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CA Intermediate · Taxation · Capital Gains

Kavita sold a plot of land, held for six years, in August 2026 and earned a long-term capital gain of Rs 80,00,000. In October 2026 she invested Rs 60,00,000 in bonds eligible for exemption for long-term gains on land or buildings (specified bonds of NHAI/REC type), within the permitted time. Assuming all other conditions are met, what is the long-term capital gain chargeable to tax?

The chargeable long-term capital gain is Rs 30,00,000. The exemption for investment in the specified bonds is limited to Rs 50,00,000, even though Rs 60,00,000 was invested, so Rs 50,00,000 of the Rs 80,00,000 gain is exempt and the balance is taxable.

  1. ARs 30,00,000Correct
  2. BRs 20,00,000
  3. CRs 80,00,000
  4. DRs 0

Explanation

The exemption is the lower of the gain and the amount invested, but investment in such bonds eligible for exemption is capped at Rs 50,00,000 in a financial year. Exempt amount = Rs 50,00,000, so taxable gain = 80,00,000 - 50,00,000 = Rs 30,00,000. Taking the full investment of Rs 60,00,000 as exempt gives Rs 20,00,000, which ignores the cap.

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