Skip to content

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

Ms. Kavita Rao, a resident individual, bought listed corporate bonds on the stock exchange on 1 April 2023 for Rs 1,00,000 and sold them on the exchange on 1 September 2023 for Rs 1,08,000. Assuming she is in the 20% slab (ignore surcharge and cess) and these are held as capital assets, how is the gain treated and what is the tax?

The gain is a short-term capital gain of Rs 8,000 because the listed bonds were held for only five months, within the 12-month threshold. It is taxed at her slab rate of 20%, giving tax of Rs 1,600.

  1. AShort-term capital gain of Rs 8,000 taxed at slab rate: Rs 1,600Correct
  2. BLong-term capital gain of Rs 8,000 taxed at 10%: Rs 800
  3. CLong-term capital gain of Rs 8,000 taxed at 20%: Rs 1,600
  4. DExempt capital gain: Rs 0

Explanation

Listed bonds held for 12 months or less give short-term gains; holding was 5 months. Gain = 1,08,000 - 1,00,000 = Rs 8,000, taxed at the slab rate of 20% = Rs 1,600. The long-term options need a holding beyond 12 months.

Did you get it right without looking?

One question tells you little. A timed set on Taxation of Debt Products shows your real accuracy, how long you take and where you lose marks.

Practise Taxation of Debt ProductsFree diagnostic mock

More Taxation of Debt Products questions