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CA Intermediate · Taxation · Capital Gains

Rajan Mehta bought unlisted equity shares of a private company in April 2015 for ₹10,00,000. In March 2020 he gifted them to his son Karan, when their fair market value was ₹18,00,000. In October 2026 Karan sold them for ₹40,00,000 and paid brokerage of ₹1,00,000 on the sale. Ignoring any indexation, what is Karan's capital gain for tax year 2026-27?

Karan has a long-term capital gain of ₹29,00,000. The cost of a gifted asset is the donor's cost of ₹10,00,000, and the donor's holding period counts, so the shares are long-term. Deducting brokerage of ₹1,00,000 from the ₹40,00,000 sale price and then the cost gives ₹29,00,000.

  1. ALong-term capital gain of ₹29,00,000Correct
  2. BLong-term capital gain of ₹21,00,000
  3. CLong-term capital gain of ₹30,00,000
  4. DShort-term capital gain of ₹21,00,000

Explanation

For a gifted asset, the donee takes the previous owner's cost and the previous owner's holding period is added. The holding period runs from 2015, so the gain is long-term. Gain = 40,00,000 − 1,00,000 brokerage − 10,00,000 cost = ₹29,00,000. Using the ₹18,00,000 gift-date value as cost is wrong.

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