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CA Intermediate · Taxation · Capital Gains

Rohit, a resident individual, bought a residential house in 2019 for ₹40,00,000 and spent ₹5,00,000 on an extension in 2021. He sold it in tax year 2026-27 for ₹1,20,00,000, paying ₹2,00,000 as brokerage and transfer expenses. Within the permitted period he bought another residential house in India for ₹50,00,000. Assuming all conditions for the residential-house reinvestment exemption are met, his taxable long-term capital gain is:

The taxable long-term gain is ₹23,00,000. The gain is 1,20,00,000 less expenses 2,00,000, cost 40,00,000 and improvement 5,00,000, which is ₹73,00,000. The exemption equals the lower of the gain and the new house cost, ₹50,00,000, so ₹23,00,000 remains taxable.

  1. A₹23,00,000Correct
  2. B₹25,00,000
  3. C₹28,00,000
  4. D₹73,00,000

Explanation

LTCG = 1,20,00,000 − 2,00,000 − 40,00,000 − 5,00,000 = ₹73,00,000. The exemption is the lower of the gain and the amount reinvested, which is ₹50,00,000. Taxable gain = 73,00,000 − 50,00,000 = ₹23,00,000. ₹25,00,000 ignores the selling expenses. ₹28,00,000 ignores the improvement cost. ₹73,00,000 assumes no exemption.

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