Indexation of cost under the second proviso to section 48 is available only where:
AThe asset has been held for more than thirty-six months
BThe assessee has opted out of the default tax regime
CThe capital gains for the year exceed Rs 1,25,000
DThe transfer of the asset took place before 23.7.2024
Answer & Solution
Correct answer: D. The transfer of the asset took place before 23.7.2024
1. After the Finance (No. 2) Act, 2024 changes, indexed cost of acquisition/improvement under section 48 applies only to transfers effected before 23.7.2024.
2. For transfers on or after that date, capital gains are computed without indexation (CII for 2025-26 is 376, relevant only to earlier-transfer computations still in play).
3. A limited relief survives in section 112: a resident individual/HUF transferring land or building acquired before 23.7.2024 may pay the lower of 12.5% without indexation and 20% with indexation — but that operates at the tax-computation stage, not while computing income.
4. Option A confuses the holding-period test with indexation; option B ties indexation to regime choice, which is irrelevant here.
_Source: ICAI CA Inter P3(A) Income-tax SM (May 2026), Ch 3 Unit 4 Capital Gains, PDF p. 33_
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