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CA Intermediate · Taxation · Capital Gains

Suresh, a resident individual with a high salary income, sold listed equity shares in tax year 2026-27 on which STT was paid on acquisition and transfer. Long-term capital gain on these shares was ₹3,25,000, and he had no other capital gains. Assuming the Income-tax Act, 2025 rates as amended by the Finance Act, 2026 are 12.5% on long-term gains above ₹1,25,000, what is the tax on the capital gain including 4% health and education cess? Ignore surcharge.

The tax is ₹26,000. The long-term gain on listed equity shares is taxed only to the extent it exceeds ₹1,25,000, so ₹2,00,000 is taxable at 12.5%, giving ₹25,000. Adding 4% health and education cess of ₹1,000 brings the total to ₹26,000.

  1. A₹26,000Correct
  2. B₹42,250
  3. C₹20,800
  4. D₹25,000

Explanation

Taxable LTCG = 3,25,000 − 1,25,000 exemption limit = ₹2,00,000. Tax at 12.5% = ₹25,000. Adding 4% cess of ₹1,000 gives ₹26,000. ₹42,250 taxes the entire gain with no ₹1,25,000 limit; ₹25,000 omits cess; ₹20,800 uses 10%.

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