NISM Certifications · NISM-Series-V-A: Mutual Fund Distributors · Taxation

A resident investor bought units of an equity-oriented fund for Rs 3,00,000 and redeems them after 8 months for Rs 3,60,000. Ignoring surcharge, cess and other income, what is the tax on this gain at the current short-term rate of 20%?

The tax is Rs 12,000. Holding for 8 months makes the Rs 60,000 gain short-term, which is taxed at 20% for equity-oriented funds. Applying 10% or the 12.5% long-term rate would be wrong because the holding was under 12 months.

ARs 6,000
BRs 12,000Correct
CRs 7,500
DRs 72,000

Explanation

Short-term gain = 3,60,000 - 3,00,000 = 60,000. Tax at 20% = 12,000. Rs 6,000 uses 10%. Rs 7,500 uses 12.5%, the LTCG rate. Rs 72,000 taxes the whole sale value at 20%.

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