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

Caselet: Meera sold listed equity shares after holding them for 18 months. The sale gave a long-term capital gain of Rs 2,50,000 and she has no other capital gains in the year. Assume a long-term capital gains exemption of Rs 1,25,000 per year and a tax rate of 12.5% on the gain above it, ignoring cess and surcharge. What is the tax payable on this gain?

The tax payable is Rs 15,625. The long-term gain of Rs 2,50,000 is reduced by the Rs 1,25,000 exemption, leaving Rs 1,25,000, which is taxed at 12.5%. Applying the rate to the full gain would overstate the tax.

  1. ARs 31,250
  2. BRs 15,625Correct
  3. CRs 62,500
  4. DRs 46,875

Explanation

Taxable gain = 2,50,000 - 1,25,000 = 1,25,000. Tax = 12.5% x 1,25,000 = Rs 15,625. Rs 31,250 applies 12.5% to a Rs 2,50,000 gain without the exemption, which is wrong here because exemption applies, and 62,500 uses 25%.

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