Taxation in Securities Markets Cert. Free Demo Test 4

Explanation:

Under section 115BAA of the Income Tax Act, 1961, any domestic company has the option to pay taxes at a concessional tax rate of 22%. This provision was introduced to provide relief to domestic companies by reducing their tax burden and thereby boosting investment and economic growth. It allows companies to opt for a lower tax rate compared to the regular tax rates applicable to them, which could be higher. This concession aims to make the tax regime more competitive and attractive for businesses, ultimately stimulating economic activity and fostering business expansion.

Explanation:

The statement is false. Section 80-IAC of the Income Tax Act does not specify that eligible startups for the benefit of deferment of TDS (Tax Deducted at Source) must be formed only by splitting up or reconstruction of an existing business. Instead, this section provides a deduction to eligible startups engaged in eligible businesses. It encourages entrepreneurship and innovation by offering tax benefits to startups, irrespective of whether they are formed through splitting up or reconstruction of an existing business or through entirely new ventures. Therefore, the statement is incorrect.

Explanation:

Equity share capital can indeed be issued with both voting rights and differential rights. Voting rights represent the ability of shareholders to participate in the decision-making process of a company, typically through voting on matters such as company policies, major decisions, and the election of the board of directors.

Differential rights, on the other hand, allow for variations in rights attached to different classes of shares. These variations can include differential rights related to voting, dividends, or other matters. This flexibility in structuring equity allows companies to tailor shareholder rights based on various factors such as ownership structure, investor preferences, and strategic objectives. Therefore, both options are valid for equity share capital.

Explanation:

While overseas citizens of India and non-resident Indians are eligible to open NPS (National Pension System) accounts, persons of Indian origin (PIOs) are not eligible. PIOs are individuals who may have had Indian nationality or have Indian ancestry but are citizens of other countries. The eligibility criteria for NPS accounts specifically exclude PIOs. Therefore, option b is the correct answer.

Explanation:

The taxability of dividend income arising from preference shares and equity shares is generally the same. Both are typically subject to tax at the individual’s applicable income tax rate. Therefore, the statement that their taxability is not the same is false.

Explanation:

If Securities Transaction Tax (STT) is not paid at the time of transfer of equity-oriented mutual funds, then tax shall be charged at the rate of 20% plus applicable surcharge and cess. This is in accordance with the provisions of the Income Tax Act, 1961. The tax rate of 20% applies to long-term capital gains on equity-oriented mutual funds if STT is not paid at the time of transfer. Surcharge and cess are additional charges that may apply depending on the total income and other factors of the taxpayer. Therefore, the correct answer is 20%.

Explanation:

Real Estate Investment Trusts (REITs) are indeed structured as a hybrid pass-through entity. This means that they pass a significant portion of their income directly to shareholders without being taxed at the corporate level. Instead, the income generated by the REIT is distributed to shareholders in the form of dividends, and it’s the shareholders who are then taxed on this income at their individual tax rates. This pass-through structure is one of the key characteristics of REITs and is designed to provide tax efficiency for investors while also facilitating investment in real estate assets. Therefore, the statement is true.

Explanation:

The period of holding of shares for tax purposes begins from the date of allotment of shares. This is important for determining whether gains or losses from the sale of shares are classified as short-term or long-term for taxation purposes.

Explanation:

Portfolio managers are permitted to deal in goods received in delivery against the physical settlement of commodity derivatives. This activity falls within the scope of their duties and responsibilities in managing portfolios that may include commodity derivatives. Therefore, the statement is false.

Explanation:

In the case of secured premium notes (SPNs), the holder typically has the option to sell back the SPN to the company at par value after the lock-in period. Par value refers to the nominal or face value of the SPN, which is the amount originally invested or agreed upon. This option provides a degree of liquidity and certainty for the holder, as they can redeem the SPN at its initial value after the specified lock-in period. Therefore, the correct answer is c) Par value.