Aumsetu
← Mock Test
Aumsetu
← Mock Test
For the Investment Adviser (Level 2) exam, per the official workbook (Version December 2025). The formulas and figures below are the ones the workbook uses, grouped by module and chapter, with small worked examples — most of them the workbook’s own figures and practice cases, re-checked. Learn them here, read the chapter notes, plan your weeks with the study planner, then drill the free mock tests.
| Module | Chapters | Marks |
|---|---|---|
| 7 · Risk Management and Insurance Planning जोखिम प्रबंधन एवं बीमा योजना | 1–3 | 25 |
| 8 · Retirement Planning सेवानिवृत्ति योजना | 4–6 | 30 |
| 9 · Taxation कराधान | 7–13 | 20 |
| 10 · Estate Planning संपदा (एस्टेट) योजना | 14–15 | 20 |
| 11 · Behavioural Finance व्यवहारिक वित्त | 16–17 | 10 |
| 12 · Comprehensive Investment Advice व्यापक निवेश सलाह | 18–20 | 45 |
| Inflation-adjusted rate | Real rate = (1 + return) ÷ (1 + inflation or income growth) − 1 — the discount rate for both methods below
(1.08 ÷ 1.06) − 1 = 1.89% · (1.10 ÷ 1.06) − 1 = 3.77% |
| Human Life Value | HLV = PV(real rate, years to retirement, −current annual income) — income growth and the post-tax return on the sum assured are the only two assumptions
Growth = return ⇒ rate 0 ⇒ HLV = income × years: ₹10 lakh × 27 = ₹2.70 crore · HLV falls with age (fewer years left)
Practice case (Charu): ₹6 lakh a year, 25 years, (1.10 ÷ 1.06) − 1 unrounded (≈ 3.77%) ⇒ ₹96,01,652; less ₹40 lakh cover ⇒ about ₹56 lakh more |
| Needs-based (income replacement) | Cover = PV(family’s annual need) + loans + other goals − existing cover − investments; the family’s need = income − the insured’s own expenses − premiums − EMIs; the self-occupied home is not deducted
Anil: ₹1,50,000 − (10,000 + 32,000 + 25,000) = ₹83,000 a month = ₹9,96,000 a year; PV(1.89%, 31, −9,96,000, , 1) = ₹2,36,43,984; + loan ₹40 lakh − cover ₹1 crore − investments ₹50 lakh = ₹1,26,43,984
Practice case (Adil): ₹3,00,000 a year for 30 years at (1.08 ÷ 1.06) − 1 unrounded (≈ 1.89%) = ₹68,24,712 + loan ₹30 lakh + child’s corpus ₹10 lakh − cover ₹50 lakh = ₹58,24,712 |
| HLV vs needs-based | HLV is always higher than or equal to the needs-based figure; more investments lower the needs-based cover |
| Return on an insurance-cum-investment plan | RATE(term, −(premium − pure term premium), , maturity value[, 1]); XIRR when payouts are staggered
Practice case (Bose): RATE(20, −5,850, , 2,00,000) = 5.3% · return-of-premium term: RATE(30, −8,057, , 5,24,190, 1) = 4.61% · endowment: RATE(30, −3,06,916, , 2,14,00,000, 1) ≈ 5% |
| Minimum sum assured | Term over 10 years: 10× the annual premium below age 45, 7× above 45 · term under 10 years: 5× |
| Paid-up value | Sum assured × Premiums paid ÷ Premiums due
₹10 lakh, 25 years half-yearly (50 premiums), 10 paid ⇒ ₹2 lakh |
| Surrender value | After 3 years (2 if the term is under 10 years) · at least 30% of premiums paid, up to 90% in the last two years · single premium: 70% to 90% · ULIP discontinuance charge at most ₹6,000 |
| Telescopic premiums | Rates stop falling beyond a level (say ₹2 crore): ₹8 crore ⇒ 4 policies of ₹2 crore from the same insurer |
Payment timing: the workbook’s Anil example puts payments at the start of each year (type 1); the practice cases use the default end-of-period (type 0). Use whatever the question states.
| Pooled premium | Premium = Expected loss ÷ Number of insured
2 ships × ₹10 lakh ÷ 100 merchants = ₹20,000 (only 40 merchants ⇒ ₹50,000) · 2 deaths × ₹20 lakh ÷ 500 employees = ₹8,000 (4% of a ₹2 lakh salary) |
| Contribution | Insurer’s share = Its sum insured ÷ Total sum insured × Loss — indemnity policies only; in health insurance the insured chooses which policy to claim
Two ₹5 lakh flood policies, loss ₹30,000 ⇒ ₹15,000 each |
| Deductible, then co-pay | Payout = (Claim − Deductible) × (1 − Co-pay %)
₹40,000 with ₹1,000 deductible + 10% co-pay ⇒ ₹35,100 · ₹5,000 deductible alone ⇒ ₹35,000 · practice case: ₹50,000, ₹10,000 deductible, 5% co-pay ⇒ ₹38,000 |
| Co-pay · deductibles | 15% co-pay on ₹2,00,000 ⇒ insured ₹30,000, insurer ₹1,70,000 · car: compulsory ₹1,000 deductible up to 1600 CC (₹25,000 claim ⇒ ₹24,000) · health: ₹80,000 bill − ₹30,000 deductible ⇒ ₹50,000 |
| Top-up vs super top-up | Top-up: threshold applies to each claim · super top-up: threshold applies to the year’s total claims Base ₹5 lakh + ₹10 lakh above ₹5 lakh; claims ₹3, 6, 2, 4 lakh: top-up pays ₹1 lakh (₹6 lakh in all), super top-up pays ₹10 lakh (₹15 lakh in all) Practice cases: base ₹3 lakh + top-up (₹5 lakh deductible), claims ₹2, 3, 4 lakh ⇒ ₹6 lakh out of pocket · same with a super top-up (₹3 lakh deductible) ⇒ nil |
| No-claim bonus | Motor NCB up to 50% of the premium after 5 claim-free years; it belongs to the insured, not the car |
| Section 45 · moratorium | No life policy can be questioned after 3 years from issue, risk commencement or revival (whichever is later) · health moratorium 5 continuous years (from the enhancement date for an enhanced sum insured) |
| Beneficial nominee | Parent, spouse or children named as nominee are beneficially entitled — Section 39(7), Insurance Act amended February 2015 |
| ULIPs | Lock-in 5 years · limited-premium term at least 5 years · benefit illustrations at 4% and 8% · charge cap from the 5th year · no surrender charge after 5 years · revival within 3 years of lapse |
| Maturity tax | ULIP exempt if sum assured ≥ 10× annual premium · ULIPs from 1 Feb 2021 with annual premium above ₹2.5 lakh ⇒ capital gains · traditional policies from 1 Apr 2023 with premium above ₹5 lakh ⇒ income from other sources |
| GST · health | Individual health insurance and life insurance exempt from GST from 22 Sep 2025 · any policy except group, top-up and super top-up can be ported · no claim rejection after 5 years continued without a break |
| Intermediaries | Composite insurance agent: one life, one general, one health and one each mono-line insurer · composite corporate agent: up to three life, three general, three health · brokers: direct, reinsurance, composite · an agent or broker advising solely on insurance is outside the IA Regulations |
| MWPA 1874 | Beneficiaries only spouse and/or children (not parents) · declared at purchase, cannot be changed · proceeds beyond creditors |
| Abroad | Indemnity health policies normally cover India only (overseas travel policies excepted) · LRS up to USD 2,50,000 a year |
| Future expense | FV = Today’s expense × (1 + inflation)^years; Excel FV(rate, nper, , −PV)
At 6%: ₹100 → ₹179 (10 yrs), ₹321 (20), ₹574 (30) · ₹60,000 a month → ₹1,07,451 after 10 yrs · ₹45,000 × 1.06^20 = ₹1,44,321 |
| Real (inflation-adjusted) rate | (1 + r) ÷ (1 + i) − 1; monthly rate = annual real rate ÷ 12 in the workbook
8% / 6% ⇒ 1.89% · 11% / 10% ⇒ 0.91% · 9% / 8% ⇒ 0.93% |
| Retirement corpus | PV(real rate, years in retirement, −first-year expense, , type) — type 0 = end of period, 1 = start; the first-year expense is the inflated figure at retirement
Age 35 → 60, life to 85: ₹15,000 today × 1.07^25 = ₹81,411 a month ⇒ PV(1.89%/12, 300, −81,411) ≈ ₹1.95 crore (₹9,000 ⇒ ₹1.17 crore; ₹24,000 ⇒ ₹3.11 crore)
Case 1: FV(10%, 8, , −4,80,000) = ₹10,28,923 a year; PV(0.91%, 15, −10,28,923, , 1) = ₹1,44,96,632
Practice case (Jaspreet): FV(8%, 20, , −6,00,000) = ₹27,96,574; 25 years at 0.93% ⇒ about ₹6.2 crore |
| Savings needed | PMT(return ÷ 12, months to retirement, , −corpus)
₹1.18 crore at 12%: ₹3,376 a month over 30 yrs · ₹6,280 over 25 · ₹11,928 over 20 · ₹2 crore in 20 yrs ⇒ ₹20,217 |
| Replacement ratio | Year-1 income = Pre-retirement income × Ratio, then × (1 + inflation) each year — 80% is the standard ratio
₹2,00,000 × 80% = ₹1,60,000 · Rajeev: ₹1,00,000 × 1.1^10 = ₹2,59,374; × 50% = ₹1,29,687; next year at 7% = ₹1,38,765 |
| Expense protection | Budget retirement expenses line by line (medical, travel, gifting, upkeep up; loans, education, tax down) — suits people close to retirement |
| Growing contributions | Each year’s contribution grows at its rate and earns the corpus return to retirement Practice case (Harish): ₹1,20,000 a year growing 10%, ₹15 lakh corpus, 8% ⇒ about ₹1.14 crore at 55 · Case 1: ₹9,000 a month growing 20% + ₹12 lakh at 8% ⇒ ₹48,65,914 at 60 |
| Cost of early withdrawal | Withdrawal × (1 + return)^years left
₹75,000 taken from EPF 30 yrs early would have grown to ₹8.66 lakh at 8.5% |
| Rules of thumb | Retirement expenses ≈ 50–60% of current expenses if there are no liabilities · when income rises 10%, step up SIPs by at least 5–7% · post-retirement phase = beyond 75 |
| Covered by the Act | 15 × Last drawn salary × Years ÷ 26 — employer with at least 10 persons; salary = basic + DA (+ commission on sales); a part-year over 6 months counts as a year
₹60,000, 20 years 7 months ⇒ 15 × 60,000 × 21 ÷ 26 = ₹7.26 lakh (20 years 5 months ⇒ 20 years) |
| Not covered | 15 × Salary × Completed years ÷ 30 (half a month per completed year)
15 × 60,000 × 20 ÷ 30 = ₹6 lakh |
| Eligibility | 5 years of continuous service, except on death or disablement |
| Central government | ¼ of a month’s basic + DA per completed six-monthly period · at most 16½ × basic + DA (33+ years) · capped at ₹20 lakh · death gratuity: under 1 yr 2× · 1–5 yrs 6× · 5–11 yrs 12× · 11–20 yrs 20× · 20+ yrs ½ month per six-monthly period, up to 33× |
| Tax exemption | Government: fully exempt · covered: least of ₹20 lakh, last salary × 15/26 × completed years, actual · not covered: least of ₹20 lakh, average salary of the last 10 months × ½ × years, actual |
| EPF | Employee 12% of basic + DA · employer 12% = 3.67% EPF + 8.33% EPS (ceiling ₹15,000 a month); EDLI 0.5%, admin 0.50% · 10% rate for units with under 20 employees and certain industries · new women employees may pay 8% for the first 3 years · EPS pension from 58 |
| EPF tax · withdrawals | Interest on employee contributions (with VPF) above ₹2.5 lakh a year taxable · employer EPF + NPS + superannuation above ₹7.5 lakh a year is a perquisite · withdrawal tax-free after 5 years continuous service; before that taxable, 10% TDS above ₹50,000 · 75% after 1 month unemployed, the rest after 2 months · up to 90% from age 54 · dormant after 3 years without contributions |
| VPF · superannuation | VPF up to 100% of basic + DA, no employer match · employer PF + superannuation at most 27% of earnings · one-third of superannuation commutable at retirement |
| PPF | ₹500 to ₹1.5 lakh a year · matures 15 years from the end of the year of opening · extension in 5-year blocks (with contribution: up to 60% of the balance withdrawable) · loan from the 3rd to the 6th financial year, up to 25% · partial withdrawal after 5 financial years, up to 50% · residents only |
| NPS basics | All Citizens model 18–70 · Tier I: ₹500 a contribution, ₹1,000 a year · Tier II: ₹1,000 to open · active choice equity up to 75%, alternatives up to 5% · scheme/PFM change once a year, allocation four times · Multiple Scheme Framework vesting 15 years |
| NPS exit | At 60: at least 20% annuitised (40% for government sector) · corpus up to ₹8 lakh: full withdrawal; ₹8–12 lakh: up to ₹6 lakh lump sum · premature: 80% annuitised, full withdrawal up to ₹5 lakh · joined after 60: full withdrawal up to ₹12 lakh · can continue to 85 · partial withdrawal after 3 years, 25% of own contributions, up to 4 times before 60 · tax: up to 60% lump sum exempt (10(12A)), partial withdrawal exempt (10(12B)) |
| UPS · Vatsalya · APY | UPS from 1 Apr 2025: employee 10% + matching, government 8.5% to a pool · 50% of the 12-month average basic after 25 years’ service, minimum ₹10,000 a month after 10 years, family 60% · NPS Vatsalya for minors under 18 (80CCD(1B) up to ₹50,000) · Atal Pension Yojana: age 18–40, not income-tax payers (from 1 Oct 2022) |
| Annuities | Immediate (payments within 12 months) vs deferred · life annuity without return of purchase price pays the highest annuity, with return the lowest · NPS: more than one annuity if the annuity corpus exceeds ₹10 lakh (₹5 lakh each) · annuity income taxable |
| SCSS | 60+ (55–60 if retired, invested within 1 month of benefits; defence 50) · ₹1,000 to ₹30 lakh · 5 years + one 3-year extension · interest quarterly, fully taxable, TDS above ₹50,000 · premature penalty 1.5% (year 1–2), 1% (2–5) · no HUFs or NRIs |
| POMIS | ₹1,000 to ₹9 lakh single / ₹15 lakh joint · 5 years, monthly interest (taxable) · no closure in year 1; penalty 2% (years 1–3), 1% (3–5) |
| PMVVY | 60+, run by LIC, 10 years · ₹1,000 a month (₹1.5 lakh) to ₹10,000 a month (₹15 lakh) · closed to new investment after 31 Mar 2023 |
| Reverse mortgage | 60+ (spouse 55+) · own home, residual life at least 20 years · tenure at most 20 years · monthly payment capped at ₹50,000 · lump sum up to 50% of the loan, capped at ₹15 lakh (medical) · receipts exempt under Section 10(43) |
| SWP · ladder | SWP sells units: ₹5,000 at NAV ₹10 = 500 units, at NAV ₹20 = 250 units · FD ladder: ₹10 lakh as five ₹2 lakh FDs maturing in years 1–5, each rolled over for 5 years |
| Income (₹) | Old regime — others / senior / super senior (FY 2024-25 & 2025-26) |
|---|---|
| Up to 2,50,000 | Nil / Nil / Nil |
| 2,50,001 – 3,00,000 | 5% / Nil / Nil |
| 3,00,001 – 5,00,000 | 5% / 5% / Nil |
| 5,00,001 – 10,00,000 | 20% |
| Above 10,00,000 | 30% |
| New regime (115BAC) | FY 2025-26 | FY 2024-25 |
|---|---|---|
| Nil | up to ₹4 lakh | up to ₹3 lakh |
| 5% | ₹4–8 lakh | ₹3–7 lakh |
| 10% | ₹8–12 lakh | ₹7–10 lakh |
| 15% | ₹12–16 lakh | ₹10–12 lakh |
| 20% | ₹16–20 lakh | ₹12–15 lakh |
| 25% | ₹20–24 lakh | — |
| 30% | above ₹24 lakh | above ₹15 lakh |
| Rebate u/s 87A | Old regime: up to ₹12,500 if total income ≤ ₹5 lakh · new regime FY 2025-26: up to ₹60,000 if ≤ ₹12 lakh (FY 2024-25: ₹25,000 if ≤ ₹7 lakh), with marginal relief · not available against Section 112A tax |
| Surcharge | Income above ₹50 lakh 10% · ₹1 crore 15% · ₹2 crore 25% · ₹5 crore 37% (new regime capped at 25%) · on gains under 111A, 112, 112A and dividends capped at 15% |
| Cess | Health & education cess 4% of tax + surcharge |
| Maximum marginal rate | 30% × (1 + 37%) × (1 + 4%) = 42.744% (Section 2(29C)) |
| Effective tax rate | Rate × (1 + Surcharge) × (1 + Cess)
Firm above ₹1 crore: 30% × 1.12 × 1.04 = 34.944% · ₹4,29,000 tax on ₹20 lakh income = 21.45% |
| Salary | Standard deduction ₹50,000 old / ₹75,000 new · HRA (old only): least of HRA received, rent − 10% of salary, 50% of salary (metros) or 40% · gratuity, see Module 8 |
| House property | 30% standard deduction on net annual value · self-occupied interest up to ₹2 lakh (old regime only; ₹30,000 if construction takes over 5 years) · loss set off up to ₹2 lakh a year, rest carried forward 8 years |
| Deductions (old regime) | 80C + 80CCC + 80CCD(1) ≤ ₹1.5 lakh · 80CCD(1B) ₹50,000 · 80D ₹75,000 / ₹1,00,000 (parents / all senior) · 80TTA ₹10,000 · 80TTB ₹50,000 · 80E interest, no limit · 80CCD(2) employer NPS: 14% (government; others in the new regime), 10% for others in the old regime |
| Residential status | Resident: ≥ 182 days, or ≥ 60 days + ≥ 365 days in the 4 preceding years (120 days for visiting citizens/PIOs with Indian income over ₹15 lakh) · deemed resident (citizen, Indian income over ₹15 lakh, not taxed elsewhere) is always RNOR · RNOR if non-resident in 9 of 10 years or ≤ 729 days in 7 years |
| Set-off · carry forward | Long-term loss only against long-term gains; short-term loss against either · capital and business losses 8 assessment years (return filed on time) · speculation 4 · unabsorbed depreciation indefinitely · other-sources loss not carried forward |
| Clubbing | Income on assets transferred to a spouse or son’s wife without adequate consideration is taxed in the transferor’s hands; a minor child’s income is clubbed with the parent’s ₹30,00,000 gifted to wife, ₹1,50,000 interest ⇒ clubbed with Mr A’s income |
| Asset (transfers on or after 23 July 2024) | Long-term after | STCG | LTCG |
|---|---|---|---|
| Listed equity shares, equity-oriented fund units, listed REIT/InvIT units (STT paid) | 12 months | 20% (111A) | 12.5% above ₹1,25,000 (112A) |
| Listed bonds, debentures, G-secs, listed preference shares, zero-coupon bonds | 12 months | Slab | 12.5%, no indexation |
| Unlisted shares, immovable property, gold, other assets | 24 months | Slab | 12.5% (land/building bought before 23 Jul 2024: lower of 12.5% or 20% with indexation) |
| Other mutual fund units (not specified funds) | 12 listed / 24 unlisted | Slab | 12.5% |
| Specified MFs (≥ 65% debt) bought from 1 Apr 2023, MLDs (from 1 Apr 2023), unlisted bonds/debentures — Section 50AA | Always short-term | Slab | — |
| Indexed cost | Cost × CII (year of transfer) ÷ CII (year first held, or 2001-02 if later)
₹50,00,000 × 301 ÷ 105 = ₹1,43,33,333 · ₹1 crore × 363 ÷ 184 = ₹1,97,28,261 |
| Grandfathering (112A) | For shares/equity fund units bought on or before 31 Jan 2018: Cost = higher of (actual cost, lower of (FMV on 31-01-2018, sale price))
Cost 100: FMV 200, sale 250 ⇒ LTCG 50 · FMV 200, sale 150 ⇒ nil · FMV 50, sale 150 ⇒ 50 · FMV 200, sale 50 ⇒ loss 50 |
| Section 54 / 54F | House → house: buy 1 yr before or 2 yrs after, construct within 3 yrs · cap ₹10 crore · two houses if gain ≤ ₹2 crore · 54F (other assets): Exemption = Investment × LTCG ÷ Net sale consideration
House bought 2011-12 for ₹1 crore, sold 2024-25 for ₹3 crore, ₹1.5 crore reinvested: indexed route nil; 12.5% route ₹2 crore − ₹1.5 crore = ₹50 lakh × 12.5% = ₹6,25,000 ⇒ the lower, nil, applies |
| Section 54EC | LTCG on land or building into NHAI or REC bonds within 6 months, up to ₹50 lakh |
| Exemption-limit adjustment | A resident individual/HUF can set unused basic exemption against 111A/112/112A gains Other income ₹1,85,000 + LTCG ₹2,50,000, old-regime limit ₹2,50,000 ⇒ LTCG taxed ₹1,85,000 |
| Bonus stripping | Bought within 3 months before the record date, originals sold within 9 months after ⇒ loss ignored, added to the cost of the bonus units |
| Corporate actions | Bonus: cost nil, held from allotment · split/consolidation: cost apportioned (1,000 at ₹150, each split into two ⇒ ₹75) · renounced rights: cost nil, short-term at slab · buyback from 1 Oct 2024: proceeds taxed as dividend, cost becomes a capital loss · segregated portfolio cost = cost × segregated NAV ÷ total NAV (₹15,000 × 2/12 = ₹2,500) |
| Dividends · gifts | Dividends at slab rates, interest deduction ≤ 20% of dividend; non-residents 20% · gifts above ₹50,000 (aggregate FMV) taxable in full, except from relatives, on marriage, by will or inheritance |
| ESOP · SGB | ESOP perquisite = (FMV on exercise − price paid) × shares: (6,500 − 500) × 100 = ₹6 lakh; that FMV is the cost on sale · SGB: 2.50% interest (taxable), redemption by an individual not a transfer |
| Life insurance 10(10D) | Maturity exempt if premium ≤ 10% of sum assured (policies from 1 Apr 2012; 20% for 2003–2012) · death proceeds always exempt |
| F&O | Non-speculative business income · turnover = Σ favourable + unfavourable differences (+ premium on options sold) · loss carried forward 8 years against business income |
| Cost Inflation Index (2001-02 = 100) | |||||
|---|---|---|---|---|---|
| 2001-02 · 100 | 2005-06 · 117 | 2009-10 · 148 | 2013-14 · 220 | 2017-18 · 272 | 2021-22 · 317 |
| 2002-03 · 105 | 2006-07 · 122 | 2010-11 · 167 | 2014-15 · 240 | 2018-19 · 280 | 2022-23 · 331 |
| 2003-04 · 109 | 2007-08 · 129 | 2011-12 · 184 | 2015-16 · 254 | 2019-20 · 289 | 2023-24 · 348 |
| 2004-05 · 113 | 2008-09 · 137 | 2012-13 · 200 | 2016-17 · 264 | 2020-21 · 301 | 2024-25 · 363 |
| Which law on intestacy | Hindus, Buddhists, Jains, Sikhs: Hindu Succession Act 1956 · Christians, Parsis, Jews: Indian Succession Act 1925 · Muslims: personal law (Shariat Act 1937) |
| Hindu male — order | Class I heirs (all together, excluding everyone else) → Class II (an earlier entry excludes a later one) → agnates → cognates |
| Class I (16) | Son, daughter, widow, mother; son, daughter and widow of a pre-deceased son; son and daughter of a pre-deceased daughter; and the listed grandchildren through pre-deceased children — the father is not Class I |
| Class II (9 entries) | I father · II son’s daughter’s son/daughter, brother, sister · III daughter’s grandchildren · IV brother’s and sister’s children · V father’s parents · VI father’s widow, brother’s widow · VII father’s brother/sister · VIII mother’s parents · IX mother’s brother/sister Workbook caselet: unmarried Hindu, no will, survived by a brother and two sisters ⇒ all three share equally (Class II entry II) |
| Shares (Section 10) | Widow (or all widows together) one share · each son, daughter and the mother one share each · each pre-deceased son’s or daughter’s branch one share, split within the branch |
| Hindu female (Section 15) | Sons, daughters (incl. children of pre-deceased ones) and husband → husband’s heirs → mother and father → father’s heirs → mother’s heirs |
| Muslim law | Will (wasiyat) up to one-third of net assets · wife ¼ without lineal descendants, ⅛ otherwise · husband ½ or ¼ · sole daughter ½, two or more ⅔ jointly · with sons, each son gets double a daughter’s share |
| MWPA · mutation | A policy expressed for the wife and/or children is a trust, beyond the husband’s creditors · mutation records a name for revenue — not proof of title |
| Will | Registration optional; plain paper, no stamp duty · revoked by a later will or codicil, a written declaration, or destruction; losing it does not revoke it · for Hindus marriage does not revoke a will · privileged will (soldier, airman, mariner) can be oral before 2 witnesses · a codicil is executed like a will |
| Probate | Mandatory where the will is made in, or covers immovable property in, Kolkata, Chennai or Mumbai; optional elsewhere · granted only to executors named in the will · one witness verifies the application |
| Certificates | Succession certificate (district/civil court) when there is no will, for debts and securities · legal heir certificate (Tehsildar) is not conclusive evidence |
| Nomination | The nominee holds as a trustee for the heirs; a will overrides a nomination · exception: beneficial nominees under the Insurance Act (spouse, parents, children) · SEBI: up to 10 nominees · only individuals can nominate |
| Gift · family settlement | Gift of immovable property must be registered and bears stamp duty · family settlement is not a transfer or gift — no capital gains, no clubbing |
| Joint ownership | Joint tenancy: right of survivorship · tenancy-in-common: no survivorship, share passes by will or succession (equal if unstated) |
| Trust tax | Discretionary trust: maximum marginal rate (exceptions, e.g. sole trust by will for dependent relatives) · specific trust: trustee taxed as representative assessee · revocable transfer: taxed on the settlor (Sections 60–61) · transfer to an irrevocable trust exempt from capital gains (Section 47(iii)) |
| Distributable net income | DNI = Taxable income − Capital gains + Tax exemptions
Interest 50,000 + dividend 50,000 + gains 20,000 − fees 20,000 − exemption 20,000 = taxable ₹80,000 ⇒ DNI = 80,000 − 20,000 + 20,000 = ₹80,000 |
| Perpetuity rule | Interest must vest within a life in being plus the minority (18 years) of a person · accumulation of income: transferor’s lifetime or 18 years, whichever is later · stamp duty on settlement under Article 58 |
| Power of attorney | Donor 18+ and of sound mind · registration needed only if it creates an interest in immovable property · ends on the death of either party |
| Standard vs behavioural | Economics vs psychology at the core · risk-return trade-off vs loss aversion as the basis · rule-driven vs thumb-rule decisions |
| Bounded rationality | Herbert Simon (1978): limited time, information and ability ⇒ investors “satisfice” (satisfactory + sufficient) |
| Prospect theory | Kahneman & Tversky (1979): outcomes judged against a reference point · risk-averse on gains, risk-seeking on losses · losses hurt more than equal gains |
| Emotional biases | Loss aversion (disposition effect: holding losers, selling winners early) · stereotyping · overconfidence (with self-attribution: “brain vs bull market”) · endowment (inherited shares rarely sold) · status quo · regret aversion (commission hurts more than omission) |
| Cognitive errors | Mental accounting (money in buckets) · framing (95% lean vs 5% fat) · anchoring (first or past price) · choice paralysis |
| Fusion investing | Value screen (P/E, P/BV, P/S) → fundamental strength (Piotroski score 0–9) → momentum |
| Bubbles | Tulip mania (1630s), South Sea Bubble, tech bubble (2000s) · likelier with inexperienced traders, uncertain value, a small chance of a big profit, borrowed money and hard short selling |
| Adviser remedies | Budgets for retail therapy · prime patience against action bias · pre-set allocation limits against chasing performance · LRS (USD 250 thousand) against home bias · rebalancing rules as a nudge |
| Expected value | Σ Probability × Payoff
Pay ₹1,00,000 to win ₹2,10,000 on a coin toss: 50% × 1,10,000 − 50% × 1,00,000 = +₹5,000, yet most decline |
| Risk appetite | Rises with earning members, lower age, longer life expectancy, employability, regular income, market knowledge and a larger capital base · falls with more dependants |
| SEBI (IA) duties | Risk profile before any advice · ability to absorb losses assessed · questionnaires fair, clear, without leading questions · updated periodically and on life events |
| Allocation types | Strategic (long-term, goal-based) · tactical (market calls, for seasoned investors with large surpluses) · dynamic (pre-defined models) · review at least once a year |
| Illustrative model portfolio (workbook) | Equity | Sector | Gold ETF | Debt / hybrid | Liquid |
|---|---|---|---|---|---|
| Young BPO employee, no dependants — high | 50% | 20% | 10% | 10% debt fund/FDs | 10% |
| Young single-income family, two school-going kids — moderate | 35% | 10% | 15% | 30% debt fund/FDs | 10% |
| Single income, grown-up children yet to settle — conservative | 35% | — | 15% | 10% gilt + 20% debt fund/FDs | 20% |
| Couple in their seventies — conservative to moderate | 15% index | — | 5% | 35% debt hybrid/MIS/SCSS + 30% debt fund/FDs | 15% |
| Same couple, fit and with a large corpus | 10% + 15% index | — | 10% | 30% debt hybrid + 25% debt fund/FDs | 10% |
The workbook calls these percentages illustrative and highly subjective — the adviser keeps a model for each client profile and tweaks it to the client.
| Real return | (1 + nominal return) ÷ (1 + inflation) − 1 — the rate used to discount inflating expenses
Case 1: (1.11 ÷ 1.10) − 1 = 0.91% · Case 2 goals: FV(15%, 5, , −15,00,000) = ₹30,17,036 · FV(10%, 7, , −1,00,00,000) = ₹1,94,87,171 |
| Post-tax return | Post-tax return = Pre-tax return × (1 − tax rate) (for income taxed every year, such as FD interest) — the workbook compares products on what is left after tax: PPF nil tax · FD interest taxed every year · ELSS gains at 12.5% · debt-fund growth option with withdrawals is largely return of capital |
| Lock-ins | ELSS 3 years · PPF 15 years (partial after 5) · tax-saving FD whole tenure · NPS till 60 · ULIP 5 years · SGB redeemable after 5 years, matures at 8 |
| Ticket sizes | Mutual fund from ₹1,000 · PMS ₹50 lakh (operating expenses capped at 0.50%, no upfront fee) · AIF ₹1 crore |
| Allocation share | Debt % = Debt ÷ (Debt + Equity)
Case 1 at age 60, retirement corpus all debt: (48,65,914 + 1,80,37,404) ÷ (… + 79,60,886 equity) = 74.21% |
| Other contrasts | Company deposits unsecured, slightly higher return than the same company’s (normally secured) debentures · personal accident covers disability, life insurance does not · ETFs trade all day, index funds at end-of-day NAV |
Aumsetu — free tools for Mutual Fund Distributors. This sheet is an independent, free study aid based on the publicly published NISM-Series-X-B Investment Adviser (Level 2) workbook (Version December 2025). It is not affiliated with, endorsed by, or a product of NISM or SEBI. Always study the official workbook for the exam.