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An individual has recently purchased a house worth Rs. 40 lakh for self-occupation by availing housing loan of Rs. 28 lakh at 9.25% p.a. rate of interest. The tenure of loan is 18 years. He has Rs. 12 lakh financial assets at present invested at 9% p.a. He is expected to save annually Rs. 2 lakh which he invests on a quarterly basis beginning a quarter from now in an instrument which is expected to provide return of 9% p.a.
1. What will be the EMI on housing loan?
a. 25669
b. 26659
c. 26969
d. 29669
2. What will be the Outstanding in his housing loan after five years?
a. 21,14,624
b. 24,14,624
c. 24,41,624
d. 24,44,624
3. What will be the value of his Financial assets after five years?
a. 14,68,349
b. 16,48,349
c. 16,84,349
d. 18,46,349
4. What will be the value of his Savings after five years?
a. 12,36,614
b. 13,26,614
c. 13,62,614
d. 16,26,614
5. What would be his net worth five years from now? The value of the house which is for consumption purposes is not considered in the net worth so arrived.
a. 6,33,688
b. 6,36,838
c. 6,68,338
d. 6,86,338
Solution :
1 - b
Housing loan liability = 28,00,000
Tenure = 18 years
Rate of interest = 9.25% p.a.
Financial assets = 12,00,000
Annual savings = 2,00,000
Rate of investment growth in assets = 9% p.a.
EMI on housing loan = 26,659 {PMT (9.25%/12,18*12,-2800000,0,0)}
2 - b
Outstanding housing loan = 24,14,624 {PV(9.25%/12,(18-5)*12,-26659,0,0)}
3 - d
Financial assets = 18,46,349 {FV(9%,5,0,-1200000,0)}
4 - a
Savings = 12,36,614 {FV((1+9%)^(1/4)-1,5*4,-200000/4,0,0)}
5 - c
Net worth of the individual after 5 years = 6,68,338 (1846349+1236614-2414624)
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Mr. Raj has bought :
2000 units of a stock at Rs. 20 on 1 Jan 2013,
2000 more units at Rs. 30 on 1 May 2013
2000 more units at Rs. 40 on 1 December 2013
and sold
5000 units at Rs. 50 on 30 December 2014,
Calculate the Indexed Capital Gains.
CII for 2012-13 = 852
CII for 2013-14 = 939
CII for 2014-15 = 1024
a. 89742
b. 92874
c. 94872
d. 97482
Ans - b
Solution :
Each purchase/sale transaction is matched on a First-In-First-Out basis.
All the units sold have been held for over one year, so long term capital gains tax applies.
So here, out of the 5000 units sold, we have three separate pieces to be considered.
The First 2000 are matched to the first 2000 bought, appropriately indexed, gains calculated and tax calculated.
Here you get two years of Indexation (2012-13 and 2014-15)
Indexed Purchase Price = 40,000 * (1024/852) = 48,075
Capital Gain = 100000 – 48075 = 51925
The Next 2000 are matched to the Next 2000 bought, appropriately indexed, gains calculated and tax calculated.
Here you get two years of Indexation (2013-14 and 2014-15)
Indexed Purchase Price = 60,000 * (1024/939) = 65431
Capital Gain = 100000 – 65431 = 34569
The next 1000 units are sold at Rs. 50 and bought at Rs. 40, appropriately indexed, gains calculated and tax calculated.
Here you get two years of Indexation (2013-14 and 2014-15)
Indexed Purchase Price = 40,000 * (1024/939) = 43620
Capital Gain = 50000 – 43620 = 6380
So let’s add them all up.
Total Capital Gain = 51925 + 34569 + 6380 = 92874
Capital Gains Tax Appl (%) = 20%
Capital Gains Tax = 18575
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Your client had inherited a property of market value of Rs. 50 lakh from his grandfather on 28th December 2009. His grandfather had acquired this property on 1st September 2001 for Rs. 12 lakh. He sold this property for Rs. 70 lakh in January 2017. Compute the capital gains/loss for AY 2017-18. Cost inflation index for FY 2001-2002 : 426, 2009-2010: 632, 2016-17: 1125
a. 18,30,986
b. 20,00,000
c. 31,69,014
d. 38,30,986
Ans - d
Solution :
Acquisition price of the property : 1-Sep 2001 = 12,00,000
Market Value when inherited: 28-Dec-2009 = 50,00,000
Sales consideration : January 2017 = 70,00,000
CII: 2001-02 = 426
CII: 2009-10 = 632
CII: 2016-17 = 1125
Index cost of acquisition for Capital Gains = 31,69,014 (1200000*1125/426)
Capital Gains = 38,30,986 (7000000-3169014)
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Suppose that during the rent of a property the owner earns the income of 60000 on a quarterly basis.
Set the value of this liability at the current moment;
in other words, determine the price of this property, if it was sold at the present moment at the interest rate:
1) of 8% converted on a quarterly basis?
2) of 8% converted on an annual basis?
We have that
1) R = 60000;
i = 0.02;
A = 60000 / 0.02
= 3000000:
Thus, the market value of this property is 3000000.
2) In the case we have a complex annuity,
thus: R = 60000, i = 0.08, c = 0.25 Then
p = 1.08^0.25 - 1 = 0.0194265
A = 60000/0.0194265 = 3088557
In this case the value of this property is 3088557.
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Mr. Raj has bought :
2000 units of a stock at Rs. 20 on 1 Jan 2013,
2000 more units at Rs. 30 on 1 May 2013
2000 more units at Rs. 40 on 1 December 2013
and sold
5000 units at Rs. 50 on 30 December 2014,
Calculate the Non Indexed Capital Gains.
a. 100000
b. 110000
c. 120000
d. 130000
Ans - b
Solution :
Each purchase/sale transaction is matched on a First-In-First-Out basis.
All the units sold have been held for over one year, so long term capital gains tax applies.
So here, out of the 5000 units sold, we have three separate pieces to be considered.
The First 2000 are matched to the first 2000 bought, appropriately indexed, gains calculated and tax calculated.
The non-indexed gain is Rs. (100000 - 40000) = Rs. 60000
The Next 2000 are matched to the Next 2000 bought, appropriately indexed, gains calculated and tax calculated.
The non-indexed gain is Rs. (100000 - 60000) = Rs. 40000
The next 1000 units are sold at Rs. 50 and bought at Rs. 40, appropriately indexed, gains calculated and tax calculated.
The non-indexed gain is Rs. (50000 - 40000) = Rs. 10000
So let’s add them all up.
Non-Indexed
Total Capital Gain = 60000 + 40000 + 10000 = 110000
Capital Gains Tax Appl (%) = 10%
Capital Gains Tax = 11000
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Mr. X has bought :
2000 units of a stock at Rs. 20 on 1 Jan 2013,
2000 more units at Rs. 30 on 1 May 2013
2000 more units at Rs. 40 on 1 December 2013
and sold
5000 units at Rs. 50 on 30 December 2014,
Should he go ahead with Indexed Capital Gains Tax or Non Indexed Capital Gains Tax to save some Tax.
CII for 2012-13 = 852
CII for 2013-14 = 939
CII for 2014-15 = 1024
a. Indexed Capital Gains Tax
b. Non Indexed Capital Gains Tax
c. Both are same
d. Sufficient information not available
Ans - b
Solution :
Each purchase/sale transaction is matched on a First-In-First-Out basis.
All the units sold have been held for over one year, so long term capital gains tax applies.
So here, out of the 5000 units sold, we have three separate pieces to be considered.
The First 2000 are matched to the first 2000 bought, appropriately indexed, gains calculated and tax calculated.
Here you get two years of Indexation (2012-13 and 2014-15)
Indexed Purchase Price = 40,000 * (1024/852) = 48,075
Capital Gain = 100000 – 48075 = 51925
The non-indexed gain is Rs. (100000 - 40000) = Rs. 60000
Indexed Capital Gain: Rs. 51925
Non Indexed Capital Gain: Rs. 60000
The First 2000 are matched to the first 2000 bought, appropriately indexed, gains calculated and tax calculated.
Here you get two years of Indexation (2013-14 and 2014-15)
Indexed Purchase Price = 60,000 * (1024/939) = 65431
Capital Gain = 100000 – 65431 = 34569
The non-indexed gain is Rs. (100000 - 60000) = Rs. 40000
Indexed Capital Gain: Rs. 34569
Non Indexed Capital Gain: Rs. 40000
The next 1000 units are sold at Rs. 50 and bought at Rs. 40, appropriately indexed, gains calculated and tax calculated.
Here you get two years of Indexation (2013-14 and 2014-15)
Indexed Purchase Price = 40,000 * (1024/939) = 43620
Capital Gain = 50000 – 43620 = 6380
The non-indexed gain is Rs. (50000 - 40000) = Rs. 10000
Indexed Capital Gain: Rs. 6380
Non Indexed Capital Gain: Rs. 10000
So let’s add them all up.
Indexed
Total Capital Gain = 51925 + 34569 + 6380 = 92874
Capital Gains Tax Appl (%) = 20%
Capital Gains Tax = 18575
Non-Indexed
Total Capital Gain = 60000 + 40000 + 10000 = 110000
Capital Gains Tax Appl (%) = 10%
Capital Gains Tax = 11000
He should go ahead to choose the non-indexed option to save some tax of Rs. (18575 - 11000) = Rs. 7575/-.
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You had purchased a license to engage in the transportation services for which you paid 5000.
Moreover, you paid 30000 for the purchased car.
You hope to replace a car with a new one every three years, hoping to allocate 30000 for a new car.
In addition, you can sell the car for 10000.
Determine the costs of this business, if the interest rate is 12%.
a. 34892
b. 48932
c. 84392
d. 94832
Ans - c
Solution :
We have that the initial business costs are 35000,
the replacement costs are R = 30000 - 10000 = 20000,
In addition,
i = 0.12
c = 3
p = 1.12^3 - 1 = 1.404928 - 1 = 0.404928, Then
K = 35000 + (20000/0.404928)
= 84392
Thus, the capitalized general business costs will be 84392
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