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

Identify the FALSE statement: (1) When an investor sells his mutual fund units, the re-purchase is done by the mutual fund. Therefore, the investor does not have to bear a tax on the capital gains. (2) When an investor invests in a debt mutual fund for more than three years, the capital gains will be considered as Long term capital gain.

Practice question from NISM Series V A - Mock Test 2 — 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 are false

    Correct answer

Why this is the answer

Selling mutual fund units triggers capital gains tax. It is not a "re-purchase" and will be taxed accordingly. As per Finance Act 2023, growth options of debt funds are taxed as short-term capital gains (STCG) irrespective of the holding period. Therefore, long-term capital gains tax does not apply to debt funds after three years.

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