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NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Case Studies in Comprehensive Financial Advice

Caselet: Arvind, a resident individual, sold listed equity shares after holding them for 18 months. Purchase cost was Rs 6,00,000 and sale value Rs 9,00,000 with no other capital gains in the year. Assume long-term capital gains on listed equity are taxed at 12.5% on gains above an exemption of Rs 1.25 lakh, and ignore surcharge and cess. What is the tax payable?

The tax payable is Rs 21,875. The long-term gain is Rs 3,00,000, from which the Rs 1,25,000 exemption is deducted, leaving Rs 1,75,000 taxed at 12.5%. Taxing the whole gain would wrongly give Rs 37,500.

  1. ARs 37,500
  2. BRs 21,875Correct
  3. CRs 60,000
  4. DRs 15,625

Explanation

Gain = 9,00,000 - 6,00,000 = Rs 3,00,000. Taxable = 3,00,000 - 1,25,000 = Rs 1,75,000. Tax = 12.5% x 1,75,000 = Rs 21,875. Rs 37,500 taxes the full gain without exemption; Rs 15,625 taxes only Rs 1.25 lakh.

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