IAI Actuarial Core Principles · Business Finance · Personal and corporate taxation
Rohan, a resident individual, sells a house property for ₹90 lakh, incurring transfer expenses of ₹1 lakh. He bought it years ago for ₹40 lakh and spent ₹5 lakh on improvement. Ignoring indexation and special rates, what is the capital gain (long-term) before any exemption?
The capital gain is ₹44 lakh. Sale price net of transfer expenses is ₹89 lakh, and the deductible cost is acquisition plus improvement of ₹45 lakh. The difference between the two gives the gain before any exemption.
- A₹44 lakhCorrect
- B₹45 lakh
- C₹49 lakh
- D₹50 lakh
- ₹39 lakh
Explanation
Net consideration = 90 - 1 = 89 lakh. Cost of acquisition plus improvement = 40 + 5 = 45 lakh. Gain = 89 - 45 = 44 lakh. Ignoring transfer expenses gives 45 lakh; ignoring improvement gives 49 lakh.
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