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

Mr. Arvind Rao, a resident individual, bought listed non-convertible debentures of an Indian company on the stock exchange for Rs 1,00,000 and sold them on the exchange after 8 months for Rs 1,12,000. Assume the gain is chargeable as capital gains under the rules applicable to listed debentures for the stated holding period and he is in the 30% slab (ignore surcharge, cess and brokerage). What is the tax on the gain?

The gain is Rs 12,000. Because the listed debentures were held only 8 months, it is a short-term capital gain taxed at the slab rate of 30 percent, giving tax of Rs 3,600, not a lower special long-term rate.

  1. ARs 1,200
  2. BRs 2,400
  3. CRs 3,600Correct
  4. DRs 0

Explanation

Gain = 1,12,000 - 1,00,000 = Rs 12,000. Listed debentures held 8 months (under the 12-month threshold) give a short-term gain taxed at slab rates. Tax = 30% of 12,000 = Rs 3,600. Rs 1,200 uses 10%, Rs 2,400 uses 20%.

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