X, a resident individual, purchased gold jewellery in 1977-78 for ₹ 50,000. Its fair market value on…

Jewellery is excluded from 'personal effects', so it is a capital asset under section 2(22) of the Income-tax Act, 2025, and having been held for more than twenty-four months it is a long-term capital asset (section 2(67) read with section 2(101)). For an asset that became the assessee's property before 1 April 2001, section 90(9)(a) lets the assessee take as cost of acquisition either the actual cost or the fair market value on 1 April 2001; X opts for ₹ 1,20,000. Indexation is not available for jewellery (under section 72(2) read with section 197(3) it is relevant only for land or buildings acquired before 23 July 2024 by a resident individual or HUF), so under section 72(1) the gain is ₹ 8,00,000 − ₹ 1,20,000 = ₹ 6,80,000, taxable at 12.5% under section 197(1). ₹ 7,50,000 uses the actual cost instead of the value opted for, ₹ 6,30,000 wrongly deducts both amounts, and ₹ 85,000 is the tax at 12.5% on the gain, not the gain itself.