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NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Taxation of Other Products

Mr. Sharma, a resident individual, sold a residential flat in Pune that he had owned for 3 years. The sale produced a capital gain. Which statement about the nature of this gain is correct?

The gain is long-term, because immovable property such as a flat is a long-term asset once held for more than 24 months. Three years exceeds that limit. It is not house property income, and it is not exempt without meeting specific reinvestment conditions.

  1. AIt is a short-term capital gain, because the flat was held for less than 5 years
  2. BIt is a long-term capital gain, because immovable property held for more than 24 months is long-termCorrect
  3. CIt is income from house property, not a capital gain
  4. DIt is exempt, because it is a residential property

Explanation

For land and buildings the long-term threshold is more than 24 months. A 3-year holding therefore gives a long-term capital gain. The 5-year idea is not a holding test for this classification. Gains from residential property are not automatically exempt; exemptions need specific conditions.

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