Chapter 12: Taxation of other Products

Table of Contents

Table of Contents

Taxation of Employees’ Stock Option Plan (ESOP)

ESOPs are provided to employees to retain top talent and acknowledge their contribution to the company. It allows employees to purchase securities of the employer company at a discounted price. ESOPs act as a motivational tool for the employees, as they feel responsible for the performance of the company after owning a stake in it.

Here are some key points related to ESOP taxation:

  1. ESOPs are taxed as perquisites in the hands of employees at the time of exercise of options.
  2. The difference between the fair market value of the shares on the date of exercise of options and the exercise price paid by the employee is taxable as a perquisite.
  3. The employer has to deduct tax at source (TDS) at the time of exercise of options.
  4. The tax rate applicable on ESOPs depends on the period between grant of options and exercise of options:
  • If options are exercised after 24 months from the date of grant and after 12 months from the date of vesting, then the gain from the exercise of options is treated as long-term capital gains (LTCG). LTCG tax rate is 20% with indexation benefits.
  • If options are exercised before the above-mentioned period, then the gain from the exercise of options is treated as short-term capital gains (STCG). STCG tax rate is the applicable income tax slab rate of the employee.
  1. In case of sale of shares acquired under ESOP, the gain from the sale is treated as LTCG or STCG, as the case may be, depending on the period of holding of shares.

ESOPs are particularly popular amongst start-ups and emerging companies as it allows them to attract and retain top talent with the promise of future returns on the company’s success.

ESOPs and Tax Implications:

ESOPs (Employee Stock Option Plans) are a form of employee compensation where the employer offers employees an option to buy shares at a predetermined price after a certain lock-in period.

Vesting date refers to the date on which an employee becomes entitled to exercise the right to acquire the shares, while exercise date is the date on which the employees exercise the option to buy the shares.

Employees are not required to exercise ESOPs and may choose to let the option lapse.

Taxation of ESOPs occurs in two instances: at the time of allotment of shares and at the time of exercise of options.

The difference between the Fair Market Value (FMV) of the shares on the date the option is exercised and the amount paid by the employee for such shares is taxable as perquisite.

FMV is determined based on different scenarios, such as whether the shares are listed on one or more stock exchanges or not listed at all.

To calculate the value of perquisite arising from ESOP, determine FMV on the date of exercise of options, subtract the predetermined value of shares paid by the employee, and multiply by the number of shares exercised.

The deferment of tax on perquisite value of ESOPs in case of start-ups:

Particulars Definition as per DPIIT Definition as per section 80- IAC
Incorporation The start-up should be incorporated as a:
– Company
– LLP
– Partnership Firm
The start-up should be incorporated as a:
– Company
– LLP
Date of Incorporation No condition as to the date of incorporation Should be incorporated between 01-04-2016 and 31-03-2021
Eligible Business The entity should be working towards innovation, development or improvement of products or processes or services, or if it is a scalable business model with a high potential of employment generation or wealth creation. Same
Tenure An entity is considered as an eligible start-up up to 10 years from the date of incorporation/registration An entity is considered as an eligible start-up up to 10 years from beginning from the year in which it is incorporated or registered
Total Turnover Turnover of entity for any of the financial years since incorporation/registration should not exceed Rs. 100 crore Turnover of entity for any of the financial years since incorporation/registration should not exceed Rs. 100 crore

ESOPs are a significant component in the compensation of employees of start-ups. The taxability of ESOPs arises in the hands of the employee at two stages. To reduce the burden of taxes, the Finance Act, 2020 amended several sections to defer the deduction and payment of tax on income in the nature of perquisites arising from ESOPs for eligible start-ups as referred to in section 80-IAC.

Section 192 provides that an eligible start-up as referred to in section 80-IAC shall deduct tax from income arising in the nature of perquisites from ESOPs within 14 days from the happening of any of the following events: (i) On the expiry of 48 months from the end of Assessment year in which shares are allotted under ESOPs; (ii) From the date the assessee ceases to be the employee of the organization; or (iii) From the date of sale of shares allotted under ESOP.

For this purpose, the tax shall be deducted on the basis of rates in force for the financial year in which shares are allotted or transferred under ESOPs. A similar amendment has been made to sections 191 and 156 to provide that if an employer does not deduct tax on perquisite arising from ESOPs then tax shall be payable by the employee directly within the period mentioned above either voluntarily or in response to a notice of demand.

Only an eligible start-up as referred to in Section 80-IAC and its employees would get the benefit of deferment of TDS and tax payment on perquisite arising from ESOPs. An eligible start-up can only be a company or limited liability partnership (LLP) engaged in innovation, development or improvement of products or processes or services or a scalable business model with a high potential of employment generation or wealth creation. The entity should be incorporated between 01-04-2016 and 31-03-2021, hold a certificate of eligible business from the Inter-Ministerial Board of Certification, and its turnover should not exceed Rs. 100 crore for any of the financial years since incorporation/registration.

Sovereign Gold Bonds (SGBs):

Type of Security Government security denominated in grams of gold
Benefits Substitutes for holding physical gold, no storage costs, market value of gold at maturity, periodical interest, free from issues like making charges and purity
Issuer Reserve Bank of India on behalf of the Government of India
Eligibility Trusts, HUFs, Charitable Institutions, Universities, individuals (resident and non-resident)
Rate of Interest 2.5% per annum (credited semi-annually)
Limit of Investment Minimum of 1 gram, maximum of 4 kg for individuals and HUFs, 20 kg for trusts per fiscal year
Maturity 8 years from the date of issue, redemption in INR based on the simple average of the closing price of gold of 999 purity of previous three business days
Premature Redemption Allowed after the fifth year from the date of issue on coupon payment dates
Collateral for Loans Eligible for collateral against loans from banks, financial institutions, and NBFCs

Tax Implications on Sovereign Gold Bonds (SGBs)

The table below summarizes the tax implications on SGBs in India:

Tax Implications Interest Income Capital Gain on Redemption Capital Gain on Transfer
Applicable Tax Rates As per the tax rates applicable to the assessee Not taxable for individuals; For other investors, 20% with indexation or 10% without indexation Short-term capital gain: Normal tax rates; Long-term capital gain: 20% with indexation or 10% without indexation
TDS No TDS on interest payment N/A N/A
Indexation of Cost of Acquisition Applicable for SGBs Applicable for SGBs Not applicable for SGBs

Note: SGBs have a tenor of 8 years, and Section 47 of the Income-tax Act provides that redemption of SGBs by an individual will not be regarded as ‘transfer.’

Example: Mr. X purchased 100 SGBs at a nominal value of Rs. 425,000 on 28-04-2019 with an interest rate of 2.5% per annum. The tax implications for Mr. X in different scenarios are:

  1. If he holds SGBs till maturity, the interest income received will be taxed as per his applicable tax rates. Upon redemption, the capital gains will not be taxable for him as he is an individual.
  2. If he transfers SGBs in the secondary market on 01-04-2020 for Rs. 450,000, the resulting capital gain of Rs. 25,000 (i.e., 450,000 – 425,000) will be treated as a short-term capital gain and will be taxed as per his normal tax rates.
  3. If he transfers SGBs in the secondary market on 29-10-2020 for Rs. 470,000, the resulting capital gain of Rs. 45,000 (i.e., 470,000 – 425,000) will be treated as a long-term capital gain. If he chooses to take the benefit of indexation while computing the capital gain, he will be taxed at the rate of 20%. Otherwise, he will be taxed at the rate of 10%.

National Pension System (NPS) and its two types of accounts, Tier I and Tier II:

Features NPS Tier I Account Tier II Account
Purpose Retirement savings scheme Mandatory retirement account Voluntary savings account associated with PRAN of the subscriber
Eligibility Any citizen of India (whether resident or non-resident) Any citizen of India (whether resident or non-resident) with an active Tier I account Subscribers with an active Tier I account
Contribution Voluntary, defined contribution retirement savings scheme A minimum contribution of Rs. 1,000 is required every year No minimum contribution is required every year, but a minimum of Rs. 1,000 to activate the account
Withdrawal Allowed after certain lock-in period and subject to certain conditions Withdrawal is allowed, and the amount can be freely withdrawn  
Tax Benefits Subscribers shall be entitled to deduction under section 80CCD at the time of making contribution in NPS. Further, no tax shall be levied at the time of withdrawal of lump-sum amount from NPS Deduction under section 80CCD for contribution made to the Tier I account. No tax benefit for investment made in Tier II NPS Account Government employees who are entitled to deduction under section 80C in respect of contribution made by them in Tier II account

Tax treatment of contributions to NPS:

Type of Contribution Tax Treatment Deduction Available
Employee contribution Deductible under Section 80CCD(1) Lower of amount contributed or 10% of salary, with additional deduction of Rs. 50,000 under Section 80CCD(1B)
Employer contribution Taxable in the hands of the employee, but deductible under Section 80CCD(2) Lower of amount contributed by employer or 14% of salary in case of Central Govt. employee or 10% of salary in case of other employees
Central Govt. employee’s contribution to Tier II account Deductible under Section 80C Lower of amount contributed or Rs. 1,50,000
Self-employed individual’s contribution Deductible under Section 80CCD Lower of amount contributed or 20% of gross income, with additional deduction of Rs. 50,000 under Section 80CCD(1B)
Threshold limit for deduction Total deduction under Section 80C, 80CCC and 80CCD(1) limited to Rs. 1,50,000, but not applicable for employer contribution and additional deduction of Rs. 50,000 Total deduction can go up to Rs. 2,00,000 with additional deduction of Rs. 50,000 above the limit of Rs. 1,50,000

Example 1:

  • XYZ Ltd. contributed Rs. 9 lakhs to NPS account of its employee Mr. A. Annual salary of Mr. A was Rs. 50 lakhs.
  • Tax implications in the hands of Mr. A:
    • Amount taxable under the head salary: Rs. 50,00,000 + Rs. 9,00,000 = Rs. 59,00,000
    • Deduction under Section 80CCD(2): Rs. 50,00,000 * 10% = Rs. 5,00,000
    • Taxable income: Rs. 54,00,000

The Tax Treatment of sum received from NPS:

Particulars Taxability
Contribution to NPS  
a) Employees’ contribution to NPS Deduction allowed up to 10% of salary plus additional deduction of Rs. 50,000
b) Employers’ contribution to NPS Deduction allowed up to 14% of salary in case of Central Government employees; 10% of salary in case of other employees
c) Any other person not being an employee Deduction allowed up to 20% of gross total income plus additional deduction of Rs. 50,000
Accumulation  
Yearly return on the corpus amount Taxable in the hands of the receiver
Withdrawal  
a) Partial withdrawal Exempt to the extent of 25% of the contribution made by the employee to the NPS if subscriber is an employee
b) Final withdrawal at the time of closure of account or opting out of the scheme Exempt up to 60% of the total corpus available in the NPS account of the subscriber
c) Amount received by a nominee on death of the subscriber The whole of the amount received by the nominee shall be exempt in the hands of the receiver
d) In case of withdrawal from Tier II account Profit or loss from investment in Tier II account shall be taxable under the head “Capital Gains”
e) In case the amount withdrawn from NPS utilized for purchasing an annuity plan No tax shall be charged on such amount withdrawn if it is utilized for purchasing the annuity plan of LIC or some other insurer
Pension Income Pension received from the fund will be taxable in the hands of the receiver

Real Estate investment Trusts (REITs)-

Real Estate Investment Trusts (REITs) are investment vehicles that allow investors to invest in large-scale portfolios of income-producing real estate. They were first introduced in the US in the 1960s and have since been introduced in over 30 countries, including India in 2014.

REITs invest in various types of real estate properties, such as offices, apartments, warehouses, retail centers, medical facilities, and hotels. Most REITs focus on a particular property type, but some hold multiple types of properties in their portfolios.

REITs are structured like mutual funds, with sponsors setting them up to collect money from the general public for investing in income-generating real estate properties. The investment is made in real estate properties either directly or through a Special Purpose Vehicle (SPV).

The structure of a REIT includes a sponsor, SPV, REIT, and unit-holders. The sponsor sets up the REIT and holds a collective holding of 25% for at least 3 years from the date of listing of units and 15% thereafter. The SPV is a company or LLP in which the REIT holds 50% or more of the equity share capital or interest, and it is formed for holding and developing real estate property. The REIT is the trust registered under SEBI (Real Estate Investment Trusts) Regulations, 2014. Unit-holders are the investors who make investments in the REIT and receive units of the REITs in return.

Real estate properties refer to land and any permanently attached improvements to it, including buildings, sheds, garages, fences, fixtures, warehouses, car parks, etc. However, assets falling under the preview of “Infrastructure” are not considered real estate property, except for hotels, hospitals, and convention centers forming part of composite real estate projects and common infrastructure for composite real estate projects, industrial parks, and SEZ.

Table: Tax implications on various types of income earned by REITs and distributed to unit-holders

Type of Income Taxability at REITs Level Taxability at Unit-holders Level Resident Unit-holders Tax Rate Non-resident Unit-holders Tax Rate
Rental Income Exempt under Section 10(23FCA) Taxable as rental income in the hands of unit-holders Normal tax rates 5% without any deduction
Interest Income from SPV Exempt under Section 10(23FC) Taxable in the hands of unit-holders Normal tax rates with deduction under Chapter VIA 5% without any deduction. Unit of IFSC can claim deduction under section 80LA
Interest Income (Other than from SPV) Taxable in the hands of REITs Exempt under Section 10(23FD) in the hands of unit-holders
Dividend Income from SPV Exempt under Section 10(23FD) if received from non-concessional tax regime Taxable as dividend income in the hands of unit-holders Normal tax rates with 20% deduction for interest expenditure 20% without any deduction. Unit of IFSC can claim deduction under section 80LA
Dividend Income (Other than from SPV) Taxable in the hands of REITs Exempt under Section 10(23FD) in the hands of unit-holders

Note: DTAA refers to Double Taxation Avoidance Agreement.

Tax implications on transfer of units of REITs by the unit-holder:

Type of units Holding period Capital gains tax rate
Listed Not more than 36 months 15%
Listed More than 36 months, up to Rs. 1 lakh Exempt
Listed More than 36 months, above Rs. 1 lakh 10% under Section 112A
Unlisted Not more than 36 months As per applicable tax rates
Unlisted More than 36 months (resident) 20% under Section 112
Unlisted More than 36 months (non-resident or foreign company) 10% without indexation benefit and foreign currency fluctuation

In addition, for units of business trust acquired on or before 31-01-2018, the cost of acquisition is determined based on the higher of the actual cost or the lower of fair market value as of 31-01-2018 or full value of consideration received upon transfer. If units were not listed on a recognized stock exchange on 31-01-2018, the net asset value on that date is considered as cost of acquisition.

Taxability in the hands of sponsor

Key points:

  • Section 47(xvii) of the Income-tax Act exempts the transfer of shares by a sponsor to a business trust in exchange for units of such trust from being considered a transfer.
  • No tax liability arises on such transfer of shares under this provision.
  • If there is any notional gain or loss on such transfer, it should be adjusted while calculating the book profit for the purpose of the Minimum Alternate Tax (MAT), if applicable.

Example: Mr. X, who holds 30% shares in an SPV, transfers those shares to a REIT in exchange for 25% units of the REIT. This transfer is exempt from tax under Section 47(xvii) of the Income-tax Act.

Table: Summary of Taxability of REITs

Income arising to REITs REIT Unit-holders Taxability Tax Rate
Interest from SPV Exempt Taxable Resident unit-holder: Applicable tax rate; Non-resident unit-holder: 5% or DTAA rate, whichever is beneficial  
Dividend from SPV Exempt Taxable if SPV opts for concessional tax regime. Else exempt Resident unit-holder: Applicable tax rate; Non-resident unit-holder: 20% or DTAA rate, whichever is beneficial  
Rental Income of REITs Exempt Taxable Applicable tax rate  
Capital Gain Taxable Maximum Marginal Rate (Except those taxable under section 111A, 112 and 112A) Exempt
Any other Income Taxable Maximum Marginal Rate Exempt

Table: Summary of taxability of capital gain arising to unit-holder from the transfer of units

Nature of capital gain Unit-holder Tax Rate
Short-term capital gain Listed units: 15%; Unlisted units: Applicable tax rate  
Long-term capital gain Listed units: 10% (beyond Rs. 1 Lakh); Unlisted Units: 20% with indexation benefit in case of resident and 10% without indexation benefit in case of non-resident  

Applicability of TDS in the context of SPV to REIT and REIT to unit-holder is as follows:

SPV to REIT:

  • TDS is not applicable when REIT receives interest income on loans/investment in listed debt securities of the SPV or income by way of renting or leasing or letting out any real estate asset owned directly by the REIT.
  • TDS is applicable when the REIT receives interest income on unlisted debt securities, and the SPV is liable to withhold taxes at the rates in force as applicable to the REIT.
  • Dividend received or receivable by a REIT from an SPV is exempt from tax under Section 10(23FC). Thus, no tax is required to be deducted from dividend credited or paid by an SPV to a business trust.

REIT to unit-holder:

  • Rental income, dividend income received from SPV, and interest income received from SPV distributed by REIT to unit-holders are chargeable to tax in the hands of the unit-holders.
  • REITs are required to deduct tax under section 194LBA while distributing the said incomes to the unit-holders.
  • The tax rates for TDS are as follows: 10% for resident unit-holders and non-resident unit-holders for rental income and dividend income received from SPV, and 10% for resident unit-holders and 5% for non-resident unit-holders for interest income received from SPV. However, if the provisions of the Double Taxation Avoidance Agreement (DTAA) are more beneficial, the tax shall be deducted as per DTAA.

Infrastructure Investment Trusts (InVITs):

  • InVITs invest in infrastructure projects such as roads, bridges, ports, airports, electricity generation, transmission or distribution, telecommunication services, telecommunication towers, special economic zones, etc.
  • InVITs are registered with SEBI under SEBI (Infrastructure Investment Trusts) Regulations, 2014.
  • The structure of InVITs is similar to that of a REIT (Real Estate Investment Trust).
  • The tax implications are the same for InVITs and REITs, except for the pass-through status relating to rental income.
  • The rental income of REITs is chargeable to tax in the hands of the unit-holders, but in the case of InVITs, rental income is chargeable to tax in its own hands and not in the hands of unit-holders.

AIF- Alternative Investment Funds (AIFs)-

Table: Taxation of Category-I and Category-II AIFs

Category of AIF Taxability of Business Income Taxability of Other Income
Category-I Taxable in hands of AIF Exempt in hands of AIF
Category-II Taxable in hands of AIF Exempt in hands of AIF

Notes:

  • AIF means any fund established or incorporated in India, as a privately pooled investment vehicle, to collect funds from sophisticated investors.
  • AIF is mandatory to obtain registration from SEBI as per SEBI (Alternative Investment Funds) Regulations, 2012.
  • Taxation of Category-I and Category-II AIFs is governed by Section 115UB of the Income- tax Act which provides pass-through status to such funds.
  • Business income is chargeable to tax in the hands of AIF itself.
  • Any other income shall be taxable in the hands of the unit-holder and it shall be exempt in the hands of the Investment Fund under Section 10(23FBA).
  • Set-off and carry forward of losses is allowed for losses arising in the hands of the investment fund under the head ‘Profits and gains arising from business or profession’.
  • Any losses, other than the business losses, accumulated at the level of investment fund as on 31-03-2019, shall be deemed to be the loss of the unit-holder who held the units as on that date.

Table: Taxation of Category-III AIFs

Category of AIF Taxation System Capital Gain Exemption
Category-I AIF Pass-through status provided Not applicable
Category-II AIF Pass-through status provided Not applicable
Category-III AIF Same as in case of a normal trust, company, LLP or any other body corporate Applicable to non-residents holding all units except sponsor or manager, subject to conditions

Conditions for Capital Gain Exemption:

  • SEBI approved AIF located in any IFSC.
  • All units held by non-residents except sponsor or manager.
  • Transaction carried out on a recognised stock exchange located in any IFSC.
  • Consideration paid or payable in convertible foreign exchange.

Example:

Nature of Income Amount (in lakhs)
Profit and gains from business and profession 20
Capital gains 15
Income from other sources 5

In the above example, Mr. X holds 30% units of a Category-I AIF, registered as a trust. The AIF has credited the entire income to the accounts of its investors except for income in the nature of other sources.

Taxability:

  • Taxable in the hands of AIF: Business income of Rs. 20 lakhs is chargeable to tax at the maximum marginal rate (MMR) of 42.744%.
  • Taxable in the hands of Mr. X: Income credited by the AIF under the head capital gains and income deemed to be credited is Rs. 4.5 lakhs. Income from other sources is Rs. 1.5 lakhs. Total income taxable in the hands of Mr. X is Rs. 6 lakhs. Income received by the unit holder from AIF in the nature of income from business or profession shall be exempt under section 10(23FBB).

Exchange Traded Funds (ETFs)

ETF Type Taxation on Long-term Capital Gains Taxation on Short-term Capital Gains
Gold ETFs 20% with Indexation Normal tax rate
Index ETFs 10% with indexation (above Rs. 1 Lakh) 15%

In summary, ETFs are like Mutual Funds that track an index or a commodity and are listed on the exchange. Gold ETFs invest primarily in gold or gold-related instruments, while Index ETFs invest in securities in the same proportion as an index of securities. For long-term capital gains, Gold ETFs are taxed at 20% with indexation, while Index ETFs are taxed at 10% with indexation (above Rs. 1 Lakh). Short-term capital gains on Index ETFs are taxable at 15%, while for Gold ETFs, it’s taxable at the normal tax rate.

As an example, if Mr. A (resident in India) acquired 10,000 units of Gold ETF at Rs. 30 per unit on 01-03-2018 and sold such units on 25-03-2021 at Rs. 50 per unit, the long-term capital gain would be Rs. 1,68,015 and the tax rate would be 20%. If Mr. A acquired 5,000 units of an Index ETF on 01-05-2019 at Rs. 200 per unit and sold the units on 01-06-2020 at Rs. 300 per unit through the recognized exchange and paid STT on such a transaction, the long-term capital gain would be Rs. 5,00,000, and the tax rate would be 10%.

Tax Aspects of Life Insurance Products

Type of Sum Tax Treatment
Sum received from a life insurance policy (including bonus) Exempt from tax
Sum received under a Keyman insurance policy Taxable
Sum received under sub-section (3) of section 80DD Taxable
Premium payable exceeds 20% of actual capital sum assured for policies issued between 1 Apr 2003 and 31 Mar 2012, or exceeds 10% for policies issued on or after 1 Apr 2012 Taxable
Amount received on death of the person Not taxable

Notes:

  • The tax treatment above applies to all types of life insurance policies.
  • Premiums payable are allowed as deduction under section 80C, with a total deduction limit of Rs. 150,000.
  • Deduction is available for policies issued in the name of an individual, spouse, or children, or in the name of any member of a HUF.
  • Deduction is restricted to 20% or 10% of sum assured depending on the policy issuance date, except for policies taken on or after 1 Apr 2013 in the name of a person suffering from disability or severe disability referred to in section 80U or suffering from disease or ailment as given in section 80DDB, where the limit is 15% of capital sum assured.
  • Various policies need to be held for a minimum period of 2 years for life insurance policies and 5 years for ULIPs of UTI or LIC. If policies are terminated before the minimum holding period, any deduction allowed in earlier years will be taxed as income of the year in which such policy got terminated.
  • Finance Act 2021 made amendments in respect of high-value ULIPs issued on or after 1 Feb 2021, with specific provisions for capital gains calculation, long-term period, and tax rates for equity-oriented funds within high premium ULIPs.
  • Any sum received on death of a person is exempt from tax, and the same applies to policies covered by the above amendments. However, for other policies where the conditions of section 10(10D) are not satisfied, it remains an open issue as to whether maturity proceeds of such policies will be treated as capital gains or income from other sources.

Tax Aspects of Reverse Mortgage

Aspect Details
Facility Senior citizens can mortgage their property and borrow funds
Tax Issues Debated if mortgaging property amounts to ‘transfer’
Section 47 Clause inserted to exclude reverse mortgage from ‘transfer’
Section 10(43) Exempts from tax any amount received under reverse mortgage
Reverse Mortgage Scheme Notified in 2008
Eligibility Age of 60 years or above
Approved Lending Institution National Housing Bank, scheduled bank or housing finance company
Loan Tenure Not exceeding 20 years from the date of signing the agreement
Repayment Reverse mortgagor, legal heirs or estate liable for repayment
Taxation of Derivative Products Discussed in Section 11.8

Mock Tests-

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NISM-Series-X-B: Investment Adviser (Level 2) Certification

Chapter 12: Taxation of other Products - 1

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1. Mr. X holds 30% shares of an SPV and transfers them to a REIT in exchange for 25% units. This transfer is considered:

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2. Can losses arising in the hands of an investment fund be passed to unit-holders?

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3. REITs are required to furnish a statement to unit-holders and the income-tax department regarding the nature of income paid during the previous year. The statement to unit-holders is required to be furnished in:

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4. What is the tax rate for short-term capital gains on equity shares or equity-oriented mutual funds held by REITs?

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5. What is the maximum loan period allowed for reverse mortgage under the scheme?

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6. Which authority is responsible for approving lending institutions for reverse mortgage?

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7. Is dividend income received by unit-holders from SPV taxable at the unit-holder level?

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8. What is the primary objective of the reverse mortgage scheme?

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9. Can individuals below the age of sixty years avail of the reverse mortgage scheme?

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10. How is other income of an AIF taxed?

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11. What is the tax rate for short-term capital gains on other capital assets held by REITs?

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12. What is the tax treatment of the loan amount received under reverse mortgage?

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13. Can the unit-holders carry forward losses accumulated at the level of the investment fund?

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14. How are short-term capital gains from index ETFs taxed?

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15. When the REIT distributes rental income or interest/dividend received from SPV to unit-holders, the income is chargeable to tax in the hands of:

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16. What is the tax rate for long-term capital gains from index ETFs above Rs. 1 lakh?

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17. How are long-term capital gains from the sale of Gold ETFs taxed?

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18. Are other incomes of REITs taxable at the REIT level or unit-holder level?

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19. Is rental income earned by REITs taxable at the REIT level?

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20. Who is eligible for the reverse mortgage scheme?

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21. What is the tax rate for interest income received by unit-holders from REITs if they are non-residents or foreign companies?

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22. How are accumulated losses at the level of an investment fund treated?

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23. The tax rate for TDS on rental income distributed by REITs to resident unit-holders is:

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24. What are Exchange-Traded Funds (ETFs)?

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25. Interest income from the special purpose vehicle (SPV) received by a REIT is:

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26. According to Section 47(xvii) of the Income-tax Act, transfer of shares by a sponsor to a business trust in exchange for units of such trust will be treated as:

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27. Dividend income from the SPV received by a REIT is exempt from tax if the SPV opts for:

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28. How are long-term capital gains on unlisted equity shares held by REITs taxed?

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29. Rental income of REITs is:

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30. What is the tax treatment of business income of an AIF?

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31. What is the maximum deduction allowed under section 80C for life insurance premiums?

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32. What is the holding period required for index ETFs to qualify as long-term capital gains?

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33. What is the tax treatment of reverse mortgage transactions under the Income Tax Act?

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34. Can deductions under Chapter VIA be claimed from dividend income received by unit-holders from REITs?

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35. What is the tax rate for long-term capital gains on unlisted other capital assets held by REITs?

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36. How are short-term capital gains from the sale of Gold ETFs taxed?

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37. InVITs invest in which of the following?

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38. How is rental income taxed for REITs?

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39. What is reverse mortgage?

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40. Which type of ETF primarily invests in gold or gold-related instruments?

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41. TDS (Tax Deducted at Source) is applicable when the REIT receives interest income on:

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42. The tax rate on long-term capital gains from listed units for a resident unit-holder is:

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43. When were AIFs allowed to pass losses to unit-holders?

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44. How are InVITs and REITs similar in structure?

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45. What is the definition of an 'approved lending institution' in the context of reverse mortgage?

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46. According to the provided information, what do REITs invest in?

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47. Who is responsible for repaying the reverse mortgage loan?

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48. Are deductions under section 80C to 80U allowed from interest income received by unit-holders from REITs?

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49. What type of life insurance policy is exempt from tax?

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50. Which income earned by REITs is taxable at the REIT level?

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NISM-Series-X-B: Investment Adviser (Level 2) Certification

Chapter 12: Taxation of other Products - 2

1 / 50

1. In case of withdrawal on closure of account or opting out of NPS, how much of the total corpus is exempt from tax?

2 / 50

2. What is the definition of an eligible start-up according to Section 80-IAC?

3 / 50

3. What is the minimum contribution that can be made to the Tier II NPS account by an employee?

4 / 50

4. What year were REITs first introduced in the United States?

5 / 50

5. What is the maturity period of SGBs?

6 / 50

6. If rental income is distributed by REITs to unit-holders, how is it taxed?

7 / 50

7. What happens if an employee fails to exercise the option to buy shares within the given time period?

8 / 50

8. What should an employee do regarding the value of perquisite from ESOPs in their income tax return?

9 / 50

9. What is the tax treatment of withdrawal from NPS?

10 / 50

10. How many countries have introduced REIT regimes?

11 / 50

11. What is the tax treatment of contribution to NPS by an employer?

12 / 50

12. What is the rate of interest on SGBs?

13 / 50

13. In case amount is received by the nominee on death of subscriber, is it exempt from tax?

14 / 50

14. What happens if an employer fails to deduct tax on perquisites arising from ESOPs?

15 / 50

15. Which regulatory body registers REITs in India?

16 / 50

16. What is the maximum limit of subscription for individuals?

17 / 50

17. How is dividend income received from SPV taxed when distributed by REITs to unit-holders?

18 / 50

18. What types of real estate properties do REITs invest in?

19 / 50

19. How will the redemption price of SGBs be determined?

20 / 50

20. What types of income may REITs have?

21 / 50

21. What is the maximum contribution that can be made to the Tier I NPS account by an employee?

22 / 50

22. Is interest income earned by REITs from Special Purpose Vehicles (SPVs) exempt from tax?

23 / 50

23. What does the Finance Act, 2020 allow regarding the deduction and payment of tax on perquisite arising from ESOPs for eligible start-ups?

24 / 50

24. In case of partial withdrawal from NPS, how much of the employee's contribution to NPS is exempt from tax?

25 / 50

25. What events trigger the deduction of tax from perquisites arising from ESOPs for an eligible start-up?

26 / 50

26. Which type of REIT focuses on managing office real estate?

27 / 50

27. What is the period within which an eligible start-up must deduct tax from perquisites arising from ESOPs?

28 / 50

28. What is the turnover limit for an eligible start-up to qualify for the deferment of TDS and tax payment on perquisites arising from ESOPs?

29 / 50

29. How is the value of perquisite arising from ESOP calculated?

30 / 50

30. Can Sovereign Gold Bonds be used as collateral for loans?

31 / 50

31. What is the tax treatment of contribution to NPS by an employee?

32 / 50

32. What is considered as real estate property for REIT investments?

33 / 50

33. Who can hold Sovereign Gold Bonds?

34 / 50

34. What is the minimum investment required in SGBs?

35 / 50

35. What is a Special Purpose Vehicle (SPV) in the context of REITs?

36 / 50

36. What are Sovereign Gold Bonds (SGBs)?

37 / 50

37. How is the Fair Market Value (FMV) of shares determined for tax purposes?

38 / 50

38. Can SGBs be redeemed before the maturity period?

39 / 50

39. When ESOPs are offered by start-ups, what is the primary reason behind it?

40 / 50

40. Which income earned by REITs is tax-exempt at the REIT level?

41 / 50

41. How long can an entity be considered an eligible start-up?

42 / 50

42. How do investors invest in REITs?

43 / 50

43. When a pension is received out of fund contributed to NPS, is it chargeable to tax?

44 / 50

44. What happens to SGBs if an individual's residential status changes from resident to non-resident?

45 / 50

45. What is the purpose of Timberland REITs?

46 / 50

46. In case of withdrawal from Tier II account, how is the profit or loss taxable?

47 / 50

47. In case amount withdrawn from NPS utilized for purchasing an annuity plan, is the annuity income taxable?

48 / 50

48. What is the minimum holding requirement for sponsors in a REIT?

49 / 50

49. Are ESOPs commonly used by start-ups?

50 / 50

50. What is the taxability of ESOPs in the hands of employees?

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NISM-Series-X-B: Investment Adviser (Level 2) Certification

Chapter 12: Taxation of other Products - 3

1 / 15

1. What is the tax treatment of ESOPs at the time of allotment of shares?

2 / 15

2. When can employees exercise their right to purchase shares?

3 / 15

3. How is the value of perquisite arising from ESOP calculated?

4 / 15

4. Are ESOPs commonly used by start-ups?

5 / 15

5. How is the Fair Market Value (FMV) of shares determined for tax purposes?

6 / 15

6. What is the tax treatment of ESOPs at the time of allotment of shares?

7 / 15

7. In the case of ESOPs, is it compulsory for employees to exercise the option to purchase shares?

8 / 15

8. What is the term used for the date an employee becomes entitled to exercise the right to acquire shares?

9 / 15

9. When ESOPs are offered by start-ups, what is the primary reason behind it?

10 / 15

10. What is the term used for the date an employee becomes entitled to exercise the right to acquire shares?

11 / 15

11. What happens if an employee fails to exercise the option to buy shares within the given time period?

12 / 15

12. What is the purpose of issuing ESOPs to employees?

13 / 15

13. In the case of ESOPs, is it compulsory for employees to exercise the option to purchase shares?

14 / 15

14. What is the purpose of issuing ESOPs to employees?

15 / 15

15. When can employees exercise their right to purchase shares?

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