Indian Market Specifics
Level 4 (Application) · Time: 60 minutes · Total Marks: 50
Use current Indian statutory rates as taught: STT delivery equity 0.1% each side; STT intraday sell 0.025%; STT options sell 0.0625% on premium; STT futures sell 0.02%; STCG (111A) 15%; LTCG (112A) 10% above ₹1 lakh with ₹1 lakh grandfathering base date 31-Jan-2018. Show all working.
Q1. [10 marks] Anita buys 500 shares of a stock at ₹340 on 10-Mar and sells all 500 at ₹362 on the same day (intraday). Brokerage is ₹20 per executed order. Assume exchange transaction charge 0.00325% on turnover, GST 18% on (brokerage + transaction charge), SEBI charge ₹10 per crore, and stamp duty 0.003% on buy turnover. (a) Compute the STT payable, identifying on which leg it applies. [3] (b) Compute total charges (brokerage, transaction charge, GST, SEBI, stamp duty). [5] (c) Compute the net profit/loss after all charges and STT. [2]
Q2. [12 marks] Ravi trades one lot of a NIFTY weekly option. Lot size is 50. He sells 1 lot of a call at a premium of ₹120 and buys it back the same day at ₹85. (a) Compute the STT on this options trade and state on which leg it is levied. [3] (b) Explain how F&O income is classified for taxation and how his turnover for this trade is computed under the "absolute profit" method. [5] (c) If this were the only trade of the year, state whether a tax audit is triggered, and explain the reasoning using the turnover figure. [4]
Q3. [10 marks] Meena's equity portfolio for FY:
- Stock A: bought 01-Jan (previous year) at ₹150, sold this year on 01-Feb (14 months held) at ₹410. 200 shares.
- Stock B: bought and sold within 5 months, realised gain ₹40,000. (a) Classify each gain as STCG or LTCG and justify. [3] (b) Compute the LTCG on Stock A assuming no grandfathering applies. [3] (c) Compute the total tax on both A and B, applying the ₹1 lakh LTCG exemption. [4]
Q4. [10 marks] A stock was held before 31-Jan-2018. Purchase price (actual cost) = ₹80. The highest quoted price on 31-Jan-2018 = ₹250. It is sold this year at: (a) ₹300 — compute the grandfathered cost of acquisition and the taxable LTCG per share. [5] (b) ₹210 — compute the grandfathered cost of acquisition and the taxable LTCG/loss per share. [5]
Q5. [8 marks] (a) Explain the difference between ASM and GSM surveillance frameworks and one consequence for a trader of a stock entering each. [4] (b) A stock in F&O crosses the market-wide position limit and enters the "ban period." State two restrictions that apply and explain the purpose of circuit filters as distinct from the ban period. [4]
Answer keyMark scheme & solutions
Q1 (10 marks)
Buy turnover = 500 × 340 = ₹170,000. Sell turnover = 500 × 362 = ₹181,000. Total turnover = ₹351,000.
(a) STT [3] Intraday equity: STT charged on sell leg only at 0.025%. STT = 0.025% × 181,000 = ₹45.25. (mark: correct leg 1, rate 1, value 1)
(b) Charges [5]
- Brokerage = ₹20 × 2 orders = ₹40 (1)
- Transaction charge = 0.00325% × 351,000 = ₹11.4075 (1)
- GST = 18% × (40 + 11.4075) = 18% × 51.4075 = ₹9.2534 (1)
- SEBI = ₹10 per crore × 351,000/10,000,000 = ₹0.351 (1)
- Stamp duty = 0.003% × 170,000 (buy side) = ₹5.10 (1) Total charges ≈ 40 + 11.4075 + 9.2534 + 0.351 + 5.10 = ₹66.11
(c) Net P/L [2] Gross profit = 181,000 − 170,000 = ₹11,000. Net = 11,000 − 66.11 − 45.25 = ₹10,888.64 (gross 1, net 1)
Q2 (12 marks)
(a) STT [3] Options STT levied on sell side on premium at 0.0625%. Sell premium value = 120 × 50 = ₹6,000. STT = 0.0625% × 6,000 = ₹3.75. (leg 1, rate 1, value 1)
(b) Classification & turnover [5] F&O income is treated as non-speculative business income (2). Turnover under absolute profit method = sum of absolute values of profits and losses of settled trades (2). Here profit = (120 − 85) × 50 = ₹1,750; absolute profit = ₹1,750, so turnover = ₹1,750 (1).
(c) Audit [4] Turnover ₹1,750 is far below the ₹10 crore threshold (with >95% digital transactions) / ₹2–3 crore presumptive limits (2). Hence no tax audit is triggered (1); audit would only arise on crossing statutory turnover limits or on declaring profit below presumptive rate while over basic exemption (1).
Q3 (10 marks)
(a) Classification [3] Stock A held 14 months (>12 months, listed equity) → LTCG (1.5). Stock B held 5 months (<12 months) → STCG under §111A (1.5).
(b) LTCG Stock A [3] Gain = (410 − 150) × 200 = 260 × 200 = ₹52,000.
(c) Total tax [4]
- STCG B = ₹40,000 taxed at 15% = ₹6,000 (1.5)
- LTCG A = ₹52,000; below ₹1,00,000 exemption → taxable LTCG = 0, tax ₹0 (1.5)
- Total tax = ₹6,000 (1)
Q4 (10 marks)
Grandfathering (§112A): Cost of acquisition = higher of (actual cost) and (lower of FMV on 31-Jan-2018 and sale price).
(a) Sold ₹300 [5] Lower of (FMV 250, sale 300) = 250. Higher of (actual 80, 250) = 250 (3). Taxable LTCG = 300 − 250 = ₹50 per share (2).
(b) Sold ₹210 [5] Lower of (FMV 250, sale 210) = 210. Higher of (actual 80, 210) = 210 (3). Taxable LTCG = 210 − 210 = ₹0 per share (no gain/no loss) (2).
Q5 (8 marks)
(a) [4] ASM (Additional Surveillance Measure) targets stocks with abnormal price/volume/volatility, imposing measures like higher margins/price bands but stock stays tradeable (1.5). GSM (Graded Surveillance Measure) targets fundamentally weak/low-price stocks with graded restrictions e.g. trade-to-trade, periodic call auction, additional surcharge deposits (1.5). Consequence: higher margin blocked / reduced liquidity / trading only in call auctions (1).
(b) [4] Ban period restrictions (any two, 1 each): only position-reducing (offsetting) trades allowed; no fresh positions permitted; increased margins. Purpose distinction (2): circuit filters cap the price movement within a day/session to curb volatility and are automatic price bands, whereas the ban period restricts new positions when open interest crosses 95% of market-wide limit — one controls price, the other controls speculation/OI.
[
{"claim":"Q1 STT intraday sell = 0.025% of 181000 = 45.25","code":"result = (0.025/100*181000)==45.25"},
{"claim":"Q1 net profit = 11000 - 66.11 - 45.25 approx 10888.64","code":"charges=40+0.00325/100*351000+0.18*(40+0.00325/100*351000)+10*351000/1e7+0.003/100*170000; net=11000-charges-45.25; result=abs(net-10888.64)<0.05"},
{"claim":"Q2 options STT sell = 0.0625% of 6000 = 3.75","code":"result=(0.0625/100*6000)==3.75"},
{"claim":"Q2 turnover absolute profit = 1750","code":"result=abs((120-85)*50)==1750"},
{"claim":"Q3 LTCG A = 52000, taxable 0, STCG tax 6000","code":"ltcg=(410-150)*200; taxable_ltcg=max(ltcg-100000,0); stcg_tax=0.15*40000; result=(ltcg==52000) and (taxable_ltcg==0) and (stcg_tax==6000)"},
{"claim":"Q4a grandfathered cost 250, LTCG per share 50","code":"cost=max(80,min(250,300)); result=(cost==250) and (300-cost==50)"},
{"claim":"Q4b grandfathered cost 210, LTCG per share 0","code":"cost=max(80,min(250,210)); result=(cost==210) and (210-cost==0)"}
]