Certifications Mock Tests Study Material Menu Certifications Mock Tests Study Material NISM Series XX: Taxation in Securities Markets Certification Mock Test (Set 2) /50 NISM Series XX: Taxation in Securities Markets Certification Mock Test (Set 2) 1 / 50 1. ________ is considered as the actual cost of the stock-in-trade arising from the conversion of a capital asset. a. Fair market value b. Market Price c. Book Value d. Acquired Value Explanation:Fair market value is considered the actual cost of stock-in-trade when it arises from the conversion of a capital asset because it reflects the current market price of the asset. 2 / 50 2. The effective tax rate shall be n the amount of distributed income paid to the shareholders at the time of buy-back of shares ________. a. 18.673% b. 10.165% c. 15.135% d. 23.296% Explanation:The effective tax rate on distributed income during a buy-back of shares is 23.296%, which includes the buy-back tax and applicable surcharge and cess. 3 / 50 3. The book value of assets shall include ________. a. Advance tax b. Deferred tax asset c. TDS d. Jewellery fair value Explanation:The book value of assets includes deferred tax assets, which represent future tax benefits resulting from temporary differences between accounting and tax treatment of certain items. 4 / 50 4. If the assessee follows __________ of accounting, interest on securities is taxable on a receipt basis. a. Mercantile system b. Going concern system c. Cash system d. Hybrid system Explanation:Interest on securities is taxable on a receipt basis if the assessee follows the cash system of accounting, meaning it’s taxed when received rather than accrued. 5 / 50 5. The redemption of sovereign gold bond, issued by the ______ under the Sovereign gold bond scheme, by an individual will not be regarded as transfer. a. NABARD b. SIDBI c. RBI d. IDBI Explanation:The redemption of sovereign gold bonds issued by the RBI does not constitute a taxable transfer event for individuals. 6 / 50 6. Any profit and gains arising to FPI from derivative transactions shall always be taxable under __________. a. Property Income b. Capital gains c. Profits and gains of business d. Income from other sources Explanation:Any profits and gains from derivative transactions by FPIs are always taxable under the head of capital gains. 7 / 50 7. As per Section 112A of the IT act, 1961, long-term capital gains arising from the transfer of units of mutual funds is not chargeable to tax if the aggregate amount of capital gain during the year is below _______. a. Rs.6,00,000 b. Rs.1,00,000 c. Rs.5,00,000 d. Rs.3,00,000 Explanation:Under Section 112A, long-term capital gains from the transfer of mutual fund units are exempt from tax if the aggregate capital gain during the year is below Rs. 1 lakh. 8 / 50 8. In the case of a Tier I NPS account, a minimum contribution of _______ is required every year. a. Rs.1,000 b. Rs.1,500 c. Rs.2,000 d. Rs.2,500 Explanation:A minimum contribution of Rs. 1,000 annually is required for Tier I NPS accounts to maintain the account’s active status and avail tax benefits. 9 / 50 9. No taxability shall arise even in the hands of the resultant fund on receipt of a capital asset from the original fund as per ________ of the IT act. a. Section 24(3) b. Section 56(2) c. Section 18(1) d. Section 24(3) Explanation:Section 56(2) of the Income Tax Act exempts the resultant fund from tax liability when it receives a capital asset from the original fund. 10 / 50 10. For a non-resident Indian, the interest received from the notified infrastructure debt fund is taxable at _______. a. 15% b. 10% c. 5% d. 12% Explanation:Interest received from notified infrastructure debt funds by non-resident Indians is taxable at a concessional rate of 5%. 11 / 50 11. The income in the nature of interest on securities is taxable in the hands of the assessee under the head _______. a. Income from other sources b. Property income c. Business income d. Capital gain Explanation:Income in the form of interest on securities is taxable under the head of business income when it’s earned as part of the regular business operations of the assessee. 12 / 50 12. The tax exemption shall be allowed only concerning low premium ULIPs the aggregate of which is under the threshold limit of _______. a. Rs.1.5 Lakhs b. Rs.2.5 Lakhs c. Rs.1 Lakh d. Rs.2 Lakhs Explanation:Tax exemption for ULIPs is available if the aggregate premium is under Rs. 2.5 lakhs annually, incentivizing investments in low-premium ULIPs. 13 / 50 13. The long-term capital gain over ______ shall be chargeable to tax if such capital gain arises from the transfer of securities, being equity shares. a. Rs. 1 lakh b. Rs. 2 lakhs c. Rs. 2.5 lakhs d. Rs. 5 lakhs Explanation:Long-term capital gains from the transfer of securities, specifically equity shares, exceeding Rs. 1 lakh are chargeable to tax at a concessional rate. 14 / 50 14. Any profit arising from the sale of Gold ETFs, after holding it for more than _______, is considered as long-term capital gain. a. 18 months b. 24 months c. 36 months d. 12 months Explanation:Profits from the sale of Gold ETFs held for more than 36 months are considered long-term capital gains and taxed accordingly. 15 / 50 15. _________ is a concept that adds value to a person’s portfolio by implementing sound tax strategies. a. Tax beta b. Tax alpha c. Jensen Alpha d. Tax delta Explanation:Tax alpha refers to adding value to an investment portfolio by implementing effective tax strategies to minimize tax liabilities. 16 / 50 16. If assesses failed to file the return on time, he can apply to the ________ for condonation of delay in filing of return of income. a. Merchant banker b. Underwriter c. Assessing officer d. Investment banker Explanation:In case of delayed filing of income tax return, the assessee can apply to the Assessing Officer for condonation of the delay. 17 / 50 17. As per section 80-IAC of IT act, the total turnover of the eligible startup for benefit deferment of TDS shall not exceed _______ in the previous year for which deduction under Section 80-IAC is claimed. a. Rs.100 crores b. Rs.200 crores c. Rs.250 crores d. Rs.500 crores Explanation:For startups claiming deduction under Section 80-IAC, the total turnover in the previous year should not exceed Rs. 100 crores. 18 / 50 18. The rebate under ________ is not available from income-tax payable on long-term capital gain covered under section 112A of IT act. a. Section 17D b. Section 42B c. Section 23C d. Section 87A Explanation:The rebate under Section 87A is not available for income tax payable on long-term capital gains covered under Section 112A. 19 / 50 19. NSE charges a transaction fee of _______ of the aggregate amount of purchase and sale. a. 0.00225% b. 0.00325% c. b) 0.00175% d. Rs. 5 lakhs0.00275% Explanation:NSE charges a transaction fee of 0.00325% on the aggregate amount of purchase and sale transactions. 20 / 50 20. The income earned by the market intermediaries, the nature of commission income, is taxable under the head _______. a. Capital gains b. Income from Prope c. Profit and gains from business d. Income from other sources Explanation:Commission income earned by market intermediaries is taxable under the head of profits and gains from business. 21 / 50 21. Under section 115A, in the case of offshore funds, the dividend from units of a mutual fund purchased in foreign currency is taxable at _______. a. 10% b. 15% c. 20% d. 25% Explanation:Dividends from mutual fund units purchased in foreign currency are taxable at 10% under Section 115A for offshore funds. 22 / 50 22. According to the Income-tax Act, 1961 Salary includes which of the following? a. Wages b. Annuity c. Pension d. All of the above Explanation:Salary under the Income Tax Act includes wages, annuity, pension, and other payments received by an individual for services rendered. 23 / 50 23. The short-term capital gain arising to an FPI from the transfer of other security shall be chargeable to tax at the rate of _______ under section 115AD without providing the benefit of foreign currency translation. a. 10% b. 20% c. 30% d. 40% Explanation:Short-term capital gains arising to an FPI from the transfer of securities other than equity shares are taxed at a rate of 30% under Section 115AD. 24 / 50 24. For a non-resident Indian, the interest received from the government is taxable at _______. a. 10% b. 20% c. 12% d. 15% Explanation:Interest received from the government by non-resident Indians is taxable at a rate of 20%. 25 / 50 25. ________ was inserted under the Income-tax act to curb the practice of bonus stripping. a. Section 16(6) b. Section 36(7) c. Section 21(4) d. Section 94(8) Explanation:Section 94(8) was inserted under the Income-tax Act to curb the practice of bonus stripping, which involves claiming tax benefits on bonus shares purchased shortly before or after their allotment. 26 / 50 26. ______ is considered as an approved instrument of accessing external commercial borrowings. a. Asset-backed securities b. Foreign currency convertible bonds c. Mortgage-backed securities d. Plain vanilla bonds Explanation:Foreign currency convertible bonds are considered as an approved instrument of accessing external commercial borrowings due to their convertibility feature. 27 / 50 27. STPs can transfer money between two mutual fund schemes of different asset management companies. a. True b. False Explanation:STPs (Systematic Transfer Plans) cannot transfer money between two mutual fund schemes of different asset management companies. They are designed to transfer funds systematically within a single mutual fund scheme. 28 / 50 28. If an investment is chargeable to tax only at the time of transfer or withdrawal then it will fall under the category of _______. a. ETE b. EEE c. EET d. Either 2 or 3 Explanation:If an investment is chargeable to tax only at the time of transfer or withdrawal, then it falls under the category of Exempt-Exempt-Taxable (EET) taxation. 29 / 50 29. The transaction charges is high in case of stock exchanges in IFSC in comparison to ordinary stock exchanges. a. True b. False Explanation:FALSE. Transaction charges in stock exchanges in International Financial Services Centre (IFSC) are typically lower compared to ordinary stock exchanges, attracting investors and businesses to operate in IFSCs. 30 / 50 30. The losses arising from the transfer of bonus unit of a mutual fund shall be disallowed if any person buys a unit within a period of _______ prior to the record date. a. 1 month b. 3 months c. 6 months d. 12 months Explanation:The losses arising from the transfer of bonus units of mutual funds shall be disallowed if any person buys units within a period of 3 months prior to the record date. 31 / 50 31. Who is involved in keeping a proper record of applications and monies received from investors during an IPO? a. Banker to an issue b. Registrar to an issue c. Custodian d. Underwriter Explanation:The Registrar to an Issue is involved in keeping a proper record of applications and monies received from investors during an Initial Public Offering (IPO). 32 / 50 32. An Indian Citizen who is deemed as a resident in India under _______ of IT act is treated as NOR in India. a. Section 4(1D) b. Section 6(1A) c. Section 5(1C) d. Section 3(2B) Explanation:An Indian citizen who is deemed as a resident in India under Section 6(1A) of the Income-tax Act is treated as Not Ordinarily Resident (NOR) in India for tax purposes. 33 / 50 33. Section 145 of the Income-tax Act provides a method of computation for income under ________. a. Income from other sources b. Income from house property c. Capital gains d. Both 1 and 3 Explanation:Section 145 of the Income-tax Act provides methods of computation for income under both Income from Other Sources and Capital Gains. 34 / 50 34. If a capital asset is held for more than ________ then it is considered a long-term capital asset. a. 24 months b. 36 months c. 16 months d. 18 months Explanation:If a capital asset is held for more than 36 months, it is considered a long-term capital asset, subject to favorable tax treatment. 35 / 50 35. _______ of the Income-tax Act defines the previous year as the financial year immediately preceding the assessment year. a. Section 1 b. Section 2 c. Section 3 d. Section 4 Explanation:Section 3 of the Income-tax Act defines the previous year as the financial year immediately preceding the assessment year for tax purposes. 36 / 50 36. Which of the following incomes of AIFs are exempt from GST? a. Sale of units b. Dividend income c. Both 1 and 2 d. Rental income Explanation:Sale of units and dividend income of Alternative Investment Funds (AIFs) are exempt from Goods and Services Tax (GST). 37 / 50 37. The concept of REIT was introduced in 2014 by the _______. a. RBI b. BSE c. NYSE d. SEBI Explanation:The concept of Real Estate Investment Trusts (REITs) was introduced in 2014 by the Securities and Exchange Board of India (SEBI) to enable investment in real estate assets through a regulated investment mechanism. 38 / 50 38. Which of the following are true about forward contracts? a. Customized contract size and expiry b. Traded on OTC market c. Standardized asset quality d. Only 1 and 2 Explanation:Forward contracts have customized contract size and expiry dates and are traded on the OTC market. These characteristics distinguish them from standardized futures contracts traded on organized exchanges. 39 / 50 39. The forward derivatives are standardized and hence involve no counterparty risk. a. True b. False Explanation:Forward derivatives are not standardized and typically involve counterparty risk. Unlike futures contracts, which are standardized and traded on organized exchanges, forward contracts are customized agreements between two parties, leading to counterparty risk because there is no central clearinghouse to guarantee performance. 40 / 50 40. _______ is a mutual fund scheme that invests in other schemes of mutual funds. a. Fund of funds b. ELSS c. Equity-oriented fund d. Debt-oriented fund Explanation:A Fund of Funds is a mutual fund scheme that invests in other schemes of mutual funds. Instead of directly investing in stocks or bonds, a Fund of Funds invests in a portfolio of other mutual funds. 41 / 50 41. ________ was inserted under the Income-tax Act to curb the practice of dividend stripping. a. Section 16(6) b. Section 94(7) c. Section 36(7) d. Section 21(4) Explanation:Section 94(7) was inserted under the Income-tax Act to curb the practice of dividend stripping, wherein taxpayers would claim tax benefits on dividends received shortly before or after the sale of shares. 42 / 50 42. The second tax implication shall arise when the ______ is under ESOP. a. The vesting period ends b. Exercise date is declared c. Share allotment is made d. Employees sell shares allotted Explanation:The second tax implication arises when employees sell the shares allotted to them under the Employee Stock Ownership Plan (ESOP). This triggers capital gains tax liability for the employees. 43 / 50 43. The concessional tax rate under Section 112A is available in case of transfer of equity shares if STT is chargeable at ________. a. Time of transfer b. Time of acquisition of shares c. Either 1 or 2 d. Both 1 and 2 Explanation:The concessional tax rate under Section 112A is available in the case of the transfer of equity shares if Securities Transaction Tax (STT) is chargeable at the time of acquisition of shares. 44 / 50 44. The transfer of assets defined under section 2(47) of the IT act excludes ______. a. Consolidation of mutual fund b. Relocation of offshore fund to IFSC c. Both 1 and 2 d. Redemption of zero-coupon bonds Explanation:The definition of transfer of asset under Section 2(47) excludes consolidation of mutual funds and relocation of offshore funds to IFSC, among other transactions. 45 / 50 45. The Income-tax Act allows a deduction under Section 80C to the extent of ______ in respect of investment made in ELSS. a. Rs 2 lakhs b. Rs 1 lakhs c. Rs 2.5 lakhs d. Rs 1.5 lakhs Explanation:The Income-tax Act allows a deduction under Section 80C to the extent of Rs. 1.5 lakhs in respect of investments made in Equity Linked Savings Schemes (ELSS), which are tax-saving mutual funds. 46 / 50 46. As per section 80-IAC of IT act, an eligible start-up for benefit deferment of TDS can be _______ engaged in innovation a. Company b. Limited liability partnership c. Both 1 and 2 d. Partnership firm Explanation:As per section 80-IAC of the IT Act, an eligible start-up for the benefit of deferment of TDS can be a company or a limited liability partnership (LLP) engaged in innovation. 47 / 50 47. The objective of masala bonds is to ____________. a. Fund infrastructure projects in India b. Fund environmental projects in India c. Fund banking operations projects in India d. None of the above Explanation:The objective of masala bonds is to fund infrastructure projects in India. Masala bonds are rupee-denominated bonds issued by Indian entities in overseas markets, primarily to attract foreign investment for infrastructure development in India. 48 / 50 48. As per ________ of the IGST Act, 2017, the place of supply of banking to any person shall be the location of the recipient of services on the records of the supplier of services. a. Section 20(7) b. Section 8(5 c. Section 10(2) d. Section 12(12) Explanation:As per Section 12(12) of the IGST Act, 2017, the place of supply of banking services to any person shall be the location of the recipient of services as per the records of the supplier of services. 49 / 50 49. A business income of _________ shall be chargeable to tax in the hands of AIF itself. a. Rs.15 lakhs b. Rs.10 lakhs c. Rs.20 lakhs d. Rs.25 lakhs Explanation:A business income of Rs. 20 lakhs shall be chargeable to tax in the hands of Alternative Investment Fund (AIF) itself. This means that AIFs are taxed on their income generated from their investment activities. 50 / 50 50. ________ is used to redeem the investment from a mutual fund scheme in a phased manner. a. Systematic investment plan b. Systematic transfer plan c. Systematic withdrawal plan d. Both 2 and 3 Explanation:Systematic Withdrawal Plan (SWP) is used to redeem the investment from a mutual fund scheme in a phased manner. It allows investors to withdraw a fixed amount or units from their mutual fund investment at regular intervals. Your score is 0% Restart quiz Exit
