NISM Series X-B: Investment Adviser (Level 2) Mock Test (Set 1)

TDS on capital gains is applicable primarily to non-resident investors. When non-residents sell certain types of assets in India, tax is deducted at source (TDS) before making the payment to them. This is done to ensure that the appropriate taxes are paid on the capital gains earned in India by non-residents.

Interest income earned by Real Estate Investment Trusts (REITs) from Special Purpose Vehicles (SPVs) is exempt in the hands of REITs under Section 10 (23FC) of the Income Tax Act. This provision is part of the tax benefits provided to REITs in India.

According to Section 4 of the Payment of Gratuity Act, 1972, an employee is eligible for the payment of gratuity after completing a minimum of 5 years of continuous service with the same employer.

Long-term capital losses from equity schemes can be set off against long-term capital gains only. They cannot be set off against any short-term capital gains or gains from short-term debt schemes.

Short-term capital gains arising from the sale of units of equity-oriented mutual funds are taxable at the rate of 15%, plus applicable surcharge and cess.

For a mutual fund scheme to be considered an equity-oriented scheme under the Income-tax Act, 1961, it should invest more than 65% of the annual average of monthly averages of opening and closing figures of investible funds in equity shares of domestic companies.

The maximum monthly payments under the Reverse Mortgage Loan (RML) have been capped at Rs.50,000.

Round trip financing refers to any arrangement in which, through a series of transactions, funds are transferred among the parties to the arrangement. This term is often associated with deceptive or manipulative practices, and it can be indicative of financial fraud or irregularities.

The gold bonds will mature on the expiration of 8 years from the date of issue of the bonds.

Investments under the Senior Citizen Saving Scheme (SCSS) are eligible for tax benefits under Section 80C of the Income Tax Act.

Dying intestate” means a person has not left a valid will or has not made a testamentary disposition capable of taking effect. In essence, it refers to the situation where someone passes away without a legally valid will.

A depreciable asset is generally treated as a short-term capital asset. The holding period for a short-term capital asset is usually up to 36 months. Depreciable assets, such as machinery or equipment, are typically used for business purposes and are subject to depreciation, leading to their classification as short-term capital assets.

Short-term capital losses can be set off against both long-term and short-term capital gains. If there is any loss remaining after setting off against capital gains, it can be further carried forward to subsequent years for set off against capital gains.

In this scenario, the fund manager is adjusting the asset allocation based on the expected market conditions. This approach is known as Tactical Asset Allocation, where the manager makes short-term adjustments to the portfolio’s strategic asset allocation in response to changing market conditions or expectations.

Masala bonds are an innovative type of bonds issued by Indian entities to overseas investors. They are linked to the Indian Rupee (INR) and allow foreign investors to raise funds in the Indian capital market without exposing themselves to currency risk.

Gifts received from relatives, including a father to a son, are generally exempt from income tax in India. Therefore, Vijay should not have to pay tax on the gift of Rs. 5 lakh received from his father to buy a house.

Gratuity received by an employee is taxable under the head “Income from Salaries” as per the Income Tax Act in India.

Stock in trade, agricultural land outside the limit of municipality, and raw materials used in business are excluded from the definition of capital assets for the purpose of capital gains taxation.

Additional tax benefits up to Rs.50,000 are available for contributions to the National Pension Scheme (NPS) under Section 80CCD (1B) of the Income Tax Act.

A partnership firm can opt for the presumptive taxation scheme under Section 44AD if the turnover from the business does not exceed Rs. 2 crores during the relevant previous year. This scheme simplifies the tax computation for small businesses.

The deduction for an employee’s regular contributions from salary to the National Pension System (NPS) is available under Section 80CCD(1) of the Income-tax Act. The deduction is limited to 10% of the employee’s salary (basic + DA), and it is subject to an overall limit of Rs. 1.5 lakh under Section 80CCE.

To qualify as a long-term capital asset, the holding period for coupon bonds listed on a recognized stock exchange should be greater than 12 months. If held for 12 months or less, the gains would be considered short-term capital gains.

If a bond is selling at a premium, it means that the market yields (current interest rates) are lower than the coupon rate (interest rate stated on the bond). Investors are willing to pay a premium for the higher coupon payments compared to the prevailing market yields.

In the context of a distribution of assets to shareholders by a company, no capital gains shall arise in the hands of the company. This is because such a distribution is not considered a transfer, and therefore, capital gains tax is not applicable to the company.

The principle of contribution in insurance ensures that multiple insurers covering the same subject matter contribute to the claim amount in proportion to their respective exposure. This principle applies in cases of overlapping insurance coverage for the same risk.

To avail the benefit of Section 54 of the Income Tax Act, a taxpayer should acquire a residential house in India or construct a residential house in India within a period of one year before or two years after the date of transfer of the old house. The construction should be completed within three years from the date of transfer of the old house.

Family floater Mediclaim policy is a type of health insurance that covers the entire family under a single policy. It provides coverage for medical expenses incurred by any family member, including the primary insured, spouse, and dependent children.