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CA Intermediate · Taxation · Capital Gains

Arvind, a resident individual, sold a self-occupied residential house in tax year 2026-27 for Rs 80,00,000, incurring transfer expenses of Rs 1,00,000. He had bought it in 2018 for Rs 30,00,000. Within the permitted period he bought another residential house in India for Rs 35,00,000. Ignoring indexation and any cap on the exemption, what long-term capital gain remains taxable after claiming the exemption for reinvestment in a residential house?

Rs 14,00,000 remains taxable. The long-term gain is Rs 49,00,000 (sale Rs 80 lakh less expenses Rs 1 lakh less cost Rs 30 lakh). Exemption is limited to the Rs 35 lakh invested in the new house because that is lower than the gain, leaving Rs 14 lakh.

  1. ARs 14,00,000Correct
  2. BRs 49,00,000
  3. CRs 44,00,000
  4. DRs 0

Explanation

Capital gain = 80,00,000 - 1,00,000 - 30,00,000 = 49,00,000. The exemption is limited to the lower of the gain and the cost of the new house, i.e. 35,00,000. Taxable = 49,00,000 - 35,00,000 = 14,00,000. Rs 44,00,000 wrongly uses net sale consideration less new cost as the base.

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