Taxation in Securities Markets Cert. Free Demo Test 6

Explanation:

Tax deducted at source (TDS) has been introduced to ensure a regular flow of revenue to the government. TDS is a mechanism through which tax is deducted at the source of income itself, ensuring that the government receives tax payments in a timely manner. It is deducted by the payer at the time of making certain payments such as salaries, interest, rent, commission, etc., and deposited with the government on behalf of the payee. By deducting tax at the source, the government ensures a steady stream of revenue and minimizes the possibility of tax evasion or default. Therefore, TDS plays a crucial role in ensuring the regular flow of revenue to the government.

Explanation:

Stamp duty is levied for transferring shares and securities from one person to another. It is a tax imposed by the state government on various transactions, including the transfer of shares and securities. When shares or securities are transferred between parties, a stamp duty is required to be paid on the transfer instrument, such as a share transfer deed or a contract note. The rate of stamp duty may vary depending on the state and the value of the transaction. Stamp duty revenue contributes to the state government’s revenue and is an essential source of income for state finances. Therefore, stamp duty is levied on the transfer of shares and securities to formalize and legalize the transaction and generate revenue for the government.

Explanation:

An options contract is a contract that gives the holder the right, but not the obligation, to buy or sell the underlying security on or before a specified date, at a stated price.

In an options contract, the buyer pays a premium to the seller for the right to exercise the option at a later date. The buyer can choose to exercise the option if it is advantageous, but is not obligated to do so. There are two types of options: call options, which give the holder the right to buy the underlying security, and put options, which give the holder the right to sell the underlying security.

Options contracts provide flexibility and allow investors to hedge risk or speculate on the future price movements of the underlying security without committing to a trade upfront.

Explanation:

The gain or loss arising from the transfer or redemption of debt instruments is classified as capital gains.

Explanation:

Income from a securitization trust in a specified fund is taxed under the head “Profits and gains from business.”

Explanation:

The taxability of securities issued by the employer depends on either the period of holding or the fair market value.

Explanation:

If PAN (Permanent Account Number) is furnished, the Tax Deducted at Source (TDS) applicable on brokerage shall be 5% for a resident person as per section 194H of the Income Tax Act. This section pertains to TDS on commission or brokerage. When a resident person receives brokerage or commission exceeding specified limits, TDS is required to be deducted at the rate of 5%, provided the PAN is furnished. If PAN is not furnished, the TDS rate is 20%. Therefore, furnishing PAN reduces the TDS rate to 5%.

Explanation:

The tax rate in the case of conversion of Global Depository Receipts (GDRs) into other securities would be the same as applicable at the time of the transfer of GDRs. This means that the tax implications remain consistent throughout the conversion process. Any capital gains or losses arising from the conversion of GDRs into other securities would be taxed at the same rate as applicable to the transfer of GDRs. Therefore, the statement is true.

Explanation:

Under Section 45(2A) of the Income Tax Act, the period of holding of securities held in demat form shall be determined as per the FIFO (First-In-First-Out) method.

This means that when determining the holding period for tax purposes, the securities that are sold first are considered to have been acquired first, following the FIFO method. This method helps in calculating the capital gains or losses accurately by matching the sale of securities with the corresponding acquisition dates. Therefore, Section 45(2A) specifies the method for determining the period of holding of securities held in demat form, which is the FIFO method.

Explanation:

During the lock-in period, no interest is paid in secured premium notes.

Secured premium notes typically have a lock-in period during which the investor cannot redeem or sell the notes. During this lock-in period, the issuer of the notes does not pay any interest to the investor. Interest payments usually commence after the lock-in period expires. This lock-in period is designed to provide stability to the issuer and ensure that investors commit their funds for a certain period, often to support specific projects or ventures.