Q.Mr. Ali purchased a residential house in March 2022 for ₹20,00,000. He incurred ₹2,00,000 on a capital improvement (adding an extra floor) in July 2023. He sold the house in April 2025 for ₹30,00,000, paying legal and brokerage expenses of ₹60,000 on the sale.

The house was held for a little over the 24-month threshold, just clearing the line into long-term territory.

1. Classification: a residential house is immovable property, subject to the 24-month threshold under Section 2(42A). Held from March 2022 to April 2025 is a period of approximately 37 months, which EXCEEDS 24 months. The house is therefore a Long-term Capital Asset, and the resulting gain is a Long-term Capital Gain.
2. Computation:

When a holding period is close to the threshold (here, roughly 37 months against a 24-month line), students sometimes skip stating the exact reasoning and simply assert 'long-term' — always show the actual months held against the applicable …