CA Intermediate · Taxation · Capital Gains
In 2018 Mr. Dinesh Rao received a plot of land as a gift from his father. The father had bought it in 2015 for ₹10,00,000. The market value on the date of the gift was ₹18,00,000. In tax year 2026-27 Mr. Rao sold the plot for ₹50,00,000 and paid ₹1,00,000 as brokerage on the sale. He chooses to compute the gain without indexation. What is his long-term capital gain?
The long-term capital gain is ₹39,00,000. For a gifted asset the cost is the previous owner's cost of ₹10,00,000 and his holding period counts. Deducting that cost and the ₹1,00,000 brokerage from the sale price of ₹50,00,000 gives the gain, without using the market value at the gift date.
- A₹39,00,000Correct
- B₹31,00,000
- C₹40,00,000
- D₹32,00,000
Explanation
For a capital asset received by gift, the cost of acquisition is the previous owner's cost, here ₹10,00,000. The previous owner's holding period is also counted, so the gain is long-term. Gain = 50,00,000 − 1,00,000 − 10,00,000 = ₹39,00,000. Using the gift-date market value of ₹18,00,000 gives ₹31,00,000, which is wrong.
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