A high-net-worth client, Mr. Sharma, approaches a wealth manager at an investment bank in April 2024 with a sum of 2,00,00,000 rupees. He has two primary objectives: First, he wants to fund his daughter's higher education in the UK, which will require a lump sum of 3,50,00,000 rupees at the end of 7 years. Second, he wants to calculate the tax impact of selling an old ancestral plot of land in his hometown, which he inherited. The plot was originally purchased by his grandfather in May 1998 for 5,00,000 rupees. The Fair Market Value (FMV) of the plot as of April 1, 2001, was 12,00,000 rupees. Mr. Sharma sold the plot in May 2024 for 60,00,000 rupees. The wealth manager suggests investing the 2 crore rupees in a balanced fund offering a compounded annual return of 9 percent. Based on the Cost Inflation Index (CII) of 363 for 2024-2025 and 100 for 2001-2002, and the principles of the Future Value of a Lump Sum and Capital Gains tax, which of the following is correct?

Question

Accepted Answer

The future value of the 2 crore investment will be approximately 3.65 crore rupees, which is enough for the education, and the long-term capital gain on the land is 16,44,000 rupees.

Answer

The future value is 3.10 crore rupees, and the indexed cost is 18,15,000 rupees because the cost must be taken from the 1998 purchase price.

Answer

The investment will grow to 4.20 crore rupees, and the indexed cost of the land is 43,56,000 rupees, resulting in a taxable gain of 16,44,000 rupees.

Answer

The future value of the investment will be 2.50 crore rupees, which is insufficient, and the capital gain is 48,00,000 rupees because indexation is not allowed on inherited property.

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