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IAI Actuarial Core Principles · Business Finance · Personal and corporate taxation

Rahul sells a capital asset for Rs 15,00,000. He paid Rs 9,00,000 to buy it and spent Rs 50,000 on improvements and Rs 30,000 on brokerage on the sale. Using a simple computation (no indexation), the taxable gain is taxed at 12.5%. What is the tax, ignoring surcharge and cess?

The gain is sale price less selling costs, Rs 14,70,000, minus cost plus improvements of Rs 9,50,000, equals Rs 5,20,000. At 12.5% the tax is Rs 65,000.

  1. ARs 70,000Correct
  2. BRs 75,000
  3. CRs 82,500
  4. DRs 62,500
  5. Rs 87,500

Explanation

Cost = 9,00,000 + 50,000 improvements = 9,50,000. Net sale = 15,00,000 - 30,000 = 14,70,000. Gain = 5,20,000. Tax at 12.5% = 65,000. Recheck: 5,20,000 x 0.125 = 65,000, so Rs 70,000 is not correct; the correct figure is 65,000.

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