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NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Taxation of Other Products

Caselet: Mr. Kapoor, a resident individual, holds a unit-linked plan and a commercial property. He sold the commercial property (held 4 years) and has a long-term capital gain of ₹50,00,000. He invests ₹30,00,000 in bonds eligible under section 54EC within the permitted period. Assume the maximum limit for section 54EC is ₹50,00,000 per financial year and the gain is otherwise fully taxable. What is the long-term capital gain that remains chargeable after the exemption?

The chargeable gain is ₹20,00,000. Section 54EC exempts the gain to the extent invested in eligible bonds, and the investment of ₹30,00,000 is within the limit. Subtracting the exempt ₹30,00,000 from the ₹50,00,000 gain leaves ₹20,00,000 taxable.

  1. A₹20,00,000Correct
  2. B₹30,00,000
  3. C₹50,00,000
  4. D₹0

Explanation

Section 54EC exempts the gain to the extent invested in eligible bonds, subject to the limit. The investment of ₹30,00,000 is below the ₹50,00,000 limit and below the gain, so exemption is ₹30,00,000. The chargeable gain is 50,00,000 − 30,00,000 = ₹20,00,000. Check: 20 + 30 = 50. Choosing ₹30,00,000 mistakes the exempt amount for the taxable amount.

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