CA Intermediate · Taxation · Capital Gains

Ms. Tanvi Kulkarni, a resident individual, bought listed equity shares of an Indian company through a recognised stock exchange in 2022 for ₹4,00,000. In tax year 2026-27 she sold them on the exchange for ₹5,60,000 and paid brokerage of ₹10,000 wholly on the transfer. Securities transaction tax was paid on both purchase and sale. Ignoring cess, what is the long-term capital gain chargeable to tax at the special rate after the available exemption limit?

The taxable long-term capital gain is ₹25,000. Net gain is 5,60,000 less 10,000 expenses less 4,00,000 cost, or ₹1,50,000. The first ₹1,25,000 of long-term gains on STT-paid listed equity is exempt, leaving ₹25,000 to be taxed at 12.5%.

A₹25,000Correct
B₹35,000
C₹45,000
D₹1,50,000

Explanation

Long-term capital gain = 5,60,000 − 10,000 (transfer expenses) − 4,00,000 (cost) = 1,50,000. The gain up to ₹1,25,000 is exempt, so ₹25,000 is taxable at 12.5%. Ignoring the transfer expense gives 1,60,000 − 1,25,000 = 35,000, which is wrong. Adding the expense instead of deducting it gives 45,000, which is also wrong.

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