Skip to content

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

An investor in an equity-oriented mutual fund scheme redeems units after holding them for 10 months. How is the gain classified for tax purposes?

The gain is a short-term capital gain. Units of equity-oriented schemes must be held for more than 12 months to qualify as long-term, and 10 months falls short of that. The gain is therefore taxed at the special short-term rate applicable to equity funds.

  1. ALong-term capital gain, because it is held over 6 months
  2. BShort-term capital gain, because holding is 12 months or lessCorrect
  3. CBusiness income, because redemption is frequent
  4. DExempt, because the fund is equity-oriented

Explanation

For equity-oriented schemes, units held for more than 12 months give long-term gains. Ten months is within 12 months, so the gain is short-term and taxed at the STCG rate for equity funds (20%).

Did you get it right without looking?

One question tells you little. A timed set on Taxation shows your real accuracy, how long you take and where you lose marks.

Practise TaxationFree diagnostic mock

More Taxation questions