WEALTH MANAGEMENT – practice questions – Capital gain tax and HLV

2. a. Mr. PRAKASH purchases a house property for Rs.21,50,000 in April 1998. Fair value of
the property as on 1st April, 2001 is Rs.36,00,000. Following expenses are incurred by
him for making addition/alteration to the house property:

i. Cost of construction of first floor in May 2005: Rs. 18,00,000

ii. Cost of construction of second floor in July 2007: Rs. 25,50,000
iii. Repairs and renovations in March. 2015: Rs.20,50,000

The house property is sold by Mr. PRAKASH in June 2018 for Rs. 1,92,00,000. (Expenses
incurred on transfer: Rs.4,15,000). Mr.PRAKASH Invests Rs.60,00,000 NHAI Bonds in
January 2019.

You are required to calculate the long term capital gain for the assessment year 2019-20 and the
applicable tax amount. (Financial/previous year is 2018-19). (7 marks)

Cost
Financia Inflation
l Year Index

2001-02 100
2002-03 105
2003-04 109
2004-05 113
2005-06 117
2006-07 122
2007-08 129
2008-09 137
2009-10 148
2010-11 167
2011-12 184
2012-13 200
2013-14 220
2014-15 240
2015-16 254
2016-17 264
2017-18 272
2018.19280
3. a.
Mr. SUMIT, 34 years old, is Associate Vice President in a reputed MNC company. His wife Sailaja,
30 years old, is home maker. They have one child SAHIL, 3 years old.

The CTC of SUMIT is Rs.20 lacs. His take home salary at present is 85% of the CTC and he spends
approx. 15% of the take home salary on himself. His employer provides group term insurance
cover of Rs.18 lacs and health insurance cover of Rs.10 lacs covering him and his family.

Mr. SUMIT has an accumulated savings of Rs. 8 lacs in PPF, Rs.6 lacs in Mutual funds (on current
value). The average return on both these savings is 9% p.a.

He has a home loan outstanding to the extent of Rs.28 lacs and car loan outstanding Rs.8 lacs at
present. His credit card dues on an average is Rs. 75,000/-.

He wants to make his son a doctor and later send him to US for PG programme in Medicine. The
cost of Medicine graduation in India at present cost is Rs.10 lacs and MS programme at US costs
at present Rs.30 lacs. SUMIT needs this amount when his SON completes the age of 23.

He also wants to perform the marriage of his Son at his age of 26. The cost of marriage expenses
at present cost is 15 lacs.

Mr. SUMIT is aiming for retirement income of which is equivalent of Rs. 60,000/- per month
today. He will be retiring at the age of 60. His provident fund accumulation (including PPF) is
expected give him a corpus of Rs.80 lacs at the time of retirement and gratuity payment (tax
free) a corpus of Rs.15 lacs. Mutual fund investment is assumed to be at same level of Rs.6 lacs
till retirement.

Assume that the average inflation is 6%, the HLV factor at the present age of SUMIT is 22.

Calculate the Human Life value of Mr. SUMIT and also suggest suitable life insurance products.