CMA Intermediate · Direct and Indirect Taxation · Capital Gains
Mr. Nair, an NRI, transfers a foreign exchange asset and earns long-term capital gain of Rs 6,00,000. Net consideration is Rs 20,00,000. Within six months he invests Rs 15,00,000 in a specified asset. Under section 215, what amount of capital gain is not charged to tax?
Rs 4,50,000 is not charged. Because the new asset costs less than the net consideration, the exemption is proportionate: capital gain of Rs 6,00,000 multiplied by Rs 15,00,000 over Rs 20,00,000 gives Rs 4,50,000, leaving Rs 1,50,000 taxable.
- ARs 4,50,000Correct
- BRs 1,50,000
- CRs 6,00,000
- DRs 5,00,000
Explanation
Cost of new asset (Rs 15,00,000) is less than net consideration, so section 215(1)(ii) applies: A = B × C/D = 6,00,000 × 15,00,000/20,00,000 = Rs 4,50,000. Rs 1,50,000 is the taxable part, not the exempt part. Rs 6,00,000 would apply only if the whole net consideration were invested.
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