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

Meera, a resident investor, sold equity-oriented fund units held for 3 years, realising a long-term capital gain of Rs 1,75,000 in the year. Assuming no other long-term gains and the exemption limit of Rs 1,25,000 and a tax rate of 12.5% on gains beyond it, what is the tax before cess?

The tax before cess is Rs 6,250. The long-term gain of Rs 1,75,000 is reduced by the Rs 1,25,000 exemption, leaving Rs 50,000, which is taxed at 12.5%. Applying the rate to the full gain would wrongly ignore the exemption.

ARs 6,250Correct
BRs 21,875
CRs 15,625
DRs 8,750

Explanation

Taxable gain = 1,75,000 - 1,25,000 = Rs 50,000. Tax = 12.5% of 50,000 = Rs 6,250. Applying the rate to the whole gain gives Rs 21,875, which is wrong because the exemption is ignored.

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