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CA Intermediate · Taxation · Income from Other Sources

Asha, a resident individual, holds 1,000 shares of a closely held company. On 5 August 2026 she sold the unquoted shares to Bharat, a resident individual, for Rs 1,20,000 in total, when their fair market value was Rs 2,00,000 and she had no relation to him. Separately, on 20 August 2026 Bharat received from a firm, as a gift, jewellery with fair market value of Rs 80,000 for no consideration (the donor not being a relative). Considering only the provisions on Income from Other Sources for Bharat, what is the amount taxable in his hands from these two transactions?

Rs 1,60,000 is taxable. The shares were bought Rs 80,000 below fair market value, which exceeds the Rs 50,000 limit, so Rs 80,000 is taxed. The jewellery received free, worth Rs 80,000, is also taxable, giving a total of Rs 1,60,000.

  1. ARs 1,60,000Correct
  2. BRs 80,000
  3. CRs 3,60,000
  4. DNil

Explanation

For shares transferred for inadequate consideration, the excess of fair market value over consideration is taxable if it exceeds Rs 50,000: 2,00,000 - 1,20,000 = 80,000, which exceeds 50,000, so 80,000 is taxable. Jewellery of Rs 80,000 received free is taxable as property above Rs 50,000. Total = 80,000 + 80,000 = 1,60,000. Taking the full 2,00,000 for the shares would wrongly ignore the consideration paid.

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