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nism-series-xb-section-54-capital-gains-residential-house-exemption[ INVESTMENT ADVISER (LEVEL 2) ]

An individual sells a long-term residential house property realizing an LTCG of ₹80,00,000. The individual purchases a new residential flat for ₹60,00,000 within 2 years. Under Section 82 of the Income-tax Act, 2025 (the erstwhile Section 54 of the Income-tax Act, 1961), what is the net Taxable Long-Term Capital Gain?

[ A ]₹0 (Entire gain is automatically tax-exempt)
[ B ]₹80,00,000 (Full gain taxable without exemption)
[ C ]₹20,00,000 (Total LTCG of ₹80,00,000 minus Section 82 exemption (the erstwhile Section 54) of ₹60,00,000)[ CORRECT ]
[ D ]₹60,00,000
Takeaway

Option C is correct: ₹20,00,000 (Total LTCG of ₹80,00,000 minus Section 82 exemption (the erstwhile Section 54) of ₹60,00,000)

Derivation
Total LTCG on the sale = ₹80,00,000. Section 82 exemption equals the lower of the capital gain realized or the amount actually reinvested in a new residential house within the prescribed 2-year window; here that reinvestment is ₹60,00,000, which is less than the ₹80,00,000 gain, so the exemption is capped at the reinvested amount rather than the full gain. Net Taxable LTCG = ₹80,00,000 − ₹60,00,000 = ₹20,00,000, taxable at 12.5% under Section 197 (the erstwhile Section 112) post-Budget 2024. The key mechanism the exam tests is that Section 82 exemption is not automatic or unlimited simply because a new house was purchased — it is strictly bounded by whichever of the two figures, gain or reinvestment, is smaller.
Why the others fail
A — ₹0 (Entire gain is automatically tax-exempt)
Exemption under Section 82 is capped at the amount actually reinvested, ₹60 Lakhs here, so the residual ₹20 Lakhs of gain above that remains taxable, not exempt.
B — ₹80,00,000 (Full gain taxable without exemption)
Ignores the legitimate Section 82 (the erstwhile Section 54) reinvestment exemption entirely, taxing the full ₹80,00,000 gain as if no qualifying new house purchase had occurred.
D — ₹60,00,000
States the exempt portion of the gain, ₹60,00,000, rather than the taxable residual of ₹20,00,000 that remains after the Section 82 exemption is applied.