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CMA Intermediate · Direct and Indirect Taxation · Capital Gains

Mr. Arun Iyer, an individual, sold a long-term capital asset (a plot of land, not a residential house) and earned a long-term capital gain. Under section 86 of the Income-tax Act, 2025, which of the following timing conditions for acquiring the new residential house in India qualifies for the exemption?

Purchasing the house ten months before the transfer qualifies, because section 86 allows purchase within one year before or two years after the transfer date, or construction within three years after. Purchases 18 months before or 30 months after, and construction after four years, are outside these limits.

  1. APurchased 18 months before the date of transfer
  2. BPurchased 10 months before the date of transferCorrect
  3. CPurchased 30 months after the date of transfer
  4. DConstructed 4 years after the date of transfer

Explanation

Section 86(1)(b) allows purchase within one year before or two years after the transfer, or construction within three years after. Ten months before is within one year before. 18 months before and 30 months after fall outside the purchase window, and construction after 4 years exceeds the three-year limit.

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