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CA Intermediate · Taxation · Capital Gains

Meera inherited a flat from her father in January 2026. Her father had bought it in 2015 for ₹20,00,000 and had spent ₹3,00,000 on improvements. Meera spent ₹2,00,000 on further improvements in 2026 and sold the flat in October 2026 for ₹80,00,000, paying ₹1,00,000 as brokerage. Ignoring indexation and exemptions, what is the capital gain and its nature for tax year 2026-27?

The result is a long-term capital gain of ₹54,00,000. The father's holding period counts, so the flat is long-term, and the cost is the father's cost plus both sets of improvements. Deducting 20 lakh, 3 lakh, 2 lakh and 1 lakh brokerage from 80 lakh leaves 54 lakh.

  1. ALong-term capital gain of ₹54,00,000Correct
  2. BLong-term capital gain of ₹55,00,000
  3. CLong-term capital gain of ₹57,00,000
  4. DShort-term capital gain of ₹59,00,000

Explanation

For an inherited asset, the holding period of the previous owner is included, so the flat is long-term. The cost of acquisition is the previous owner's cost, and his improvement cost is also deducted. Gain = 80,00,000 − 1,00,000 − 20,00,000 − 3,00,000 − 2,00,000 = ₹54,00,000. Ignoring the father's improvement gives ₹57,00,000, which is wrong.

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