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CA Intermediate · Taxation · Capital Gains

Kavita sold a residential house, held for 5 years, for ₹90,00,000 in tax year 2026-27. Its cost of acquisition was ₹40,00,000 and transfer expenses were ₹1,00,000. Within 2 years she bought another residential house in India for ₹30,00,000. Assuming all conditions for the exemption on reinvestment in a residential house are met, what is her taxable long-term capital gain?

The taxable long-term capital gain is ₹19,00,000. The gain is ₹49,00,000 after cost and expenses, and the exemption equals the ₹30,00,000 invested in the new house, since that is lower than the gain. Only the unreinvested part is taxed.

  1. A₹49,00,000
  2. B₹59,00,000
  3. C₹19,00,000Correct
  4. DNil

Explanation

Capital gain = 90,00,000 − 1,00,000 − 40,00,000 = ₹49,00,000. The exemption is the lower of the gain and the amount invested, so it is ₹30,00,000. Taxable gain = 49,00,000 − 30,00,000 = ₹19,00,000. The ₹59,00,000 option wrongly deducts the investment from net sale consideration instead of from the gain.

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