Accounting and Taxation
9 questions. Each answer is explained.
Question 1 of 9Practice · Series VIII — Equity Derivatives
0 right · 0 wrong · 9 to go
A–D or 1–4 to answer · Enter or → for the next question · ← to go back
Learn these topics
More units in NISM Series VIII
Exam format
| Questions | 100 · 1 mark each |
|---|---|
| Duration | 120 min · 2 hours |
| Pass mark | 60% · 60 of 100 marks |
| Negative marking | 25% · 0.25 marks off per wrong answer |
| Certificate validity | 3 years · from the date of the examination |
| Marks for this unit | 3 of 100 marks (3%) |
Source: Unit 9: Accounting and Taxation
NISM Series VIII Equity Derivatives
Exam rules read on NISM's site on 3 October 2026. Test objectives in force from 1 May 2022. 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 If a rule changes before your exam, treat the linked questions as out of date and check NISM's current workbook.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 3 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 9 questions on Accounting and Taxation, with answers
Q1For an equity option that is sold on a recognised stock exchange and is not exercised, the STT on the sale side is calculated with reference to:
Option A. The option premium — Correct answer
Option B. The strike price multiplied by the lot size in every case
Why it is wrong: Strike value is not the general sale-side base for an unexercised option.
Option C. Only the seller's profit
Why it is wrong: STT is a transaction tax, not a tax calculated only on trading profit.
Option D. The buyer's margin deposit
Why it is wrong: Margin deposited is not the STT base.
Answer: A. For the sale of an option in securities, the STT base is the option premium. A separately specified rule applies when an option is exercised, where the taxable base is tied to intrinsic value under the current law. Remember: Distinguish the STT tax base from profit, margin and contract notional.
Hint, shown before you answer in practice mode: Common mistake: Applying the STT rate to the strike notional for every option sale.
VIII-089mediumregulatory
Q2For the sale of an equity futures contract on a recognised stock exchange, STT is levied with reference to:
Option A. Only the net profit earned after the futures position is closed
Why it is wrong: STT can apply even if the trade later produces a loss.
Option B. The traded value of the futures transaction on the sale side — Correct answer
Option C. The initial margin deposited for the futures position
Why it is wrong: Initial margin is a risk-control deposit, not the STT base.
Option D. Only the brokerage charged by the broker on each trade
Why it is wrong: Brokerage is a separate trading cost.
Answer: B. The futures STT is a transaction tax applied on the sale-side traded value at the prescribed rate. It is not calculated from the trader's eventual profit, margin amount or brokerage bill. Remember: STT is transaction-based. Do not confuse its base with P&L or margin.
Hint, shown before you answer in practice mode: Common mistake: Calculating futures STT on the trader's net profit.
VIII-090mediumregulatory
Q3For a person carrying on exchange-traded equity F&O activity as a business, an eligible derivative transaction executed on a recognised stock exchange is generally treated for income-tax purposes as:
Option A. A speculative transaction merely because it is a derivative contract
Why it is wrong: Eligible exchange-traded derivatives are specifically carved out of the speculative-transaction definition.
Option B. A non-speculative business transaction under the derivative exception — Correct answer
Option C. Salary income, because the person trades as a full-time job
Why it is wrong: Trading profit is not salary income, even when trading is a full-time job.
Option D. Agricultural income, as derivatives began as hedges for farmers
Why it is wrong: Equity-derivative trading is not agricultural income, whatever the farm roots of early derivatives.
Answer: B. Income-tax law contains a specific exception under which an eligible derivative transaction carried out on a recognised stock exchange is not deemed to be a speculative transaction. For a trader carrying on such activity as business, the resulting F&O profit/loss is therefore generally treated as non-speculative business income/loss, subject to the facts and statutory conditions. Remember: Tax terminology differs from trading terminology: a directional F&O trade can be economically speculative while still being 'non-speculative' business for income-tax classification.
Hint, shown before you answer in practice mode: Common mistake: Assuming the everyday word 'speculation' automatically determines the Income-tax Act classification.
VIII-091mediumregulatory
Q4A taxpayer has a valid non-speculative business loss from F&O trading and files the return on time, so the loss can be carried forward. For how many years after the year of the loss can it generally be set off?
Option A. 8 years — Correct answer
Option B. 6 years
Why it is wrong: Six years is not the prescribed period.
Option C. 4 years
Why it is wrong: Four years is associated with different loss rules, not the ordinary non-speculative business-loss carry-forward tested here.
Option D. Indefinitely
Why it is wrong: The carry-forward is not indefinite.
Answer: A. A qualifying non-speculative business loss can generally be carried forward for eight assessment years immediately succeeding the assessment year for which the loss was first computed, subject to the statutory conditions including the return-filing requirements for carry-forward. Remember: For ordinary non-speculative business loss, remember eight assessment years, subject to the conditions for valid carry-forward.
Hint, shown before you answer in practice mode: Common mistake: Confusing the period for speculative loss with the period for non-speculative business loss.
VIII-092hardregulatory
Q5A trader closes two futures transactions during the year: one produces a favourable difference of ₹1,200 and the other an unfavourable difference of ₹800. Using the commonly applied ICAI method of aggregating absolute favourable and unfavourable differences, what turnover do these two futures trades contribute?
Option A. ₹400
Why it is wrong: ₹400 is the net P&L, not the absolute-differences turnover.
Option B. ₹800
Why it is wrong: This includes only the losing trade.
Option C. ₹2,000 — Correct answer
Option D. ₹1,200
Why it is wrong: This includes only the profitable trade.
Answer: C. Under the commonly applied ICAI approach for derivative turnover, favourable and unfavourable differences are aggregated in absolute terms. Therefore, turnover contribution = ₹1,200 + ₹800 = ₹2,000. This question contains only futures differences, so no separate option-premium issue is introduced. Remember: Derivative turnover for this method uses absolute differences, not the net profit or loss.
Hint, shown before you answer in practice mode: Common mistake: Netting profit and loss before computing turnover.
VIII-093hardnumerical
Q6For the compulsory tax audit of a business, what turnover threshold applies when cash receipts and cash payments are each no more than 5% of their totals?
Option A. ₹1 crore
Why it is wrong: ₹1 crore is the ordinary base threshold, not the enhanced threshold in the stated low-cash case.
Option B. ₹2 crore
Why it is wrong: ₹2 crore is not the enhanced Section 44AB threshold tested here.
Option C. ₹10 crore — Correct answer
Option D. ₹5 crore
Why it is wrong: ₹5 crore was an earlier enhanced threshold, not the current ₹10 crore threshold under the stated condition.
Answer: C. The business tax-audit threshold is enhanced to ₹10 crore where the prescribed cash-receipt and cash-payment conditions are both satisfied. Whether a particular taxpayer requires audit can also depend on other provisions and facts, so this question tests only the stated turnover threshold. Remember: For the low-cash Section 44AB condition, both the receipt and payment tests matter.
Hint, shown before you answer in practice mode: Common mistake: Checking only cash receipts and forgetting the cash-payment condition.
VIII-094mediumregulatory
Q7Assume an individual is carrying on F&O trading as a business. Which expense is the clearest example of a cost that may be claimed against business income, subject to normal deductibility conditions and supporting records?
Option A. The purchase price of a personal television used only at home by the family
Why it is wrong: A television used only personally has no stated business purpose.
Option B. A purely personal vacation that has nothing to do with the F&O business
Why it is wrong: A personal vacation lacks the required business nexus in this scenario.
Option C. A family member's school fee that has no connection with the business
Why it is wrong: Personal education expenses are unrelated to the trading business.
Option D. Brokerage and exchange transaction charges incurred for the F&O business — Correct answer
Answer: D. Ordinary expenses incurred wholly and exclusively for the F&O business—such as brokerage and exchange transaction charges—can generally be considered under normal business-expense rules, subject to the specific tax provisions and documentation. Purely personal expenditure is not converted into a business deduction merely because the taxpayer also trades. Remember: Deductibility depends on business nexus and the specific tax rule, not simply on who paid the expense.
Hint, shown before you answer in practice mode: Common mistake: Treating personal spending as deductible merely because the taxpayer has business income.
VIII-095mediumregulatory
Q8With effect from 1 April 2026, what is the STT rate on the sale of an option in securities, applied to the option premium?
Option A. 0.01%
Why it is wrong: 0.01% is not the current option-sale rate.
Option B. 0.15% — Correct answer
Option C. 0.10%
Why it is wrong: 0.10% was the immediately preceding option sale rate before the 2026 increase.
Option D. 0.05%
Why it is wrong: 0.05% is the current futures sale rate from 1 April 2026, not the option-premium sale rate.
Answer: B. The 2026 tax amendment increased STT on the sale of an option in securities to 0.15% of the option premium with effect from 1 April 2026. A separate 0.15% rule applies to the intrinsic-value base when an option is exercised. Remember: From 1 April 2026: option sale STT = 0.15% of premium.
Hint, shown before you answer in practice mode: Common mistake: Using the futures rate (0.05%) for options.
VIII-101mediumregulatory
Q9With effect from 1 April 2026, what is the STT rate on the sale of a futures contract in securities, applied to the traded price/value?
Option A. 0.01%
Why it is wrong: 0.01% is not the current rate.
Option B. 0.05% — Correct answer
Option C. 0.02%
Why it is wrong: 0.02% was the preceding futures STT rate before the 2026 change.
Option D. 0.15%
Why it is wrong: 0.15% is the current option-sale rate on premium, not the futures rate.
Answer: B. The 2026 tax amendment increased STT on sale of futures in securities to 0.05% of the traded price with effect from 1 April 2026. Remember: From 1 April 2026: futures sale STT = 0.05% of traded value.
Hint, shown before you answer in practice mode: Common mistake: Swapping the option rate and futures rate.
VIII-102mediumregulatory
Accounting and Taxation: common questions
How many practice questions are there on Accounting and Taxation?
9 questions, all written out on this page with the correct answer and why each other option is wrong. This unit is one of the 11 practice topics for NISM Series VIII, which has 150 questions in total.
Are these real NISM Series VIII questions on Accounting and 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 VIII exam is Accounting and Taxation?
NISM's published syllabus outline gives it 3 of the paper's 100 marks, or 3% of the exam. It is quoted from the outline, not estimated. The published unit it comes from: Unit 9: Accounting and Taxation
Does negative marking apply to NISM Series VIII?
Yes. NISM takes off 25% of a question's marks for a wrong answer. On a 1-mark question that is 0.25 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.
Sales Practices and Investor Protection
5 questions on Sales Practices and Investor Protection. Its quiz opens on that unit.
Open Sales Practices and Investor Protection