CMA Intermediate · Direct and Indirect Taxation · Capital Gains
Mr. Raman Iyer transferred land on 10 June 2026 and earned long-term capital gains of Rs 70,00,000. On 20 August 2026 he invested Rs 40,00,000 in eligible NHAI bonds (redeemable after five years, issued after 1 April 2018). What amount of the gains is charged to tax as long-term capital gains for the year, ignoring the Rs 50 lakh cap?
Rs 30,00,000 is charged to tax. The investment of Rs 40,00,000 in eligible NHAI bonds within six months is exempt, and only the excess of gains over the investment, Rs 70,00,000 less Rs 40,00,000, remains chargeable as long-term capital gains.
- ARs 30,00,000Correct
- BRs 40,00,000
- CRs 70,00,000
- DNil
Explanation
The investment was made within six months and the bonds qualify. Under Section 85(1)(i), the excess of gains over investment is charged: 70,00,000 - 40,00,000 = 30,00,000. Rs 40,00,000 is the exempt portion, not the taxable one.
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