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CS Professional · Advanced Direct Tax Laws and Practice · Income Tax Implication on Specified Transactions

Under the Income-tax Act, 2025, an NRI transfers a foreign exchange asset, earning long-term capital gain of ₹6,00,000. The net consideration is ₹20,00,000 and, within six months, he invests ₹15,00,000 in a specified asset. What amount of capital gain is not charged to tax under section 215?

The exempt capital gain is ₹4,50,000. Under section 215(1)(ii), the whole gain of ₹6,00,000 is multiplied by the ratio of the new asset cost ₹15,00,000 to net consideration ₹20,00,000, which is three-fourths, leaving ₹1,50,000 chargeable.

  1. A₹4,50,000Correct
  2. B₹1,50,000
  3. C₹6,00,000
  4. D₹3,00,000

Explanation

Cost of new asset (₹15,00,000) is less than net consideration (₹20,00,000), so section 215(1)(ii) applies. Exempt gain = 6,00,000 × 15,00,000 / 20,00,000 = ₹4,50,000. ₹1,50,000 is the taxable balance, a common mistake of reporting the taxable part as the exempt part.

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