NISM XB Level 2 IA Mock Exam

Rhea purchased two policies of Rs. 5 lakhs and Rs 3 lakhs from Company A & Company B respectively to cover the risk of loss arising from theft. When a theft occurred, the ascertained loss was Rs. 30,000. Who pays this amount - Company A or Company B?

Policy 1 has a deductible of Rs. 1,000 and Co-Pay of 10%. Policy 2 only has a deductible of Rs. 5,000 and no co-Pay. The ascertained claim amount is Rs. 40,000. How much will Policy 1 and Policy 2 pay?

Calculate the human life value (HLV) using the above numbers.

Estimate the insurance based on needs analysis in the above example.

Ramesh was employed with Cross Ltd, which was covered under the Payment of Gratuity Act, 1972. He retired after service of 20 years and 7 months. His last drawn basic pay is Rs 60,000 per month. Calculate the gratuity due to him.

Shweta was employed with NewMoon Ltd since the last 3 years. The company was incurring losses and the promoters decided to close it down. She was given her dues along with the funds in her EPF account. Will the money she receives from her EPF account be taxable or tax-free?

If the aggregate employer’s contribution to an employee's EPF, National Pension System and superannuation fund exceeds ______in the financial year, then the contribution and interest thereon in excess of the aforesaid amount is treated as perquisite in the hands of the employee in the year of contribution.

If an employee's own contribution to the EPF (Employees' Provident Fund) account along with VPF (Voluntary Provident Fund) exceeds Rs ____lakh in a financial year, then the interest earned on contributions exceeding this amount will be taxable in the hands of then employee.

Rahul joined Starr Ltd as an employee. It was a small company with 9 employees (including Rahul). In the first month, Rahul was surprised to find that the company's contribution to his EPF (Employees' Provident Fund) was only 10% instead of the stipulated 12%. Should the company contribute 10% or 12% to Rahul's EPF account?

What should be the minimum residual life of the property?

What is the maximum monthly payment in reverse mortgage?

What is the maximum lumpsum payment that can be availed for medical treatment?

Are receipts in reverse mortgage taxable?

Rajiv wanted to know what would happen if he outlived the loan tenure. He had heard that insurance companies offered lifetime annuity, but he wanted to know the name of the annuity available linked to reverse mortgage.

Atul, 40 years of age, is earning a monthly income of Rs. 60,000 of which 50% is household expenses. He is planning to retire at the age of 60 years. He expects additional expenses of Rs. 15000 at his retirement. Assume inflation at 6%. What will be his expenses at time of retirement?

Chetan was working in London for some years. He returned to India in FY 2020-21. The details of his stay are given above. Determine his residential status for FY 2020-21.

Alok's monthly income is Rs.1,50,000. He pays insurance premium of Rs.25,000 per month and EMI of Rs.32,000 on a home loan of Rs.40 lakhs. His personal expenses are Rs.10,000. He wants to provide insurance protection for his wife who is currently 49 years old and is expected to live till 80. If the expected inflation is 6% and return on investment is 8%, what is the insurance cover he should take? His current insurance cover is for Rs.1 Cr and he has other investments amounting to Rs.50 lakhs. His house is worth about Rs.50 lakhs.

Calculate the return on investment of a term insurance plan with return of premium with the following parameters: Sum Assured: Rs. 1 crore; Policy tenure: 30 years; Policy premium if pure protection policy: Rs. 9416 per annum; Policy premium if premiums are returned in the end: Rs. 17,473 per annum; Amount of Premium returned on maturity: Rs. 5,24,190; Payment is made at the beginning of each period.

Ramesh was employed with Cross Ltd, which was not covered under the Payment of Gratuity Act, 1972. He retired after service of 20 years and 7 months. His last drawn basic pay is Rs 60,000 per month. Calculate the gratuity due to him.

In case of self-occupied house property, interest on borrowed capital is tax deductible up to a maximum of _______ if the property is acquired or constructed on or after April 01, 1999 and the construction or acquisition is completed within five years of taking the loan.

Navnit, a salaried employee working in Mumbai, received house rent allowance of Rs 30,000 each month. His monthly salary was Rs 250,000. Navnit owns a house in Mumbai, which he has given on rent while he is living in a rented house for which he is claiming house rent allowance. How much house rent allowance is tax-free?

Rasesh has earned rental income from his house properties as indicated above. Calculate his income from house property and determine allowable amount for set-off and carry forward.

Sudha's statement of total income showed a loss of Rs 2,25,000 in the head 'Income from house property'. How much loss can you set off against her other income during the year?

Neeraj, a salaried employee, owns a house property which is taken on loan. His income and expenses during the current financial year are: Taxable salary income - Rs 15,00,000; Interest on Home loan for self occupied property - Rs 5,00,000; EPF/Life Insurance/School Fees for Children - Rs 1,80,000. Determine his taxable income for FY 2020-21.

What is residential status of Rajesh?

What is residential status of Ricky?

What is residential status of Richard?

What is the residential status of Ritvik?

What is the residential status of Shoumik?

Rajesh created a Trust for his parents who are senior citizens, both with equal beneficial interest. Father gets a fixed monthly pension of Rs. 40,000 while mother gets a net annual value of Rs. 3.8 lakh from her let out property. The trust property hasgenerated a net annual value of Rs. 5.40 lakh in FY 2019-20. Find the tax payable by the trustee as a representative assessee for AY 2020-21 after taking into account cess @4%. (from NISM)

Pankaj, a salaried employee, owns a house which he has given on rent. His income details are as follows: Taxable salary income - Rs 15,00,000; Rental income from the property - Rs 2,20,000; Interest on Home loan for the rented property - Rs 5,00,000; EPF/Life Insurance/School Fees for Children - Rs 1,80,000. Determine his taxable income for FY 2020-21 and amount to be carried forward.

Sachin settled certain properties on trust for the benefit of his brother Sohail for his lifetime. He appointed Surjit as the trustee. The trust is an irrevocable trust. Will the income from the property be clubbed with Sachin's income?

Minimum Alternate Tax (MAT) is payable by companies whose tax on total income is less than ____of ‘book profit’.

Alternate Minimum Tax (AMT) is payable by an assessee, other than a company, whose tax on total income is less than ____ of ‘Adjusted Total Income'. However, AMT is not applicable if the adjusted total income of such person does not exceed ________.

Calculate his capital gains for FY 2020-21.

How can he avail of exemption under section 54?

The new residential house will have to be acquired within 2 years from the date of transfer of the old residential house or a new residential hose will need to be constructed within 3 years of the date of transfer of the old residential house for the exemption to be available. This statement is:

If the amount required to be invested in a new residential house is not invested by the return filing date (say July 31, 2021) then it needs to be deposited in a capital gain account scheme with a bank authorised to run such schemes. The amount deposited needs to be then used within the given time frame of 2 years/3 years to acquire/construct a residential house property. This statement is:

The provisions relating to GAAR do not apply to an arrangement where the tax benefit in the relevant assessment year arising, in aggregate, to all the parties to the arrangement does not exceed _____.

Vishnu decided to close down his money lending business. He transferred all his investments (shares, securities, etc.) which were stock in trade in his business into his personal books as capital assets. What is the cost of acquisition considered to be?

Manish, an NRI, sold listed coupon bonds through the stock exchange. He had held these bonds for more than a year. What tax rate will apply for capital gains earned on the sale?

Nitin sold unlisted capital index bonds. He had held these bonds for 3 years. What tax rate will apply for capital gains earned on the sale?

Nirmal, an NRI, received interest from his investment in foreign currency convertible bonds (FCCBs) of Oil Ltd, an Indian Public Sector Company (PSU). At what rate will this interest income be taxed?

Ojas, an NRI, received interest from his investment in rupee-denominated bonds of Prism Ltd, an Indian company. At what rate will this interest income be taxed?

On retirement, how much will Mr. Z have in his retirement corpus?

At the end of Age 55, what percentage of Mr. Z's portfolio will be in debt (excluding retirement corpus)?

If he re-invests the entire retirement corpus in debt, what percentage of Mr. Z's portfolio will be in debt when he retires?

What is the corpus requirement to ensure that he is able to sustain the same standard of living for 15 years after retirement?

Kamlesh, an NRI, received interest from his investment in long term infrastructure bonds. At what rate will this interest income be taxed?

Rohit, an NRI, received interest from his investment in foreign currency in deposits of Super Ltd, an Indian company. At what rate will this interest income be taxed?

Nihar, an NRI, received interest from infrastructure bonds he had invested in with Kshama Ltd, an Indian company. These bonds were listed on a recognized stock exchange in an International Financial Services Centre (IFSC). At what tax rate will the interest on these bonds be taxed?

Dheemant sold his house on 1 Jan 2020. He had owned the house for 5 years and earned capital gains of Rs 2 crore. He invested the capital gains in bonds of NHAI on 14 August 2020. Is he eligible for capital gains tax exemption under section 54EC?

Gautam invested in a Fixed Maturity Plan (FMP), which had a tenure of 18 months. At the end of the tenure, the mutual fund decided to extend the FMP to 36 months. Gautam opted to go with the extension. Will he need to compute capital gains on his investments for 18 months and pay tax thereon, if there is a profit?

Suraj and Pritesh were directors in a private company. They decided to convert the company into a limited liability partnership (‘LLP‘). Does this constitute transfer and result in capital gains?

How much money will need to be set apart from the corpus at the end of Year 5, to finance the son's post-graduate education? Assume the amount set apart will earn 6% interest.

What is the likely outflow on account of daughter's marriage in the year it is planned?

How much will be left in the corpus after both goals are fulfilled (assume that he does not set apart money in the 6% corpus mentioned in Q55)?

How would you describe the investment policy Mr. Y is using for the corpus?

Divesh received redemption proceeds of Sovereign Gold Bond issued by the Reserve Bank of India under the Sovereign Gold Bond Scheme. Does this constitute transfer and result in capital gains?

Devesh, an NRI, sold GDRs and rupee denominated bonds of Indian companies on a recognised stock exchange located in any International Financial Services Centre. Do these transactions constitute transfer and result in capital gains?

Devesh and Amrut, both NRIs, entered into transactions to purchase/sell GDRs and rupee denominated bonds of Indian companies. Their transactions took place in the US. Do these transactions constitute transfer and result in capital gains?

Surjit, married with two children, and his father decided to convert their HUF into two HUFs with Surjit and his father as karta of their own HUFs. The assets of the original HUF were distributed across both HUFs. Does this constitute transfer and result in capital gains?

Sonal held 1000 units of New Flexicap Fund – dividend payout. She decided to shift to dividend reinvestment option. Does this constitute ‘transfer’ and, as a result, taxable capital gains?

Sudesh, an Indian resident, sold a plot of land situated in Dubai, in foreign currency. The sale took place on 15 May, 2020. His accountant computed the capital gains in foreign currency. To convert this into Indian currency, the INR rate on what date will be considered?

Rohit acquired a house in Mumbai out of inheritance from his father. His father had purchased the house for Rs. 50 lakh in the F.Y. 2002-03. The current market value of the house is Rs. 3.5 crore. The CII for the current year (FY 20-21) is 301; the CII for FY 2002-03 is 105. Calculate the cost of acquisition in case Rohit decides to sell the house in the current year.

Investments in units listed on the Indian stock exchange such as Fixed Maturity Plans, Gold ETF, Nasdaq 100 ETF etc. are treated as long term assets if held for more than ____. In case of both residents and non-resident investors, long term capital gains are taxed at ____ plus applicable surcharge plus cess.

Deepak sold listed Sovereign Gold bonds through the stock exchange. He had held these bonds for more than a year. What tax rate will apply for capital gains earned on the sale?

Under Chapter XII-A, applicable to non-residents, who are Indian Citizens or Persons of Indian Origin, tax on Investment income is capped at ____ plus applicable surcharge and education cess, and long term capital gains is at ____ plus applicable surcharge and education cess.

A securitisation trust has derived following income from securitisation activity during the year: Nature of income Amount (in lakhs) Income under the head profit and gains from business and profession 50 Income under the head capital gains 25 Income from other sources 10 One of its investors, A Ltd. holds 40% share in it. During the year, such securitisation has credited the entire income to the accounts of its investors except for income in the nature of other sources worth Rs. 5 lakhs. Determine the taxable income both in the hands of securitisation trust and A Ltd.

Mr. A purchased 400 listed bonds of ABC Ltd. at Rs. 1,200 each on 01-01-2015. The face value of the bond is Rs. 1,000. It carries a coupon rate of 7% per annum. The interest on bonds is paid half-yearly on June 30 and December 31 every year. The bonds are redeemable on 31-12-2025. However, Mr. A sold such bonds on 01-07-2020 at Rs. 2,000 each. Compute the amount of interest and capital gain chargeable to tax in the hands of Mr. A for the financial year 2020-21. Assume that Mr. A follows the mercantile system of accounting. (from NISM)

In case of the above example, calculate capital gains and tax thereon.

Mr. Adam, a person non-resident in India, invested in GDRs of an Indian company on 01-04-2020. He purchased 1,000 GDRs at the rate of USD 148 each. On 31-03-2021, he received dividend of USD 5 per GDR. He paid USD 1,000 to his portfolio manager. On 07-06-2021, he sold the GDRs to a person resident in India at the rate of USD 193 per GDR. Compute the income taxable in his hands and tax thereon. See the image above for exchange rates on various dates.

Dividend received by a non-resident person or foreign company (including foreign portfolio investors (FPIs) and Non-resident Indian Citizens), is taxable in their hands at the rate of ___, subject to provisions of DTAA.

Inter-corporate dividend shall be reduced from total income of company receiving the dividend if the same is further distributed to shareholders within ____ prior to the due date of filing of return.

How much own funds did Ms. T invest?

What was Ms. T’s net return?

What was Ms. T’s return on equity?

An equity share is acquired on 01-01-2017 at Rs. 100, its fair market value is Rs. 200 on 31-01-2018 and it is sold on01-01-2020 at Rs. 150. Calculate long term capital gain. (from NISM)

Profits from unlisted equity shares held for more than _____ are taxed as long-term capital gain.

The total income of a resident individual (excluding long-term capital gains) is Rs. 1,85,000 and long-term capital gain from the sale of unlisted shares is Rs. 2,50,000. What is the amount chargeable to tax?

These are private agreements between parties to exchange cash flows in the future according to a pre-arranged formula.

Mr. X purchased 10,000 units of equity oriented mutual funds at the rate of Rs. 250 each per unit on 01-04-2020 through a recognised stock exchange. He had taken loan of Rs. 20,00,000 to purchase such units. He paid Rs. 1,60,000 as interest on such loan during the year. He received dividend of Rs. 50 per unit on 15-03-2021. Thereafter, he sold the units for Rs. 280 per unit on 01-06-2020 through a recognised stock exchange and paid STT on such transaction. Discuss the tax implications in the hands of Mr. X.

Mr. A (resident in India) acquired 5,000 listed units of an equity oriented mutual fund on 01-05-2017 for Rs. 200 per unit. He sold the units on 01-06-2020 for Rs.300 per unit through the recognised exchange and paid STT on such transaction. The FMV of the units as on 31-01-2018 was Rs. 225 per unit. Compute the amount of income arising to Mr. A from transfer of units of equity oriented mutual funds and tax thereon. (from NISM)

A trust purchased Sovereign Gold Bonds (SGBs) for Rs 5 lakhs and received Rs 6 lakhs as redemption proceeds. What is the capital gains tax rate?

Mr X purchased Sovereign Gold Bonds (SGBs) for Rs 5 lakhs. He received Rs. 6 lakhs on their redemption. Calculate capital gains tax.

In case of unlisted Real Estate Investment Trust (REITs), where REITs units are held by the investor for less than 36 months, short-term capital gains will arise, which will be taxable at _____.

In case of listed Real Estate Investment Trust (REITs), where REITs units are held by the investor for more than 36 months, long-term capital gains will arise, which will be taxable at _____.

In case of listed Real Estate Investment Trust (REITs), where REITs units are held by the investor for less than 36 months, short-term capital gains will arise, which will be taxable at _____.

Dividend received by a resident unitholder from a Real Estate Investment Trust (REIT) is taxable in his hands at _______. The unit-holder is entitled to claim a deduction of only interest expenditure incurred to earn that dividend income to the extent of ____ of total dividend income.

If a Real Estate Investment Trust (REIT) distributes any rental, dividend or interest income to its unitholders, tax is charged in the hands of the REIT before distribution to unitholders.

Where the amount withdrawn or received out of National Pension System (NPS) is utilized for purchasing an annuity plan of LIC or some other insurer in the same previous year then the annuity income received shall be taxable in the hands of the recipient.

Any payment from the National Pension System (NPS) to an assessee on closure of his account or on his opting out of the pension scheme is exempt from tax to the extent of ___ of the total corpus.

Basic salary of Mr. Gopal is Rs 50,000 per month. He is entitled to dearness allowance of 40% of basic salary (Rs. 20,000 per month) and 50% thereof forms part for retirement benefits. He and his employer (non-govt.) both contribute 15% of basic salary as a contribution to National Pension System (NPS). Mr. Gopal is already claiming a deduction of Rs 150,000 under Section 80C. How much additional tax deduction he can get under section 80? (from NISM)

An employee repays a housing loan of Rs. 170,000 during the year and contributes Rs. 65,000 in his NPS account. How much is the deduction he can get under section 80? (from NISM)

Mohammed wanted to bequeath a part of his wealth to a charitable institution. He created a Will for this. Does he need to get this Will registered?

An insane person can make a will during an interval in which he is of sound mind.

When a soldier during his engagement in the actual warfare pronounces his Will by mouth before 2 witnesses, it is termed as ______ Will.

Where a Muslim dies with testamentary succession, and the asset is immovable property which is situated in __________, the Muslim shall be bound by the Indian Succession Act, 1925.

Under the Law of Succession among Muslims, uterine sister and uterine brother fall in the category of _______.

Under the new Insurance act, if ______ is/are nominee(s) in the policy, also become beneficiary(ies).

In case of a resident individual, rebate of up to ______is allowed under Section 87A from the amount of tax if the total income of such individual does not exceed ______. However, no rebate shall be allowed from tax on ______covered under section 112A.

Mr. X acquired units in a mutual fund on 01-06-2019. The fund created a segregated portfolio in which he was allotted units on 01-04-2020. The period of holding of the units in the segregated portfolio will be taken from _____.

Mr. X purchased 10,000 shares of A Ltd on 01-04-2019 for Rs. 58 each on a recognized stock exchange and STT was charged at the time of purchase. With effect from on 01-07-2019, A Ltd. amalgamated with B Ltd. to form a new company AB Ltd. Mr. X was allotted 8,000 shares in the new amalgamated company. He sold the shares of the amalgamated company for Rs. 100 per share on 01-06-2020. The shares of AB Ltd. are listed on recognized stock exchange and STT was charged at the time of transfer. Compute his income and tax thereon. (from NISM)

XYZ Ltd, a domestic company, announced buy back of 5% of its outstanding shares for which it has to be distribution tax. What is the distribution tax rate?

Sudhir created a trust through his Will. The trust earned business income. At what tax rate will it be charged?

The maximum loan tenure for reverse mortgage is _____.

A senior citizen above the age of ____ is eligible for reverse mortgage.

A Category-III SEBI-approved AIF located in an International Financial Services Centre (IFSC) had all non-resident investors. The AIF incurred capital gain on sale of bonds, GDRs, rupee denominated bonds and derivatives sold through a recognized stock exchange in the IFSC. What is the tax impact on the AIF?

Category-I AIF, registered as a trust, has derived following income during the year: Income under the head profit and gains from business and profession - Rs 20 lakh; Income under the head capital gains - Rs 15 lakh; Income from other sources - Rs 5 lakh; Mr. X holds 30% units of the AIF. During the year, the AIF has credited the entire income to the accounts of its investors except for income in the nature of other sources. Determine the taxability both in the hands of AIF and Mr. X. (from NISM)

As on 31-03-2019, a category I AIF had accumulated losses as follows: Loss under the head house property - Rs 5 lakh; Loss under the head capital gains (long-term) - Rs 20 lakh; Loss under the head capital gains (short-term) - Rs 10 lakh. It has incurred loss of Rs. 15 lakhs under the head "Profits and gains from business and profession" and a loss of Rs. 5 lakhs under the head house property during the financial year 2019-20. Details of unit holders are as follows: Unit holder A - Percentage of units as on 31-03-2019 - 25%; Percentage of units as on 31-03-2020 - 20%; Unit holder B - Percentage of units as on 31-03-2019 - nil; Percentage of units as on 31-03-2020 - 20% (acquired on 01-05-2019). Calculate losses attributable to the unitholders. (from NISM)

ABC Ltd. issued 1,00,000 warrants of Rs. 200 each aggregating to Rs. 2 crores to Mr. X on 29-12-2019. Share warrants are exercisable into equal number of equity shares of face value of Rs. 10 each. The company received a sum of Rs. 50 lakh from Mr. X towards 25% subscription against the said warrants on the same date. What shall be the tax implications in the hands of Mr. X in the following scenarios? (1) Mr. X exercised warrants and paid the entire consideration of Rs. 2 crore to ABC Ltd. on 29-03-2021. On the same day, the company allotted 1,00,000 equity shares of face value of Rs. 10 each to Mr. X at a premium of Rs. 190 per share. The fair market value of the share on date of allotment was Rs. 250 share. (2) Mr. X transferred share warrants to Mr. Y on 15-06-2020 for Rs. 75 per warrant. (from NISM)

Mr. X (resident in India) acquired 1,000 preference shares of ABC Ltd. at Rs. 105 each on 01-07-2018. The shares are listed on a stock exchange. He transferred such shares on 04-05-2020 at Rs. 120 per share. Compute the amount of capital gain chargeable to tax in hands of Mr. X. (from NISM)

Trust ABC reported total income of Rs 1,40,000. Of this, Rs 50,000 was interest income and another Rs 50,000 was derived from dividends. Fees charged by the trust amounted to Rs 20,000, while the trust realized a capital gain of Rs 20,000. (1) Compute the trust's taxable income. (2) Compute the Distributable Net Income (DNI). (from NISM)

Shishir bought stock of ABC Ltd at Rs 100 per share. A year later, ABC Ltd's share price has risen to Rs 150 per share and it had a 'buy' recommendation from most brokerages, including Shishir's investment advisor. Shishir abstained from buying more shares stating that the stock price had already risen from Rs 100 per share (his purchase cost) to Rs 150 per share. This mindset is called _______ in behavioural finance.

Suraj was considering an investment opportunity where he was told that the risk of loss was up to 25% of his investment while the possibility of gain was up to 45%. He decided to avoid the investment. Later, he was offered another investment opportunity where he was told that the risk of loss was up to Rs 25 per Rs 100 invested while the chance of gain was up to Rs 45 per Rs 100. Suraj invested. Both investments' outcomes were the same. This is called ______ in behavioural finance.