CA Intermediate · Taxation · Capital Gains
Meera received a plot of land as a gift from her father in May 2025. Her father had bought the plot in April 2022 for Rs 10,00,000. Meera sold it in December 2026 for Rs 25,00,000 and incurred no transfer expenses or improvement costs. What is the nature and amount of her capital gain for tax year 2026-27?
The gain is a long-term capital gain of Rs 15,00,000. For a gifted asset, the donor's holding period is added to the recipient's, making the land long-term, and the donor's cost of Rs 10,00,000 is used as the cost of acquisition, not nil.
- ALong-term capital gain of Rs 15,00,000Correct
- BShort-term capital gain of Rs 15,00,000
- CLong-term capital gain of Rs 25,00,000
- DShort-term capital gain of Rs 25,00,000
Explanation
For an asset received by gift, the previous owner's period of holding is included, so the land was held from April 2022 to December 2026, which is more than 24 months and therefore long-term. Cost of acquisition is the previous owner's cost, Rs 10,00,000. Gain = 25,00,000 - 10,00,000 = Rs 15,00,000. Treating the cost as nil because it was a gift gives Rs 25,00,000, which is wrong.
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