Fund Taxation Practice Quiz

Question 1

In a Category II AIF, who is taxed on the fund’s long-term gains?

Accepted Answer

The investor, on their share. Pass-through under section 224: the investor is taxed as if they held the investment.

Question 2

A Category II fund deducts 10% from a resident’s payout. That 10% is:

Accepted Answer

An advance towards the investor’s tax. TDS is credited against the actual tax; the balance is paid or refunded in the return.

Question 3

What is the yearly allowance on long-term gains on listed shares and equity fund units?

Accepted Answer

₹1,25,000, once on the total. Section 198(2): one allowance a year, on the total of such gains.

Question 4

Listed shares become long-term after:

Accepted Answer

More than 12 months. Section 2(101): 12 months for listed securities and equity fund units.

Question 5

A GIFT IFSC Category III fund admits Indian residents beyond the 5% exception. It is:

Accepted Answer

Taxed as a trust. It fails Note 1(g)(C), so the trust provisions apply.

Question 6

Non-resident unit holders of a specified fund pay Indian tax on payouts and unit gains:

Accepted Answer

Not at all (Schedule VI, Sl. 9). Schedule VI, Sl. 9 leaves that income out of their total income.

Question 7

An IFSC fund management company on the default regime with a 100% deduction may still pay:

Accepted Answer

MAT at 9% of book profit. Section 206(1)(b)(i): 9% for an IFSC unit earning solely in convertible foreign exchange.

Question 8

Does MAT apply to a company that opted for section 200?

Accepted Answer

No. Section 206(1)(q)(ii) excludes it.

Question 9

For how long can an IFSC unit claim the section 147 deduction?

Accepted Answer

20 consecutive tax years out of 25. Section 147(2)(b), as substituted by the Finance Act, 2026.

Question 10

By when must a Category I or II fund give investors Form No. 78?

Accepted Answer

30 June. Rule 145(2): by 30 June of the year after the tax year.

CS Prashant Kumar