CA Intermediate · Taxation · Capital Gains
Arjun, a resident individual, bought listed equity shares of an Indian company on a recognised stock exchange in January 2025 for Rs 4,00,000, paying STT. He sold them on the exchange in November 2026 for Rs 6,00,000, paying STT. He has no other capital gains in tax year 2026-27. Ignoring surcharge and cess, what is the tax on this gain?
The tax is Rs 9,375. The shares are long-term as they were held over 12 months, giving a gain of Rs 2,00,000. After the Rs 1,25,000 exemption, the remaining Rs 75,000 is taxed at 12.5%, which yields Rs 9,375.
- ARs 9,375Correct
- BRs 25,000
- CRs 15,000
- DRs 40,000
Explanation
The shares were held for more than 12 months, so the gain is long-term: 6,00,000 - 4,00,000 = Rs 2,00,000. Long-term gains on such listed equity are exempt up to Rs 1,25,000, leaving Rs 75,000 taxable at 12.5%, which is Rs 9,375. Applying 12.5% to the full Rs 2,00,000 ignores the exemption and gives Rs 25,000.
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