Taxation
3 questions. Each answer is explained.
Question 1 of 3Practice · Series V-D — Mutual Fund - Specialized Investment Fund Distributors
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Learn these topics
More units in NISM Series V-D
- The Investment Landscape5
- Concept & Role of a Mutual Fund4
- Legal Structure of Mutual Funds in India3
- Legal and Regulatory Framework7
- Scheme Related Information7
- Fund Distribution and Channel Management Practices4
- Net Asset Value, Total Expense Ratio and Pricing of Units5
- Investor Services10
- Risk, Return and Performance of Funds5
- Mutual Fund Scheme Performance5
- Mutual Fund Scheme Selection10
- Basics of Derivatives10
- Understanding Index5
- Introduction to Forwards and Futures15
- Introduction to Options13
- Strategies Using Equity Futures and Equity Options9
- Introduction to Interest Rate, Interest Rate Instruments and Fixed Income Markets6
- Interest Rate Derivatives2
- Exchange Traded Interest Rate Futures10
- Exchange Traded Interest Rate Options6
- Strategies Using Interest Rate Derivatives6
Exam format
| Questions | 150 · 1 mark each |
|---|---|
| Duration | 180 min · 3 hours |
| Pass mark | 60% · 90 of 150 marks |
| Negative marking | 10% · 0.1 marks off per wrong answer |
| Certificate validity | 3 years · from the date of the examination |
| Marks for this unit | 3 of 150 marks (2%) |
Source: July 2026 Annexure I, Chapter 8: Taxation
NISM Series V-D Mutual Fund - Specialized Investment Fund Distributors
Exam rules read on NISM's site on 30 October 2026. Check the current rules on NISM's site (opens in a new tab)
What these answers assume, and when it was last checked
Each question uses the rules listed below. We last checked them on 5 September 2026. A Budget or SEBI circular can change a rate, lot size or expiry day. If a rule changes before your exam, treat the linked questions as out of date and check NISM's current workbook.
- NSE uses Tuesday expiry and BSE uses Thursday expiry. This applies from 1 September 2025.
- The January 2026 index lot sizes are NIFTY 65, BANKNIFTY 30, FINNIFTY 60, MIDCPNIFTY 120 and NIFTYNXT50 25.
- The October 2024 SEBI framework sets a minimum index contract value of Rs 15–20 lakh. Each exchange may list one weekly benchmark index.
- Option buyers pay the premium upfront from 1 February 2025. A short index option has an extra 2% Extreme Loss Margin on expiry day from 20 November 2024.
- Equity short-term capital gains are taxed at 20%. Long-term gains are taxed at 12.5% above Rs 1.25 lakh. Both rates apply from 23 July 2024.
- F&O income is non-speculative business income in ITR-3. NSE equity derivatives trade from 9:15 a.m. to 3:40 p.m.
- The final ten-minute session began on 3 August 2026. It aligns with the cash market Closing Auction Session.
- Most Securities Transaction Tax questions test the base and who pays. On an option sale, it is the premium and the seller pays. On a futures sale, it is the traded value and the seller pays.
- On exercise, Securities Transaction Tax uses intrinsic value: settlement price minus strike price. The buyer pays it.
- Two questions test the current rate. From 1 April 2026, option sales carry 0.15% on the premium and futures sales carry 0.05% on traded price. The earlier rates were 0.10% and 0.02% from 1 October 2024.
- This section uses the T+1 rolling settlement cycle. Obligations are fixed on T+1. A short delivery goes to buy-in auction on T+1 and settles on T+2.
- The trade-for-trade surveillance segment uses direct close-out. Funds pay in by 10:30 a.m. and pay out on or after 1:30 p.m. on settlement day.
- Securities pay in to the settlement pool by 10:30 a.m. They pay out directly to the client’s demat account by 3:30 p.m.
- The 3:30 p.m. deadline replaced 1:30 p.m. under SEBI’s 10 October 2024 circular. Direct client credit was required by SEBI’s 5 June 2024 circular.
- The optional T+0 cycle trades until 1:30 p.m. Obligations are fixed by 2:30 p.m. on the trade day. An early pay-in shortage is closed out directly.
- Cash-market Value at Risk margin is six times exponentially weighted moving-average volatility. It has a 9% floor for Group I, a 21.5% floor for Group II, and a fixed 50% or 75% level for Group III.
- Extreme Loss Margin is 3.5% for a share and 2% for a broad-market-index exchange traded fund. Mark-to-market margin is collected before the next day’s trading. The trade-for-trade segment has 100% upfront margin.
- Close-out uses the higher of the highest price from trade day to auction day and 20% above the auction day’s official close.
- A funds shortage costs 0.07% a day. The trading facility is withdrawn at a shortage of Rs 5 lakh or more.
- SCORES allows 21 calendar days, then two 15-day review levels. Online Dispute Resolution moves from conciliation to arbitration after the market participant and SCORES steps.
- At NSE, the Investor Protection Fund limit is Rs 35 lakh per investor for each defaulting or expelled member. This applies to claims arising after 13 August 2024.
- A Basic Services Demat Account has no annual maintenance charge up to Rs 4 lakh of holdings. It costs up to Rs 100 above that, until the Rs 10 lakh eligibility ceiling. These slabs apply from 1 September 2024.
- The rupee pairs are USD-INR, EUR-INR, GBP-INR and JPY-INR. The cross-currency pairs are EUR-USD, GBP-USD and USD-JPY.
- Each contract covers 1,000 units of the foreign currency, except JPY-INR. JPY-INR covers 100,000 yen and is quoted in rupees per 100 yen.
- The tick is 0.25 paise, or Rs 0.0025. It equals Rs 2.50 a contract.
- Rupee pairs trade from 9:00 a.m. to 5:00 p.m. A monthly contract stops trading at 12:30 p.m. two working days before the expiry month’s last business day.
- Final settlement is in cash at the FBIL reference rate on expiry day. FBIL, Financial Benchmarks India, has published this rate in place of the Reserve Bank since 2018. Premium-style European options are quoted in rupees. The buyer pays the premium in cash on T+1.
- Daily settlement is on T+1 and final settlement is on T+2.
- NSE Clearing circular 026/2020 sets SPAN margin plus Extreme Loss Margin. The futures margin is 0.50% for USD-INR, 0.15% for EUR-INR, 0.25% for GBP-INR and 0.35% for JPY-INR. A short option has 0.75%. These figures apply from 1 June 2020.
- A USD-INR client may hold 6% of total open interest or USD 20 million, whichever is higher. A trading member may hold 15% or USD 100 million.
- A resident user has one USD 100 million equivalent limit across all rupee pairs and exchanges. No document is needed below that limit, but a valid underlying contracted exposure must still exist. This clarification applies from 3 May 2024.
- The currency segment has no Securities Transaction Tax.
The exam figures (questions, time, pass mark, negative marking and certificate validity) come from NISM's own pages, read on 30 October 2026. Timed practice uses the same figures. Study with the official workbook as well.
The written-out answers on this page are hidden while your timed set runs.
All 3 questions on Taxation, with answers
Q1During Tax Year 2026–27, a resident individual redeems units of a qualifying equity-oriented mutual fund after eight months and realises a taxable short-term capital gain of ₹60,000. All conditions for the 20% special rate, including applicable STT conditions, are satisfied. With no loss set-off, basic-exemption adjustment, rebate, surcharge or cess, what is the tax on this gain? Assumptions: Qualifying equity-oriented fund, applicable STT conditions and special-rate eligibility are expressly satisfied. The gain is already taxable after any permitted cost adjustments. No other tax adjustment or levy applies.
Option A. ₹9,000
Why it is wrong: This uses the older 15% rate rather than the stated current 20% rate.
Option B. ₹12,000 — Correct answer
Option C. ₹7,500
Why it is wrong: This applies 12.5%, the long-term rate relevant to a different classification.
Option D. Zero
Why it is wrong: The annual qualifying-equity LTCG threshold does not exempt this short-term gain.
Answer: B. Tax on the stated short-term gain is ₹60,000 × 20% = ₹12,000. The question excludes other adjustments and additional levies so that only this tax component is measured. Remember: Confirm the fund category, holding period and rate conditions before calculating tax.
Hint, shown before you answer in practice mode: Apply the stated special rate to the already determined taxable gain.
V-D-036mediumnumerical
Q2An investor has a current-year long-term capital loss of ₹30,000, long-term capital gains of ₹20,000 and short-term capital gains of ₹50,000. No other loss is available. Considering only permitted current-year capital-loss set-off, before exemptions or tax rates, which result is correct? Assumptions: All gains and losses are validly computed for the same tax year. The question asks only about current-year set-off.
Option A. Both gain categories become zero, because a long-term loss can be set off against any capital gain in full
Why it is wrong: The loss is insufficient for that result and cannot offset the short-term gain.
Option B. Long-term gains become zero, short-term gains remain ₹50,000, and ₹10,000 of long-term loss remains unabsorbed — Correct answer
Option C. Short-term gains fall to ₹20,000 and long-term gains remain ₹20,000 after the loss is set off
Why it is wrong: A long-term capital loss cannot be set off against short-term capital gains.
Option D. The entire ₹30,000 loss must be ignored because there are short-term gains in the same year
Why it is wrong: The available ₹20,000 long-term gain can absorb part of the long-term loss.
Answer: B. The ₹30,000 long-term loss absorbs the ₹20,000 long-term gain, leaving ₹10,000 unabsorbed. The ₹50,000 short-term gain is unaffected. Any future carry-forward of the unused loss requires the applicable conditions to be met. Remember: Loss classification determines the gains against which it may be used.
Hint, shown before you answer in practice mode: Long-term capital loss can be set off against long-term gains, not short-term gains.
V-D-037hardregulatory
Q3In Tax Year 2026–27, a resident individual has qualifying long-term gains of ₹1,10,000 from one equity-oriented fund and ₹90,000 from another. Both holdings exceed 12 months and all conditions for the special equity LTCG treatment, including applicable STT conditions, are satisfied. There are no other qualifying gains or losses. Apply a single annual ₹1,25,000 threshold and 12.5% to the excess. Ignore basic-exemption adjustments, rebate, surcharge and cess. What is the tax? Assumptions: All stated equity-LTCG classification and STT conditions are satisfied. No other qualifying gain, loss or tax adjustment applies. Surcharge and cess are excluded.
Option A. ₹25,000
Why it is wrong: This taxes the entire ₹2,00,000 without applying the stated annual threshold.
Option B. ₹9,375 — Correct answer
Option C. ₹15,000
Why it is wrong: This applies the 20% short-term rate to the taxable excess instead of 12.5%.
Option D. Zero
Why it is wrong: The ₹1,25,000 threshold is annual and aggregate, not a separate allowance for each fund.
Answer: B. Aggregate gain is ₹2,00,000. Taxable excess is ₹2,00,000 − ₹1,25,000 = ₹75,000, and ₹75,000 × 12.5% = ₹9,375. Remember: An annual threshold is not multiplied by the number of schemes held.
Hint, shown before you answer in practice mode: Combine both qualifying long-term gains before applying the one annual threshold.
V-D-038mediumnumerical
Taxation: common questions
How many practice questions are there on Taxation?
3 questions, all written out on this page with the correct answer and why each other option is wrong. This unit is one of the 22 practice topics for NISM Series V-D, which has 150 questions in total.
Are these real NISM Series V-D questions on Taxation?
No. LearnNifty wrote every question from NISM's public syllabus. NISM does not publish its question bank, so nobody can offer you the real paper. Use these questions to check that an idea has gone in. Use the official NISM workbook to see what is examined.
How much of the NISM Series V-D exam is Taxation?
NISM's published syllabus outline gives it 3 of the paper's 150 marks, or 2% of the exam. It is quoted from the outline, not estimated. The published unit it comes from: July 2026 Annexure I, Chapter 8: Taxation
Does negative marking apply to NISM Series V-D?
Yes. NISM takes off 10% of a question's marks for a wrong answer. On a 1-mark question that is 0.1 marks off. A blank question earns nothing and loses nothing, so a wrong guess costs marks on this paper. Timed practice here uses the same rule.
Are these practice questions kept up to date?
Each question is written against the rules printed on this page, last checked on 5 September 2026. A Budget or a SEBI circular can change a rate, a lot size or an expiry day. If one of those rules changes before your exam, treat the questions that use it as out of date. Then check NISM's current workbook.
Investor Services
10 questions on Investor Services. Its quiz opens on that unit.
Open Investor ServicesPaper Trading Try it on the practice trading desk