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CA Intermediate · Taxation · Capital Gains

Rajan bought a plot in April 2015 for ₹12,00,000 and spent ₹3,00,000 on improvements in 2019. He died, and his daughter Meera inherited the plot on 10 January 2026. She sold it in December 2026 for ₹50,00,000 and paid transfer expenses of ₹50,000. What is the nature and amount of the capital gain in Meera's hands for tax year 2026-27, without indexation?

It is a long-term capital gain of ₹34,50,000. The father's holding period counts for the heir, and her cost is his cost plus his improvement cost. The gain is ₹50,00,000 less expenses of ₹50,000, cost of ₹12,00,000 and improvements of ₹3,00,000.

  1. AShort-term capital gain of ₹34,50,000
  2. BLong-term capital gain of ₹46,50,000
  3. CLong-term capital gain of ₹34,50,000Correct
  4. DLong-term capital gain of ₹35,00,000

Explanation

The previous owner's period of holding is included, so the plot is long-term (held since April 2015). Cost of acquisition is the cost to the previous owner, ₹12,00,000, plus his improvement cost of ₹3,00,000. Gain = 50,00,000 − 50,000 − 12,00,000 − 3,00,000 = ₹34,50,000. Counting only Meera's own holding would wrongly make it short-term.

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