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NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Taxation of Equity Products

Meera, a resident individual, sold listed equity shares of an Indian company on a recognised stock exchange (STT paid on sale) after holding them for 20 months. The sale gave a long-term capital gain of Rs 1,60,000. She has no other capital gains in the year. Assume the long-term capital gain on listed equity is taxed at 12.5% above an exemption of Rs 1,25,000 per year, and ignore surcharge and cess. What is the tax payable on this gain?

The tax payable is Rs 4,375. The shares were held over 12 months, so the gain is long-term. After deducting the Rs 1,25,000 exemption, Rs 35,000 remains taxable, and 12.5% of that gives Rs 4,375, before surcharge and cess.

  1. ARs 4,375Correct
  2. BRs 20,000
  3. CRs 8,750
  4. DRs 0

Explanation

Holding of 20 months exceeds 12 months, so the gain is long-term. Taxable gain = 1,60,000 - 1,25,000 = 35,000. Tax = 12.5% x 35,000 = Rs 4,375. Rs 20,000 wrongly taxes the full gain without the exemption; Rs 8,750 uses 25% on the taxable amount; Rs 0 ignores that the gain exceeds the exemption.

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