a residential house, if the cost of the new house is less than the capital gain, the exemption equals the cost of the new house. So the exemption is Rs 60,00,000 and the taxable gain is 80,00,000 - 60,00,000 = Rs 20,00,000. The proportionate method (80 x 60/150 = 32 lakh exempt) applies to exemption for assets other than a house, so Rs 48,00,000 is wrong.

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