NISM V-A Mutual Fund Taxation — Practice Questions
Questions on how mutual fund returns are taxed in India: short- and long-term capital gains across equity and debt schemes, taxation of dividends in the hands of the investor, TDS, STT and set-off of losses.
34 questions on Taxation in the ScoreSetu bank — each with a detailed explanation and, where useful, a memory hook.
What this topic covers
- Equity vs debt capital gains
- Holding periods and rates
- Dividend taxation and TDS
- Securities Transaction Tax
Free sample questions
1. For units of Equity Linked Savings Scheme (ELSS), the lock-in period is ______ .
- A. three years from the date of original investment, even in case of subsequent purchases by SIP
- B. three years from the date of original investment for each individual unit for purchases made by SIP ✅
- C. There is no lock-in period if tax exemption is claimed
Answer: B — three years from the date of original investment for each individual unit for purchases made by SIP
Why: If one is investing in ELSS through SIP then each investment would be locked-in from the date of the respective investment. The lock-in for the entire amount would not get over on completion of 3 years from the date of the first SIP instalment.
💡 ELSS via SIP -> EACH instalment locked-in 3 yrs from its OWN date, not from first SIP.
2. Which of these is an important criteria for choosing either Growth option or Dividend option in the same mutual fund scheme?
- A. Returns on the scheme
- B. Fund Manager
- C. Tax status of the investor ✅
- D. Assets Managed by the scheme
Answer: C — Tax status of the investor
Why: Mutual funds offer options, whereby the investor can let the money grow in the scheme for several years. By selecting such options, it is possible for the investor to defer the tax liability. So if the investor wants to differ his tax payments, he should choose the Growth option. However, if the tax liability of the investor is low, he can choose the dividend option so that even the dividend can taxed at a low rate every year.
💡 Growth vs Dividend option decided by INVESTOR'S TAX STATUS (Growth defers tax).
3. Securities Transaction Tax (STT) on the repurchase of debt mutual fund units is levied at what rate?
- A. .001
- B. .025
- C. .0025
- D. No STT is applicable ✅
Answer: D — No STT is applicable
Why: No Securities Transaction Tax (STT) is applicable on the repurchase/redemption of debt mutual fund units in India. STT is levied only on equity-oriented mutual fund transactions, not on debt-oriented schemes.
💡 NO STT on debt fund repurchase; STT hits equity-oriented funds only.
Practise all 34 Taxation questions
Plus the full 743-question NISM V-A bank and real-feel mock exams.