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

Mr. Arvind Rao, a resident individual, sold listed equity shares on a recognised stock exchange after paying STT on both purchase and sale. He bought them for ₹3,00,000 and sold them 18 months later for ₹4,50,000. He has no other capital gains in the year. Applying the 12.5% rate and the ₹1,25,000 exemption on long-term gains on listed equity (ignore cess and surcharge), what is the tax payable?

The tax is ₹3,125. The gain of ₹1,50,000 is long-term as the holding exceeds 12 months. After the ₹1,25,000 exemption, ₹25,000 is taxable at 12.5%, giving ₹3,125 before cess and surcharge.

  1. A₹3,125Correct
  2. B₹18,750
  3. C₹0
  4. D₹5,625

Explanation

Holding exceeds 12 months, so the gain is long-term: 4,50,000 - 3,00,000 = 1,50,000. Less exemption 1,25,000 = 25,000 taxable. Tax at 12.5% = ₹3,125. ₹18,750 taxes the full gain without exemption; ₹0 ignores the excess over the exemption.

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