Taxation: NISM Series XXI-A notes and practice questions

Q1. Which statement best describes “Taxation at client level”?

1. PMS transactions are in the client's own name, so gains and losses are taxed directly in the client's hands.
2. Equity trades settle on T+1 through a clearing corporation, which guarantees settlement.
3. Tactical allocation makes temporary deviations from the strategic weights to benefit from expected short-term moves.
4. An ETF is a fund traded on exchanges, typically tracking an index at low cost.

Q2. Which term is described here? Gains on listed shares held up to 12 months are short-term and over 12 months long-term, with different tax rates.

1. Penalties
2. Up and down capture
3. Short-term and long-term gains
4. SEBI

Q3. Which term is described here? High portfolio turnover can push more gains into short-term, increasing the tax cost.

1. Dividend
2. Transparency
3. Turnover and tax
4. Segregation of client assets

Q4. Which term is described here? Dividend received on shares in the portfolio is taxable in the client's hands at the slab rate.

1. Dividend income
2. Gross versus net returns
3. Derivative
4. Price-to-book ratio

Q5. Which term is described here? Managers provide a statement of realised gains and losses, which helps the client file her tax return.

1. Capital gains statement
2. PMS versus mutual fund
3. Withdrawals and partial redemptions
4. Inflation

Q6. Which term is described here? Capital losses can be set off against capital gains and carried forward as per the tax law.

1. Diversification
2. Set-off of losses
3. Segregation of client assets
4. Risk-adjusted evaluation