NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Capital Gains
Mr. Sharma sold a residential flat for Rs 90 lakh. Assume the capital gain is long-term and the flat was bought many years ago. He intends to claim exemption by reinvesting only the net capital gain in a new residential house in India. Which statement correctly describes the condition for full exemption under the section for sale of a residential house?
For exemption on sale of a residential house, the individual must reinvest the long-term capital gain amount in a residential house in India within the prescribed time. Investing at least the gain gives full exemption; the whole sale price need not be reinvested, and shares or foreign houses do not qualify.
- AHe must invest the entire sale consideration of Rs 90 lakh in the new house
- BHe must invest the capital gain amount in a new residential house within the prescribed period; investing at least the gain gives full exemptionCorrect
- CHe must invest in a new house only outside India
- DHe must buy any asset, including shares, within one year
Explanation
Exemption for sale of a residential house requires investing the capital gain (not whole sale proceeds) in one or more residential houses in India within the prescribed period. Investing at least the gain gives full exemption. Entire consideration is needed only for other exemptions such as the net-consideration rule on non-house assets.
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