n NISM Certifications
V-A NISM Series V-A
Medium

Identify the FALSE statement: (1) The investor does not have to bear a tax on the capital gains as the re-purchase of units is done by the mutual fund. (2) Capital gains will be considered as Long term capital gain in case of debt funds only if the holding period is more than 3 years

Practice question from Nism VA Mock Test 1 — bank. The correct answer is highlighted below with a full explanation.

Options

  1. A

    Only 1 is false

  2. B

    Only 2 is false

  3. Both 1 and 2 is false

    Correct answer

  4. D

    Neither 1 nor 2 is false

Why this is the answer

Re-purchase transactions are treated as a sale of units by the investor. Therefore, there will be an element of capital gain (or capital loss), and it will be taxed accordingly. In the Finance Act of 2023, the growth option of debt funds was made taxable as short-term capital gains (STCG) irrespective of the holding period. The Long-Term Capital Gains tax was removed.

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