RETIREMENT PLANNING Mock Test 1 1 An establishment had 9,10,11,20,21,9 and 8 employees in the years 1998,1999,2000, 2001,2002,2003 & 2004.

Are the employees of that establishment covered under the Payment of Gratuity Act, 1972? (a) (b) (c) (d) Since 1999 Since 2000 Since 2001 Not now covered.

2 What is the minimum number of employees in an establishment for it to come under the purview of the Payment of Gratuity Act, 1972? (a) (b) (c) (d) 20 and above Above 20 10 and above Above 10

3 What is the maximum amount of gratuity payable as per the Act? (a) (b) (c) (d) Rs 3,50,000 Rs 2,50,000 Rs 50,0000 No ceiling.

4 How much amount of gratuity is payable for each year of completed service to the monthly rated employees? (a) (b) (c) (d) 15 days wages Half a months wages 20 days wages None of the above.

5 Wages for the purpose of gratuity is payable for each year of completed service to the monthly rated employees? (a) (b) (c) (d) Basic Pay Basic Pay and Dearness Allowance Basic Pay, Dearness Allowance, City Compensatory Allowance and House Rent Emoluments including all allowances, bonus and commission etc.

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6 Can an employer have an arrangement to pay gratuity higher than that prescribed under the Act? (a) (b) (c) (d) No Yes, but always within the prescribed ceiling on the maximum amount Yes, but always at the prescribed rate for each year of completed service Yes, at the same or a higher rate and with or without the prescribed ceiling.

7 As per section 4A of the Act, insurance of gratuity liability is currently NOT compulsory: (a) For employees employing less than 500 persons and not having an approved gratuity fund (b) For employers employing 500 or more persons and not having an approved gratuity fund (c) For employers employing 500 or more persons and wish to establish now an approved gratuity fund (d) For all employers covered under the Act irrespective of the number of employees being more or less than 500. 8 What is the maximum Tax Free gratuity in case of? (i) Gratuity payable to Govt. employees (a) Full amount of gratuity (b) Rs 5,00,000 (c) Rs 2,50,000 (d) None of the above (ii) Gratuity payable to other than Govt. employees as per limitations prescribed in Act (a) Maximum Rs 2,50,000 (b) Full amount of gratuity (c) Maximum Rs 1,00,000 (d) None of the above (iii) Gratuity payable to employees other than (i) and (ii): (a) 15 days terminal wages for each completed year of service with a ceiling of Rs 3,50,000 (b) 15 days average wages of the last 10 months for each completed year of service with a ceiling of Rs 2,50,000 (c) Half months terminal wages for each completed year of service without ceiling (d) Half months average wages of the last 10 months for each completed year of service with a ceiling of 3,50,000.

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9 For monthly rated employees, to determine the amount of wages for one calculation of gratuity amount, the month is reckoned of: (a) 30 days (b) 26 days (c) 31 days (d) 365 / 12 days 10 Mr. Anil joined a private company on 1st day of September 1965. He retired from the services on 30th April 2004 at Superannuation age of 60 years when his monthly emoluments were as under: Basic Salary Rs 7,000; Dearness Allowance Rs 3,000; City Compensatory Allowance Rs 1000; House Rent allowance Rs 5,000. During the period of service, he had availed without pay leave of 4 months. The company pays gratuity as per the provisions of the Payment of Gratuity Act, 1972. Mr. Anil is entitled to get the gratuity amount of: (a) Rs 3,50,000 (b) Rs 2,19,231 (c) Rs 2,25,000 (d) Rs 3,28,846. 11 Mrs. Neena joined a company on 15th March 2003 and died in an accident on 30th September 2003. The company pays gratuity as per the Payment of Gratuity Act. Her terminal monthly wages was: Basic salary: Rs 4,000; Dearness allowance Rs 3,000; City Compensatory Allowance Rs 500; House Rent allowance @ 25% of the Basic salary. How nominee would get as gratuity an amount of: (a) (b) (c) (d) Rs 4,615 Rs 4,903 Rs 4,038 Nil.

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12 An employee joined in the year 1992 in a sugar mill. After working all the years as a seasonal employee up to the year 2003, he retires with the following monthly salary: Basic salary: Rs 2,000; Dearness allowance Rs 1,000; City Compensatory Allowance Rs 500; How much amount of gratuity is payable to him? (a) Rs 11,308 (b) Rs 9692 (c) Rs 8400 (d) Rs 20,769 13 Ms Anju joins on 1st January 1995 as on officer in an establishment. On account of some domestic circumstances, she resign on 30th September, 2003. The gratuity rules of the company provide for payment of 21 days gratuity for each completed year of service on Terminal Salary including Basic pay and Dearness Allowance or the gratuity amount as per the Gratuity Act whichever is higher. For calculation of gratuity as per the company rules, the month is reckoned of 30 days. What would be the amount of gratuity payable to her if her last drawn monthly salary was Rs 6,000 as Basic Pay, and DA and HRA @ 55% and @ 20% of the Basic Pay respectively? (a) Rs 50,000 (b) Rs 58,590 (c) Rs 60,222 (d) Rs 50,062. 14 The Employees Provident Funds and Miscellaneous Provisions Act, 1952 extends to: (a) (b) (c) (d) Whole of India A few specified States of India All States excluding Union Territories Whole of India except the State of Jammu and Kashmir

15 Which of the establishments are covered under the EPF and Misc. Provisions Act, 1952? (a) An establishment having more than 20 employees (b) An establishment having 20 or more employees (c) An establishment notified by the Central Government and also that which is a factory engaged in a specified industry employing 20 or more persons (d) An establishment notified by the Central Government and also that which is a factory engaged in a specified industry employing more than 20 persons

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16 In an establishment covered under the EPF Act, can an employee/employees remain uncovered if so desired by the Employer and / or by the employee? (a) No because all employees are statutorily to be covered for the benefits (b) Yes, because the employee / s getting salary more than Rs 6,500 p.m may be excluded by the employer (c) Yes, because the coverage depends upon the will of the employee and the employer (d) Yes, because the employer may include or exclude any number of employees as per his choice. 17 What are the benefits available to the employees now a days who are covered under the EPF and Misc. Provisions Act, 1952? (a) Benefits of Provident Fund and Family Pension Scheme (b) Benefits of Provident Fund and Family Pension Scheme (c) Benefits of Provident Fund, Employees Deposit Linked Insurance Scheme and Employees Pension Scheme (d) Benefits of Provident Fund, Employees Deposit Linked Insurance Scheme and Family Pension Scheme 18 How is the amount of insurance cover worked out under the EDLI scheme of the PF authorities? (a) On the basis of the average salary of the employee over a period of preceding 12 months at the time of death (b) On the basis of the average PF balance of the employee over a period of preceding 12 months at the time of death (c) On the basis of the designation and the average salary of the employee over a period of preceding 12 months at the time of death (d) None of the above 19 What is the rate of matching contribution to the PF by the employee and the employer in a covered establishment? (a) (b) (c) (d) @ 8.33% of the eligible salary @ 12% of the eligible salary @ 10% of the eligible salary Either @ 10.00% or @ 12.00% of the eligible salary as decided by the employer

20 Who contributes for the Statutory Employees Pension Scheme (EPS), 1995? (a) Employer only (b) Employer and Employee (c) Employer and the Central Government (d) Employer, Employee and the Central Government

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21 Why do most of the employers go in for Group Insurance Scheme providing term cover from a life insurance company in lieu of the statutory Employees Deposit Linked Insurance Scheme, 1972? (a) To avail extra tax benefit (b) To save administrative expenses (c) To provide higher cover to employees than that are available under EDLI scheme (d) To avoid statutory compliance 22 Maximum withdrawal from the Provident Fund for the purchase of a site for construction of a house thereon shall not exceed the cost of the site, or the PF balance (including members and employers contributions with interest) or: (a) 24 months salary (Basic + DA) of the member (b) 18 months salary (Basic + DA) of the member (c) 36 months salary (Basic + DA) of the member (d) 12 months salary (Basic + DA) of the member 23 Maximum withdrawal from the Provident Fund for the purchase of a ready built house / flat or construction of a house shall not exceed the cost of such house / flat, or the PF balance (including members and employers contributions with interest) or: (a) 24 months salary (Basic + DA) of the member (b) 6 months salary (Basic + DA) of the member (c) 36 months salary (Basic + DA) of the member (d) 12 months salary (Basic + DA) of the member 24 To avail the withdrawals from the PF as asked for in question numbers (22) and (23), the member should have completed: (a) (b) (c) (d) 2 years membership 10 years membership 5 years membership 7 years membership

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25 If a loan has already been taken from a state government, Co-operative society, Housing Board, Municipal Corporation or a body similar to Delhi Development Authority, withdrawal from the PF for repayment of such loan availed for the purpose of purchase of a dwelling house / flat for the construction of a dwelling house including acquisition of a site is allowed subject to the maximum amount being the least of the outstanding loan with interest, the PF balance (including members and employers contributions with interest) and (a) (b) (c) (d) 24 months salary (Basic+DA) of the member 6 months salary (Basic+DA) of the member 36 months salary (Basic+DA) of the member 12 months salary (Basic+DA) of the member

26 To avail the withdrawal from the PF for repayment of loan in the above question (25), the member should have completed: (a) (b) (c) (d) 2 years membership 10 years membership 5 years membership 7 years membership

27 Illness, a non-refundable advance from the PF may be allowed to a member in case of: (a) (b) (c) (d) Hospitalization lasting for one month or more, or Major surgical operation in a hospital, or Suffering from TB, leprosy, paralysis, cancer, mental derangement or heart ailment Any of the above

28 The amount advanced for Illness shall not exceed the members own contribution with interest in the fund or: (a) (b) (c) (d) 24 months salary (Basic+DA) of the member 6 months salary (Basic+DA) of the member 36 months salary (Basic+DA) of the member 12 months salary (Basic+DA) of the member

29 To avail advance from the PF for the members own marriage, the marriage of his or her daughter, son, sister or brother or for the post matriculation education of his or her son or daughter, the member should have completed: (a) (b) (c) (d) 2 years membership 10 years membership 5 years membership 7 years membership

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30 How much withdrawal from the PF amount standing at the credit of the member is available for purchase of Varishtha Pension Bima Yojna of LIC at any time after attaining the age of 55 years? (a) (b) (c) (d) Up to 90% Up to 50% Up to 75% Nil

31 Ms. Neelam joins a private limited company covered under the PF Act. The employer contributes for all the employees up to the specified salary limit. Her monthly salary consists of Rs 10,000 as basic, Rs 5,000 as DA and 10% of the basic as HRA, what would be the deduction from the monthly salary towards the statutory PF benefits? (a) (b) (c) (d) Rs 780 Rs 1200 Rs 1800 Rs 1920

32 In the above question number (31), what would be the employers liability including administrative charges under all the three schemes of the PF authorities, namely, EPF, EPS and EDLI? (i) PF Contribution: (a) (b) (c) (d) Rs 1800 Rs 239 Rs 780 Rs 1200

(ii) Administrative expenses for maintenance of PF: (a) Rs 165 (b) Rs 110 (c) Rs 72 (d) Rs 176 (iii) EPS contribution: (a) Rs 1250 (b) Rs 541 (c) Rs 833 (d) Rs 1333

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(iv) Administrative expenses for maintenance of EPS: (a) Rs 100 (b) Rs 150 (c) Rs 160 (d) Nil (v) EDLI contribution: (a) Rs 33 (b) Rs 50 (c) Rs 75 (d) Rs 80 (vi) Administrative expenses for maintenance of EDLI scheme: (a) Rs 1 (b) Rs 2 (c) Rs 5 (d) Rs Nil 33 An employee having an average balance of Rs 90,000 in the PF during the last 12 months dies in an accident, what amount of insurance cover is payable to his nominee under the EDLI scheme of the PF authorities? (a) (b) (c) (d) Rs 90,000 Rs 60,000 Rs 41,250 Rs 48,750

34 From which date did the Employees, Pension Scheme become effective? (a) (b) (c) (d) 1st January 1995 16th November 1995 1st January 1996 16th January 1995

35 The eligible service for the purpose of the EPS is (a) The aggregate of the actual service and the past service (b) The actual service only (c) The past service only (d) None of the above

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36 In the content of the EPS, the actual service means: (a) If the employee was already in service, the period of service rendered by the employee from the date on which the EPS came into force till date of his exit (b) If the employee joins the service after the date on which the EPS came into force, the period of the service pout in by him from the date of his joining service till date of exit (c) Any of the above (d) Neither of the above 37 What is meant by the past service under the EPS Act, 1995? (a) Service rendered by an employee up to the date of exit from service (b) Service rendered before the EPS came into force (c) Service rendered with an earlier company (d) Service rendered by an employee from the date of joining Employees Family Pension Fund till the EPS came into force 38 The EPS shall be applicable to every employee: (a) Who becomes a member of the Employees Provident Fund on or after the EPS scheme came into force (b) Who has been a member of the ceased Family Pension Scheme (EPS) (c) Who not being a member of the Family Pension Scheme from 1-4-93 to 15-11-1995 opts for joining EPS subject to compliance of certain conditions (d) Any of the above 39 The pensionable service under the EPS is determined with reference to (a) The period of service for which the contributions have been received or are receivable in the Employees Pension Fund (b) The period of actual service (c) The aggregate of the actual service and the past service (d) None of the above 40 The pensionable salary shall be the average monthly pay drawn during the contributory period of service in the span of .. preceding the exit from the membership of the EPS (a) 10 months (b) 6 months (c) 12 months (d) 36 months

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41 A member shall be entitled to pension if he has rendered minimum eligible service of (a) 5 years (b) 10 years (c) 20 years (d) 33 years 42 Under the Employees Pension Scheme, the monthly superannuation or retiring pension is decided on the basis (a) The pensionable service and the pensionable salary (b) The actual service and the pensionable salary (c) The eligible service and the pensionable salary (d) None of the above 43 The PPF Account can be opened in (a) (b) (c) (d) State Bank of India or its subsidiaries Head PO or any selection grade sub PO Any nationalized bank Any of the above

44 An individual can open (a) An account in his own name and an additional account in the name of a minor of whom he is a guardian (b) An account subscribing to the fund on behalf of and out of the income of the HUF (c) An account subscribing to the fund on behalf of an association of persons or a body of individuals consisting in either case only of husband and wife governed by the system of community of property in force (d) All of the above 45 The amount to be subscribed to the PPF in any financial year can be in multiples of Rs 5 but not less than Rs 500 in his own account or a minors account and the maximum being (a) (b) (c) (d) Rs 70000 Rs 100000 Rs 60000 None of the above

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46 How many PPF accounts can be opened in one name? (a) (b) (c) (d) One Two Three Five

47 The subscription paid into the PPF account enjoys the tax benefit of: (a) (b) (c) (d) Section 80C Section 10 Section 80CCC Section 80D

48 The subscription to a PPF account can be made in a year in not more than: (a) (b) (c) (d) 12 installments 2 installments 1 installment Any number of installment

49 The PPF account is initially meant for 15 years and then the subscriber can exercise his option for extension for a block of: (a) (b) (c) (d) 5 years 10 years 15 years 1 year

50 In which year can a subscriber to a PPF account take the take the first loan from the opening of the account (a) (b) (c) (d) Third year Fifth year Second year Sixth year

51 How much maximum loan from the PPF account can be given in the year 2004-2005? (a) (b) (c) (d) 25% of the PPF balance in the year 2002-2003 25% of the PPF balance in the year 2003-2004 25% of the PPF balance as on 1-4-2004 None of the above

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52 The PPF account was opened in the year 1999-2000, when can the first withdrawal be made? (a) (b) (c) (d) After 31-3-2005 After 31-3-2004 After 31-3-2002 After 31-3-2003

53 The amount standing to the credit of the subscriber in a PPF account is (a) Exempt from the Wealth Tax (b) Free from attachment by a court in respect of any debt or liability incurred by the subscriber (c) Subject to attachment under the orders of the Income Tax authorities (d) All of the above 54 The interest credited to the Public Provident Fund is (a) (b) (c) (d) Exempt from the tax Allowed benefit of 80L Fully taxable income None of the above

55 Which of the following are false? (a) An NRI can open a PPF account (b) The parents can open PPF account on behalf of their minor children (c) A discontinued account cannot be closed before the date of maturity (d) A resident who had opened a PPF account can continue his account till its maturity on becoming an NRI 56 Which of the following statements are true? (a) (b) (c) (d) Open a new PPF account Raise Loan Take withdrawals All of the above

57 Which of the following statements are false? (a) If HUF is dissolved, the PPF account will be closed (b) On death of the Karta, the HUF PPF account will not be closed (c) The PPF account cannot be opened in joint names (d) On death of the subscriber in the case of an individual PPF account, it can be closed before maturity

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58 Is pension a statutory a benefit in India and if so, for which segment of employees? (a) (b) (c) (d) All employees working in any sector All government employees All employees covered under the EPF and Miscellaneous Provisions Act, 1952 All government and public sector employees

59 If an employer wishes to pay pension benefits to his employees in addition to the statutory pension if any, what arrangement should he make so that the employees may enjoy almost the same tax related benefit as available to government pensioners? (a) Adopt pay as you go method and pay pension direct from its current revenue as when done (b) Purchase pension on retirement of the employee from a life insurer paying lump sum amount from the current revenue (c) Purchase pension form a life insurer paying out of an approved fund (d) Purchase deferred annuity and pay installment premiums every year from the current revenue 60 A scheme providing pension benefits as per Income Tax provisions is called: (a) (b) (c) (d) Superannuation Scheme Retirement Scheme Pension Scheme Retirement Income Scheme

61 Which government authority accords approval to such a scheme providing pensionary benefits to the employees? (a) (b) (c) (d) Ministry of Finance Ministry of Labour PF Authorities Income Tax Department

62 What is the maximum amount of pension that can be commuted as per Rule 90 of the Income Tax Rules? (a) 40% of the pension (b) One half of the pension if the employee gets gratuity, otherwise one third of the pension (c) One third of the pension (d) One half of the pension

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63 Pension from an approved fund entitles the pensioner to the benefit of (a) Not any more (b) Section 10 (c) Standard deduction 64 Who is authorized to pay pension under such a scheme to the eligible employees on their exit from service? (a) The trustees themselves (b) The employer after taking withdrawals from the trust (c) The Trustees of certain specified banks and any IRDA approved life insurer to whom the trustees pay the amount for purchase of the desired annuity (d) The Pension Authority 65 The type of Annuity to be purchased from a life insurer can be any one of the following: (a) Annuity for single or joint life with or without guarantee of minimum period and / or return of corpus decided by the employer / beneficiary (b) Annuity Certain for any period as decided by the employee (c) Annuity Certain for 15 years (d) Any type of annuity as decided by the employer 66 The maximum contribution an employer can pay to fund the scheme as percentage of the salaries of the employees is: (a) (b) (c) (d) 15% 12% 10% 27% minus percentage of PF contribution being paid by the employer

67 The reasons for the DB type of pension schemes generally not being liable are: (a) Reluctance on the part of the employer and the employees not to pay more than a predetermined contribution (b) Lower yield during accumulation and payment stage than that assumed (c) Absence of timely valuation of the fund from an actuary and non payment of suggested contributions (d) All of the above including abnormal circumstances like VRS and /or steep fall in interest rates

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68 A good retirement benefit scheme should satisfy the following need of the person: (a) Need for a particular periodical income after retirement (b) Need for lump sum cash payment on retirement (c) Need for reimbursement of expenses connected with medical emergencies (d) All of the above 69 Gratuity benefit payable by an employee as per the provisions of the Payment of Gratuity Act, 1972 is under (a) Defined Contribution retirement benefit (b) Defined Benefit type of a retirement benefit (c) Either of the two types (d) Neither of the plans 70 Contributions under a defined benefit plan (a) Will be fixed in relation to the wages earned (b) Will be determined based on the benefits assured (c) Will remain unaltered once fixed (d) Will be decided by the members of the benefit scheme 71 Consider the following employee: Mr. Subodh Kothari (D.O.B: 28.11.1967) joined the services of ABC engineering and locomotives Company Limited on 15th July 1989. His salary was fixed at 25,000 pm , with an annual increase of 5%. He has to retire on 30.11.2027. His last drawn salary would be Rs 160000 pm. If Mr. Kothari has a retirement benefit plan which promises to pay him 1.5% of the last drawn salary for every completed year of service or part thereof, as the monthly income after retirement, he would get a monthly income of (a) Rs 93600 (b) Rs 85450 (c) Rs 752801 (d) None of the Above 72 In case of a defined benefit plan where the benefit payable is based on the terminal salary, an increase of 10% of the wages of the employees would increase the contribution to be made by the employer for the benefit by (a) Exactly 10% of the earlier level of contribution (b) More than 10% of the amount of contribution being made earlier (c) Less than 10% of the earlier rate of contribution made before the wage revision (d) Can be any of the above (e) None of the above

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73 If Mr. Kotharis employer had an approved Provident Fund for its employees and were contributing to the Fund equal to the employees contributions, the benefit scheme would fall under: (a) Defined benefit scheme (b) Defined Contribution scheme (c) Either of the two (d) None of the two 74 Which of the following is not a defined retirement plan: (a) Gratuity benefit payable as per the Act (b) Superannuation scheme as applicable to the Government Servants (c) Gratuity benefit payable to the Public sector Banks employees as per the agreement between the employees and the India Banks Association (e) Employees Provident Fund Benefit 75 From the view of the employer, a defined contribution retirement benefit plan is easier to operate because: (a) His contribution would be lesser than the defined retirement plans (b) He doesnt have to contribute anything to the scheme at all (c) Since there is no need for valuation the employers expense is less (d) The employer doesnt have to submit any returns to any authority for approval 76 In case of a defined benefit plan where the benefit payable on the terminal salary, an increase of 10% of the wages of the employees would increase the contribution to be made by the employer for the benefit by (a) Exactly 10% of the earlier level contribution (b) More than 10% of the amount of contribution being made earlier (c) Less than 10% of the earlier rate of contribution made before the wage revision (d) Can be any of the above 77 In a defined contribution retirement plan, any change in the interest earned by the funds would affect (a) The benefits payable to the employees and not the employer (b) The contribution payable by the employer and not the benefits payable to (c) The employees (d) Both the employees benefit and the employers contributions (e) None of the above

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78 Carrying the retirement benefit plan from one employer to another when an employee leaves the service of one employer and joins another is easy if the retirement plan is under (a) Defined benefit plan (b) Defined contribution plan (c) The type of plan makes no difference (d) None of the above 79 Gratuity is payable to all employees who leave the service of the employer (other than by death or incapacitation) after putting in a minimum service of years (a) 15 (b) 10 (c) 5 (d) 12 80 The minimum service required for entitlement to payment of Gratuity under the Act, in case of an employee leaving service by death or incapacitation is (a) 2 years (b) 3 years (c) 5 years (d) No minimum service required 81 For calculation of liability of payment of gratuity to an employee on leaving service, the wage to be taken into account is (a) The average wage earned by him in the entire service (b) The average wage earned by him in the last 5 years (c) The last drawn wage (d) None of the above 82 The prime financial goal under retirement planning is (a) To have assured returns (b) To manage average income (c) Arrange for cash flow liquidity (d) Meeting family obligation

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83 For creation of an estate through long term planning with risk coverage the best product is (a) Long Term Care Policy (b) Health Insurance Policy (c) Accident Insurance Policy (d) Life Insurance Policy wih profit & Accident Cover 84 The named beneficiary in a life insurance policy is generally known as (a) Claimant (b) Assignee (c) Nominee (d) legal heir 85 NSSO stands for (a) National social service organization (b) National small saving organization (c) National sample survey organization (d) National Social security organization 86 The term OASIS stands for (a) A place with lake in a desert (b) Organization for application of scientific innovative systems (c) Old age social and income security (d) Old age security information system 87 Wealth Erosion occurs on account of (a) Increase in expenditure (b) Accumulated debts (c) Loses incurred (d) Reduction in purchasing power of currency 88 The abbreviation SLY stands for (a) Small Liquidity Yield (b) Saving Linked Yield (c) Safety Liquidity and Yield (d) Security Linked Yield

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89 Public Provident Scheme is for (a) a period of 15 years (b) a period of 12 years (c) a period of 8 years (d) a period of 20 years 90 The yield under PPF is at (a) 9.5% (b) 9% (c) 8.5% (d) 8% 91 Tax exemption limit for the lump sum received towards Leave Encashment on retirement is at (a) Rs 3.5 lacs (b) Rs 3 lacs (c) Rs 2.4 lacs (d) Rs 2 lacs 92 Commutation of pension up to a limit of is tax exempt in case the gratuity also is received (a) of the pension (b) 1/3 of the pension (c) of the pension (d) of the pension 93 Under NSC-VIII series the interest paid is (a) Simple interest (b) Compounded annually (c) Compounded half yearly (d) Compounded quarterly 94 While estimating retirement income needs planner should consider (a) That where the individual stands financially for retirement (b) Purposes (c) That where he wants to be financially during the retirement and his ability to reach his objectives (d) A & B above (e) None of the above

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95 A planner must analyse features of personal assets at the time of retirement planning on the basis of ____________ parameters viz. (a) Return (b) Return & risk (c) Return, risk and liquidity (d) All of the above (e) None of the above 96 The variation of return from expected rate of return is called (a) Investment risk (b) Business risk (c) Market risk (e) None of the above 97 In the falling interest rate scenario which risk will be faced by the investors as regards matured investments? (a) Business risk (b) Reinvestment risk (c) Inflation risk (d) None of the above 98 The assets in the Client financial portfolio depends upon (a) His risk appetite (b) His wealth and income (c) His income-earning span (d) Financial goals (e) All of the above 99 Portfolio of client should be restructured for retirement planning ______________ years before retirement (a) 5 to 10 years (b) 1 year (c) 3 years (d) 20 years

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100 If a client desires to have income growing but without erosion of principal then he may invest in (a) Monthly income schemes as it pays only interest and principal will be paid at the time of maturity (b) Immediate life Annuities with return of purchase price (c) Long term fixed deposit on bonds (d) Rent on real estate (e) All of the above 101 Arithmetic Mean is appropriate measure of average (a) Multiple period (b) Single period (c) Broken period 102 Geometric Mean reflects the ________ rate of growth over time (a) Simple (b) Double (c) Compound 103 Geometric Mean is always ________ arithmetic mean (a) Equal to (b) Greater than (c) Less than 104 Your client has purchased shares of reliance worth Rs 1000. He received dividend 10%, 15%, 12%, 17%, 20% respectively for 5 years. Calculate the rate of return by using arithmetic mean (a) 14% (b) 15% (c) 14.8% (d) 14.5% 105 Using the date in the above problem calculate the rate of return using geometric mean method (a) 14% (b) 14.74% (c) 14.8% (d) 14.5%

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106 The return on equity stock for a year is 23%. The rate of inflation during the year is 5%. Calculate the real total return (a) 17% (b) 20% (c) 19.5% (d) 17.14% 107 Your client purchased shares of reliance worth Rs 1000. He received dividend 10%, 15%, 12%, 17%, 20% respectively for five years. Calculate risk of shares (a) 0.00628 (b) 0.00157 (c) 0.05 (d) 0.74 108 Suppose a client puts away Rs 10000 and this earns a net average 7 per cent per annum, which is compounded. By age 60, a person who started this practice at age 30(simply investing and not adding anything other than interest) will have accumulated Rs __________ (a) 76122.55 (b) 75000.55 (c) 75600.45 (d) 76211.54 109 Average life expectancy in India during 2001 estimated at ___________ (a) 71 (b) 69 (c) 58 (d) 64 110 The percentage above 65 on global level will rise to _______ in the year 2025 (a) 12% (b) 14% (c) 10% (d) 9%

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111 Retirees generally need _______ % of their pre-retirement income to sustain their desired lifestyle (a) 25 to 30% (b) 50 to 75% (c) 90% (d) None of the above 112 Budgeting for retirement can be done more accurately (a) In the young age (b) Near to retirement age (c) After retirement (d) Immediately after marriage 113 To reduce stress in retirement, clients need to be (a) Encouraged to join clubs (b) Encouraged to set goals, plan their lifestyle and plan their finances (c) Do not make any planning for retirement (d) Encouraged to plan luxurious lifestyle 114 The clients often choose and remain with a financial planner because (a) They believe they can develop a long-term, trusting relationship with the adviser as a person, not an institution (b) Their children are not trustworthy (c) They have no acumen to plan for retirement (d) They do not trust financial institutions 115 What is the advantage of profit sharing plan? (a) Allows greater employee payroll reduction contributions than most other plans (b) Allows employers to contribute and deduct more than other defined contributions plans. Guarantees that employees receive an annual contribution (c) Allows greater employee payroll reduction contributions than most other plans and, if the employer chooses, employees may direct the investment of their assets (d) Employers have flexibility to vary the annual contributions. Appropriate for businesses with unpredictable cash flow

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116 Under Government Employees scheme Pension is calculated by (a) As 1/66th of the average final salary for total number of years service employee has to put in (b) AS 1/66th of the average final salary for each year of pension-able service subject to a maximum of 50% (c) 50% of the final salary irrespective of number of years service (d) None of the above 117 A mandatory defined benefit and annualized scheme was created by the Central Government under sec 6A of Employees Provident Fund and Miscellaneous provisions Act, 1952 (PF Act) is known as (a) EPF 1995 (b) EPS 1995 (c) Employees Pension Scheme 1995 (d) Public Pension Scheme 1995 118 EPS (1995) is applicable to employees of establishments falling within the preview of the (a) ESI Act (b) Workmens compensation Act (c) Provident Fund Act (d) Income Tax Act 119 Employer can contribute maximum ____ of a total of salary towards PF & pension and further amount up to ____ of salary towards Gratuity Fund (a) 25%, 5% (b) 27%, 8.33% (c) 8.33%, 8.33% (d) None of the above 120 How much maximum amount employee can contribute towards provident fund? (a) 8.33% of basic salary (b) 10% of basic salary (c) 12% of basic salary (d) 20% of gross salary

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121 How much amount employer contributes towards EPS (a) 10% of basic salary (b) 12% of basic salary (c) 20% of gross salary (d) 8.33% of basic salary 122 There are _______ broad categories of pension schemes in India (a) 5 (b) 4 (c) 3 (d) 1 123 The annuities can be classified into ______ on the basis of commencement of payment of ______ annuity (a) 3, Immediate, Life Immediate annuity, Immediate annuity certain (b) 2, Immediate annuity, deferred annuity (c) 2 Last survival annuity, life annuity (d) All above

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SOLUTIONS 1 2 3 4 5 6 7 8(i) 8(ii) 8(iii ) 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 A C A A B D D A B D B C C B B D C B C B B C C A C C C 26 27 28 29 30 31 32(i) 32(ii) 32(iii) 32(iv) 32(v) 32(vi) 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 B D B D A A B C B D A B D B A C D D A C B A D D A A A 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 A A A A A D A A D A C C A D B A C A D D D B B A B B D 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 100 101 C B A B C D C D D C C D D C A D C B C C C A B E A E B 102 103 104 105 106 107 108 109 110 111 112 113 114 115 116 117 118 119 120 121 122 123 C C C B D B A D C B B B A D B B C B C D C B

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Mock Test - II 1. Employees Provident Fund is applicable to firms employing over ____ employees. (a) (b) (c) (d) 20 15 10 25

2. An employee can contribute beyond ____ of his salary towards EPF but he will get tax benefits u/s 80C upto _____. (a) (b) (c) (d) 11.33, 11.33 10 ,10 12, 12 8.33, 8.33

3.Pension plans eligible for benefit u/s 80CCC have a tax free commutation option upto _____ of the eligible corpus as a the vesting date. (a) (b) (c) (d) 30 33 25 35

4. Contribution to an Unrecognized Provident Fund will result in : A. Taxing of interest income earned by the employee on employer contributions B. Employer cannot treat the PF Contribution as a deductible business expense. C. No Rebate u/s 80C to the empoyee. (a) (b) (c) (d) A& C A B B&C

5. _____ % of Gratuity received on retirement by a Central Government employee is taxable . (a) (b) (c) (d) (e) Ten Nil Twenty Five Twenty Thirty- Three

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6. Gratuity is categorized as a ____ Plan. (a) Defined Benefit (b) Defined Contribution (c) Combination of Defined Benefit & Defined Contribution 7. Pension received from an employer are classified under_________. (a) Income from Other Sources. (b) Profit in Lieu of Salary (c) Income from Salaries 8. While determining the taxability of Gratuity , the term salary usually includes___. (a) Basic + House Rent Allowance (b) Basic + Dearness Allowance (c) Basic + Uniform Allowance 9. Leave Salary received during the tenure of employment is _________. (a) Fully exempt. (b) Exempt up to a certain ceiling (c) Fully taxable 10. Real return is defined as ________. (a) Nominal returns adjusted for inflation (b) Nominal returns adjusted for time value of money. 11. In a inflationary period which of the following statement holds true: (a) Nominal Interest rates are lower than real interest rates (b) Nominal interest rates are higher than real interest rates (c) Nominal Interest rates are equal to real interest rates. 12. Suraj has been an employee of a public sector undertaking for the past 15 completed years and is retiring on 1st December next year. His firm is not covered under the provision of the Payment of Gratuity Act, 1972 .His employer has agreed to pay him gratuity amount of Rs. 5 Lacs on Retirement. What is the tax status of this amount? (a) The Gratuity paid is exempt from Income Tax only to the Extent of Rs. 350000 (b) The Amount of Gratuity payable to him cannot exceed Rs. 350000 (c) The Income Tax Act will only allow a maximum exemption upto 15days wages per completed year of service. The rest is taxable.

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13. Seema has been an employee of a public sector undertaking ( covered under the payment of gratuity act ,1972) for the past 20 completed years and is retiring on 31st Dec this year. She hopes to invest the proceeds along with PF proceeds, in order to fund her retirement. Her monthly salary at retirement is expected to be Rs.20000. The amount of gratuity that she will be _____________. (a) (b) (c) (d) 241245 242308 243579 241940

14. Mr. khanna retired from Ace Manufacturing Co. Ltd , Mumbai 31st Dec,03. Ace is covered under the Payment of Gratuity Act, 1972. She served for 30 years and 9 months. Ace paid her a Gratuity of Rs.400000.Her monthly Basic salary at the time of retirement was Rs.9000 p.m & DA Rs.4000 p.m, HRA was Rs.1500 p.m. Mr. Khanna lives in a ownership flat . Compute : Taxable amount of Gratuity & Taxable amount of HRA. (a) (b) (c) (d) Gratuity : Rs. 160000 ; HRA : Rs. 20000 Gratuity : Rs. 157500 ; HRA : Rs. 16000 Gratuity : Rs. 170000 ; HRA : Rs. 18000 Gratuity : Rs. 167500 ; HRA : Rs. 18000

15. Mr. Sachin, aged 30,wants to retire at 45. He wants to maintain his present living standard. He spends Rs. 500000 a year. He is expected to live upto 75.Inflation is to be assumed at 5% and expected returns are 7% p.a. what is the real rate of return? (a) (b) (c) (d) 1.75 1.90 2.05 2.15

16. Aditi is 30 years old. She deposits 25000 at the beginning of each year in deferred annuity scheme as a part of her retirement planning. How much will be in the account after 25 years if it earns 9.5% compound annual interest? (a) (b) (c) (d) 2474985 2487216 2414854 2497857

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17. Sumeet aged 25 plans to retire at age 55. His life expectancy is 75.His current annual expenditure is Rs 250000. He estimates no reduction in his expenses post-retirement. If interest rate is expected to be 8.5% and inflation is 5% p.a. estimate how much will he have to save per annum in order to achieve his target, provided he does not wish to leave an estate. (a) (b) (c) (d) 119568 125054 117154 120963

18. A retirement benefit scheme providing for regular periodical income after retirement can take care of the problems due to inflation by (a) Providing for a lump sum cash payment at the beginning of the periodical income (b) Making the periodicals income stream linked to an index representing the cost of living (c) Handing over the handling of investments of the funds earmarked for the benefit to professional managers (d) None of the above 19. A defined benefit plan provides for (a) Lump sum cash payment on retirement only (b) Periodical income after retirement (c) Either a lump sum payment or periodical payments or a combination of both depending upon the contribution made by the person (d) Either a lump sum payment or periodical payments or a combination of both depending 20. The exact share of the assets belonging to each member of the fund is easily calculated in case of (a) (b) (c) (d) Defined benefit schemes offering lump sum payment on retirement Defined contribution schemes offering regular income after retirement Defined benefit schemes offering regular income after retirement Both the types of plans as there is no difference in asset allocation

21.The Payment of Gratuity Act,1972 is applicable to employers employing a minimum of _______ employees: (a) (b) (c) (d) 10 15 5 20

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22. The maximum liability of payment of gratuity under the Act, as it stands today is (a) (b) (c) (d) 500000 250000 350000 300000

23.A nomination made in favour of a person who is not the family of the employee (a) (b) (c) (d) Would always be valid once it is accepted Would be valid only if the employee did not have a family Would be valid only if it approved by a court of law Would never be valid

24.Provision for encashment of Leave to the credit of the employee in the books of accounts of an employer is made compulsory by (a) A central Legislation governing the retirement benefits of employees (b) Legislations of the individual states which deal with the provision of the employee benefits (c) Accounting standards brought out the Accounting Professional Body (d) None of the above. 25. The Gratuity received by the employee as calculated by the Provision of the Act is (a) (b) (c) (d) Exempt from the Income Tax completely Exempt from the Income Tax up to a ceiling and the balance is taxable To be treated as income in the hands of the employee Subject to the provision of capital gains tax

26. The gratuity received by the nominee (or the dependents ) in case of the death of the employee while in service is (a) Totally exempt from income tax (b) Exempt from the Income Tax up to the ceiling prescribe in the Act & any gratuity in excess of that is taxable (c) To be subject to Wealth Tax & exempt from Income Tax (d) None of the above. 27. The amount paid in encashment of leave on the employee leaving service is (a) (b) (c) (d) Treated as income in the hands of the employee & taxed Exempt from the Income Tax fully Exempt from the Income Tax up to a certain limit Subject to a reduced rate of tax

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28. As per Industrial Disputes Act, the compensation payable to a workman in case of retrenchment is (a) (b) (c) (d) One months wage for each remaining year of service & part thereof 15 days wages for each year of remaining service & part thereof 15 days wages for each completed year of service & part thereof 30 days wages for each completed year of service & part thereof

29. Once an employer introduces superannuation benefit for his employees, he can arrange for the same by (a) (b) (c) (d) Payment by the employer Creating a Trust & administering the scheme through the trust Entering into a contract with a Life Insurer Any of the above

30. Payment of the superannuation benefit by charging to the current revenue is not permitted as per the provision of (a) (b) (c) (d) Income Tax Act,1961 Insurance Act, 1938 Payment of Gratuity Act, 1972 Accounting Standard by ICAI

31.In case of voluntary of an employee the additional benefit payable by the employer isa (a) (b) (c) (d) Taxable income in the hands of the employee Exempt from Income Tax wholly Exempt from Income Tax upto Rs. 500000 Exempt from Income Tax upto Rs. 250000

32. Superannuation benefit for an employee has to be under (a) (b) (c) (d) Defined Benefit Plan Defined Contribution Plan Either of two above None of the above

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33. Which of the following statement is wrong with reference to Trustee Administered Approved Superannuation Funds ? (a) Trustees will have to compulsorily transfer all the contribution received from the employer to a Life Insurance & have an Insurance scheme in place. (b) The Trustee will have to file the returns with the Income Tax Commissioner to get the fund approved continually (c) The trustees have to buy annuity contracts from a Life Insurers as when the superannuation benefits become payable as per the schemes (d) None of the above. 34. For becoming an approved superannuation fund, the fund has to be approved by (a) (b) (c) (d) The Commissioner of Labour Welfare under the Industrial Disputes Act The Commissioner of Labour Welfare under the Payment of Wages Act The Commissioner of Income Tax Act under the Income Tax Act The Commissioner of Local Body under the Shops & Establishment Act.

35. The Ccontribution made by the employer to an approve superannuation fund is (a) Treated as perks in the hands of the employee (b) Treated as business expense of the employer for computation of business income (c) Treated as income to the extent of commuted value of pension that is received on retirement (d) None of the above 36. The income received by the approved superannuation fund on the investment made by the fund is (a) (b) (c) (d) Exempt from income tax Taxed at a concessional rate of 10% of the income Taxed at the hands of the employees concerned based on the share of each employee Taxed under Capital Gains Tax depending upon the nature of investment

37. The approved superannuation fund has to deposit all the contributions received from the employer (a) With the Government of India through the Reserve Bank of India (b) In a Saving Bank Account with Reserve Bank of India (c) In a Saving Bank Account with a Post office or a schedule Bank if they are not invested in any of the approved investment specified (d) None of the above

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38. The contribution made by an employee to an approved superannuation fund is (a) (b) (c) (d) Deducted from the taxable income of the employee u/s 80L of the Income Tax,1961 Eligible for tax deduction u/s 80C of Income Tax Act,1961 Eligible for deduction u/s 80G of Income Tax,1961 up to 50% of the contribution Not eligible for any tax concession

39. An employer who does not want any tax favoured treatment for the superannuation benefit payments can (a) Pay the pension payout directly to the retried employees directly from the current years profit every year (b) Make a provision for the accrued liability of pension in the books of accounts every year & pay the benefits himself to the employees or their dependents (c) Buy annuity contracts from a life insurer (d) Do any of the above. 40. If the trustees of a superannuation fund directly enter into a group superannuation contract with a life insurer then (a) The fund will not get the approval from the commissioner of Income Tax (b) The employer will get the tax benefits for the contributions made to the Life Insurance company based on the life insurers certification (c) The trustees need not maintain any books of accounts (d) The trustees will have to get actuarial certification of the liability in order to get tax benefits 41. The pension payment received by the employee after retirement from an approved superannuation fund is (a) (b) (c) (d) Exempt from income tax as the superannuation fund was approved Treated as income fully & taxable Eligible for tax exemption up to 50% of the last drawn salary None of the above

42. The Investment Norms are applicable to an superannuation fund (a) (b) (c) (d) Only if the fund has to be approved under the Income Tax Act Irrespective of whether the fund is approved or not Only if the fund is for the fund is for the welfare of Government Employees Only if the fund is managed by Private Fund managers

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43. Individuals can buy annuity contracts from Life Insurance companies (a) (b) (c) (d) Only if they do not have any superannuation benefit from their employer Only if they are self employed or employed in unorganized employment Irrespective of whether they are employed or not Only if they want to reduce the tax liability

44. Individual pension plan sold by mutual funds will (a) (b) (c) (d) Provide regular pension guarantee for life Provide regular pension for a fixed period of years Provide regular pension for life but guaranteed for a fixed period of years None of the above

45. Premium paid for most of the Annuity products of life insurance companies are eligible for (a) Deduction from taxable income u/s 80CCC of the Income Tax Act,1961 up to a limit of Rs. 70000/(b) Deduction from taxable income u/s 80CCC of the Income Tax Act,1961 up to a limit of Rs. 100000/(c) None of the above 46. Annuities when received by the annuitants (a) (b) (c) (d) Are exempt from Income Tax completely Are exempt from Income Tax after age 65 Treated as income for the purpose of income tax Treated as capital gain in respect of the interest portion only

47. Profit sharing plans mean (a) Superannuation benefit for which the employer & the employee contribute (b) Defined benefit retirement benefit plan, to which the employer contributes a certain portion of the profit made by him (c) Defined contribution retirement benefit plan, to which the employer contributes a certain portion of the profits made by him (d) A plan in which the employee gets an annual payment linked to the profits of the employer

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48. The pension scheme for the senior citizens Varisht Pension Bima Yojana provide for a regular pension which provides (a) (b) (c) (d) A market rate of return guaranteed by the Government of India A fixed rate of return of 9% p.a on the purchase price A flexible rate of return not less than 9% p.a on the purchase price A rate of return equal to the small savings instruments

49. The pension scheme for the senior citizen can be purchased from (a) (b) (c) (d) Any Life insurer registered with IRDA Life Insurance Corporation of India only Public Sector Banks % Life Insurance Corporation Any schedule bank or post office in the country

50. Pension is ________ product which collects & accumulates money for an individual during his working life time to make provision for income after retirement. (a) (b) (c) (d) Financial Insurance Intangible Investment

51. Policy Money becomes payable on survival to an individual if a policy is taken under plan (a) (b) (c) (d) Term Assurance Health & Term Assurance Endowment Annuity

52. Financial planner has to undertake an effective__________ process (a) (b) (c) (d) Counseling Consultation Conversation Communication

53. In Retirement Planning _____ is most Important point to be considered. (a) (b) (c) (d) Level of Income Family size Present wealth Time Factor

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54. Generally gratuity will be received (a) (b) (c) (d) After normal retirement Submission of resignation On being retrenched On being laid off

55.There is ______ relationship between Inflation & Money supply (a) (b) (c) (d) Indirect Direct Inverse None of the above

56. There is ______ relationship between inflation & purchasing power parity per _____ currency unit. (a) (b) (c) (d) Inverse Direct Indirect Inter-dependent

57.Deficit Financing provision in the budget will result into (a) (b) (c) (d) Increase in money supply Adjustment of interest rate Rise in prices Fall in National savings

58.The proceeds under key man insurance policy are (a) (b) (c) (d) Subject to tax Partially taxable Non- Taxable Can be contested

59. Life Insurance proceeds received by an individual as per Finance Bill 2003 (a) (b) (c) (d) Are exempt from Tax Are taxable Are partially taxed Taxable if the premium paid during the year is 20% of the sum assured.

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60.The retirement objectives differ from person to person which in turn depend upon various factors like (a) (b) (c) (d) Age, Marital status Number of dependants & their ages Health & Preferences All the above.

61. It is important for a planner to note that the retirement planning should be done (a) (b) (c) (d) Only a few years before retirement Even if individuals are Juvenile to plan for retirement After retirement None of the above

62. There are ______ common methods to determine the income needs, viz______ (a) (b) (c) (d) 1 Replacement ratio method 1 Expense method 2 Replacement ration method & Expense Method None of the above

63. List out characteristics of qualified plans (a) (b) (c) (d) (e) (f) (g) (h) Always Tax deferred to employees Immediate Tax deduction to employer Accumulated earnings are tax free Special Tax treatment at retirement for employees Effective instruments to attract, retain & motivate employees It must meet non-discrimination rules in selection & cost Plan administration is expensive & difficult All the above

64. Can a person having a PPF account in the State Bank open another account in the post office & vice versa (a) Yes (b) Absolutely not

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65. In the falling interest rate scenario, as a financial planner which you will suggest to your retiring clients (a) (b) (c) (d) Short term fixed deposit Life Insurance Policies Life Annuities, MIS Shares & Debentures

66. What are the causes of investment risk? (a) (b) (c) (d) (e) Inflation Interest rate Financial markets changes All the above None of the above

67. Retire portfolio must contain _____ to reduce lump sum expenditure if he becomes disabled or ill (a) (b) (c) (d) Shares Debenture Real estate Health insurance Medi-claim Hospitalisation policy, Critical policy

68. A financial planner will comes across____ types of clients viz._____ as regards risk tolerance & attitude towards equity (a) 1, Risk Takers (b) 2, Risk takers & risk averse. 69. To calculate dependency ratio the population _____ is to be taken into consideration (a) (b) (c) (d) Over & above age 60 Unemployed individuals Children below age 15 Both a & c above

70. Senior citizens population among the total population of India will reach at 13% i.e 180 million in the year _____ (a) (b) (c) (d) 2010 2012 2030 2020

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71.Loyalty towards employer is one of the factors influencing_____ (a) (b) (c) (d) Prospects in career Bonded relationship Career stability Protection

72.Trade Unionism in developing countries largely affects the decision in regards to ____ (a) (b) (c) (d) Pay packages Protection to employees Redundancy Productivity

73. Individual Insurance is contract between (a) (b) (c) (d) Individual insured & insurance company Group of people & Insurance company Between to two friends None of the above

74. In case of group insurance the most important feature is (a) (b) (c) (d) Group cover is granted after full medical check up After the evidence of insurability Without medical examination & other forms of evidence of insurability A & B above

75. Under group insurance (a) (b) (c) (d) Separate contract is made for every individual A group of persons under single master contract Only 5 people under each contract None of the above

76. Under group insurance who are parties to the contract (a) (b) (c) (d) (e) Individual & Employer Insurer & Individuals Employer & Insurance Company Trustee or Labour union or an association or creditor debtor & insurance company All the above

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77. The cost of group insurance is____ Individual insurance as it provides mass protection (a) (b) (c) (d) Higher than Lower than Equal to None of the above

78. Another special feature of group insurance is the premium charged (a) From year to year according to the ages in the respective years & will increase for every member as his age goes up & are subject to experience rating (b) Once in two years according to the ages of members (c) Premium does not change according to age & experience rating (d) Premium changes irrespective of age & experience rating 79. Group insurance contract is continuous contract because (a) It is mandatory by law (b) New persons are added to the group from time to time & nobody exits from the contract unless death occurs (c) New persons are added to the group from time to time & exit from employments result in termination of cover & employers overall employee welfare plan it is rarely discontinued (d) None of the above 80. Among the following plans that are not a group insurance plans (a) (b) (c) (d) Group Life & Health insurance plans Group Disability income plan Workers compensation Householders package policy

81. The purpose of Group gratuity scheme is to provide (a) Periodical survival benefits to the groups of employees (b) Periodical death benefit to the family members of insured person (c) Lump sum benefit to the group of employees on their retirement from the service or leaving the job after attaining specified years of continuous services (d) A & B above.

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82. The payment of gratuity is mandatory to the employers (a) (b) (c) (d) Who have at least 30 employees Who have less than 5 employees but less than 10 employees Who have 10 or more than 10 employee strength All the employers irrespective of employee strength

83. Under the payments of gratuity act 1972, the payment of gratuity is mandatory to the employees (a) Where the 10 or more than 10 employee strength & employees leaving service after rendering at least 7 years of continuous service. And the minimum service is necessary in case of death or disablement. (b) Where the 10 or more than 10 employee strength & employee leaving service any time after completion of one year. (c) None of the above 84. The amount of gratuity payable under the act is (a) @ 15 days wages based on wages last drawn for each year of Service subject to maximum gratuity Rs.350000/(b) @ 30 days wages last drawn subject to maximum of Rs. 500000/(c) Lump sum Rs. 350000/- at the time of retirement (d) None of the above 85. In India payment of a regular superannuation income to the employees of any Organisation is (a) (b) (c) (d) A statutory obligation Not a statutory obligation A social obligation Not voluntary obligation

86. There are _______ types of Superannuation Schemes are available viz ______ (a) (b) (c) (d) 2, cash purchase scheme and benefit purchase scheme 3, cash purchase scheme, benefit purchase & cash + benefit 1 cash purchase None of the above

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87. As per the cash purchase scheme (a) The amount of contribution to the superannuation scheme for each employee is in percentage of the salary & gets accumulated with investment income & from the accumulated value annuity is purchased to make regular payment of annuity (b) Payable to the employee or his dependents is predetermined may be as a percentage of last drawn salary & the amount required to contribute for securing the benefit will be computed by the insurers from time to time & employer will have to make the necessary contribution through the trustees (c) The employee purchases it at the time of retirement (d) None of the above 88. People often ______ the cost of living in retirement & therefore they are under funded. (a) (b) (c) (d) Overestimates Properly estimate Underestimate None of the above

89. People should aim to ______ just prior to retirement Take a loan for childrens marriage Have paid off their loans , debt & home mortgage Investment in highly illiquid assets None of the above 90. While selecting investments & budgeting for living expenses the following facts should be taken into consideration (a) (b) (c) (d) (e) Living expenses are more in cities than rural area Increase in medical cost Possible travel cost during the retirement period Price rise due to inflation All the above

91. A retirement budget prepared 5 or more years prior retirement age will be less reliable than current years budgeting in estimates expenditures (a) (b) (c) (d) Due to possible changes in budget categories As there will not be any changes during 5 years Inflation & interest rates will remain unchanged All the above

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92. Preparation of a detailed personal budget after retirement can highlight (a) (b) (c) (d) Needs & estimated cash requirements in retirement Mortgage & other loans Independent childrens needs None of the above

93. Retirement Planning requires two important factors to be considered (a) (b) (c) (d) Estimating expense during retirement Identifying sources of income during retirement A & B above None of the above

94. The main source of retirement income include (a) (b) (c) (d) (e) Superannuation benefits viz. Provident Fund , Gratuity etc Earnings from personal investment Income from Part time work All the above None of the above

95. In addition to the above mentioned issues the planner should be aware of ______ in case of clients those facing retrenchment or retirement (a) (b) (c) (d) Psychological stress Physical stress Exercise None of the above

96. What are the risk areas in retirement planning which should be considered closely by the planner (a) (b) (c) (d) (e) Taking a big trip Starting a new business Giving gifts All the above None of the above

97. Government servant can commute ______ for cash value (a) (b) (c) (d) 75% of his basic pension 48% of his basic pension 50% of his basic pension & daily allowance 40% of his basic pension

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98. Public sector employees index linked final salary based pension is applicable to the employees of ____________ (a) (b) (c) (d) Bank Insurance companies Telecommunication companies Defence

99. Funding contribution in these Public sector organization pensions are made out of (a) (b) (c) (d) Their own earning The government revenue Their own earnings & government grant Public Provident fund

100. Statutorily, employers employing employees have to provide provident fund benefit (a) (b) (c) (d) Less than 10 20 or more 10 or 15 Exactly 10

101. Employers employing employees have to provide gratuity or severance pay (a) (b) (c) (d) 10 or more 5 to 7 Less than 10 None of the above

102. The amount of the monthly pension will be calculated as (a) 1/70th of the Pension able salary for each year of pension able service. The pension able salary is a average salary subject to the limit of Rs.6500/- ( or the higher salary on which basis contribution was made) (b) As 1/66th of the average final salary for each year of Pension able service subject to a maximum of 50% (c) 50% of the final salary irrespective of number of year service (d) None of the above 103. Up to ______ of the pension can be commuted under EPS 1995 (a) (b) (c) (d) One- Third 50% 3/4 None of the above

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104. Employee can get _______ on his contribution towards recognized provident fund (a) (b) (c) (d) 20% tax deduction 20% tax rebate Full exemption Partial exemption

105. Interest income on provident fund contribution is _________ (a) (b) (c) (d) Taxable Partially taxable Tax free None of the above

106. Name the broad categories of pension schemed (a) (b) (c) (d) Employer Pension Occupation Pension Personal pension offered by life insurer & mutual fund All above

107. The annuity starts immediately after one month from the date of purchase & continues for a specified period of time & payment of this annuity does not depend upon the death of annuitant during that period is known as (a) (b) (c) (d) (e) Immediate Life annuity Immediate annuity certain Deferred annuity Last survival annuity All above

108. The annuity provides benefits for more than one life & generally written on the lives of two people self & spouse. The annuity continues to be paid until last person dies is know as ________ (a) (b) (c) (d) (e) Immediate Life Annuity Immediate Annuity certain Deferred Annuity Last survival annuity All the above

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109. Personal pension product (deferred as well as immediate annuity) for regular retirement income may be purchased by (a) (b) (c) (d) The any person, self employed business , traders professional etc Only people working at private companies Only government servants None of the above

110. The issuer of annuities or personal pension products are (a) (b) (c) (d) (e) Banks Stock exchanges Insurance companies Mutual funds None of the above

111. Personal pension product such as deferred as well as immediate annuity are the main instrument available for making regular retirement income provision are not popular in India due to (a) (b) (c) (d) (e) Relatively lower return Availability of ample financial instrument yielding good returns Lack of widespread awareness All of the above None of the above.

112. Ranjit Wardhan has been offered a job as sales manager in a firm with more than 100 employees. He discusses with his financial planner on various aspects of his remuneration & retirement benefits. A. Ranjit Wardhan believes the terms of employment make him automatically eligible for superannuation schemes. He is (a) Correct since the same is funded out of Provident Fund payment by employers (b) Correct since superannuation scheme is an additional statutory obligation of employers (c) Correct, as it is fully tax exempt on receipt (d) Wrong as it is not a statutory obligation of employers

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B. What is the advice the financial planner would make to Ranjit Wardhan about encashment of leave salary for private sector employees? Encashment of leave salary is (a) Always taxable on receipt (b) Fully exempt if received on retirement but taxable if received during the course of employment (c) Administered through pension schemes of mutual funds (d) A voluntary scheme of employers C. For Ranjit Wardhan, Provident Fund deduction is (a) Compulsory since it is applicable to all employees (b) May not be required since it is applicable only to employees with pay of less than Rs.6500 per month (c) Compulsory since it is applicable to all employees but only upto a pay of Rs. 6500 P.M (d) May not be required since it is applicable to all employees with pay of less than Rs.6500 per month D. The financial planner explains the provision of Employee Pension Scheme 1995. Under the Scheme (a) The employers contribution to PF, upto pay of Rs.6500 Pm, is fully diverted to the Pension Scheme (b) Of employers contribution to PF, 8.33 of pay is diverted to Pension Scheme (c) None of the above E. The financial planner also explains that under Employee Pension Scheme 1995 (a) Life Annuity is paid for a period of 20 years from the age of 58 years for all employees (b) Life Annuity is paid for a period of 20 years from the age of 58 years for all employees with past service of more than 10 years (c) No amounts is paid if the employee has achieved past service of less than 10 years (d) None of the above

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113. An employer has a small establishment. to take care of his employees future needs, he has in place an unrecognized provident fund. He matches the contribution made by his employees to this fund. He also encourages his employees to contribute to the public provident fund. Based on the above, answer the following questions. A. Which one of the following is true about the status of an unrecognized provident fun. (a) (b) (c) (d) The employers contribution is tax exempt The employees contribution is fully tax exempt The employers contribution & interest thereon is taxable as salary The fund is recognized by the commissioner of income tax

B. Which one of the following is true (a) (b) (c) (d) The employers contribution is tax exempt The employees contribution is fully tax exempt The employees contribution is fully taxable in the hands of the employee Both the employees & employers contribution is eligible for rebate under u/s 80C

C. The following is true regarding the tax status of return from an Unrecognised provident fund (a) The return are fully tax exempt (b) The employees contribution is tax exempt, the interest on employees contribution is taxable under income from other sources (c) The returns are eligible for deduction u/s 80L (d) The returns are partially taxable. 114. The payments of gratuity is mandatory (a) (b) (c) (d) Within 30 days, otherwise a penalty has to be paid by employer Within 21 days, otherwise penal interest @ 15% has to be paid by employer May be paid at any time May be paid within one year of the employees entitlement

115. Mr. Roy took medical leave due to accident for one year two months. Will he be entitled to gratuity because his total service including medical leave is Five years (a) (b) (c) (d) No, he has to have continuous service of five years Yes as medical leave is counted for the purposes of continuous service No, as leave only for the purposes of education is counted in continuous service No, as leave only upto six months is allowed for counting continuous service.

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116. Mr. Roy made a nomination in favour of his mother. Later he got married. On his death, gratuity will be payable to (a) (b) (c) (d) His wife, as the nomination to mother is nullified on marriage Legal heirs as per his will To the nominee, as long as he/ she is part of the family To any member of the family.

117 A . Mr. Raj wants to send his daughter for higher education abroad. He wants to take an advance for the purpose. He (a) (b) (c) (d) Cannot take any advance, as a advance for foreign education is not allowed Can take an advance Cannot take any advance for education for somebody else Can take an advance without disclosing the purpose.

B. Mr. Raj wants to construct a house & wants to take an advance for the purpose. He (a) May take an advance for construction of the house provided he has 5 years membership of the fund (b) May take an advance, provided he has 15 years of service completed (c) May take an advance, provided he has just 3 years of service left (d) May take an advance, provided he mortgage the house. C. The amount of advance for repaying a loan for construction of his house is equal to (a) (b) (c) (d) 3 months pay or 50% of the amount at credit 36 months wages Any amount upto Rs.1 lakh Any amount upto Rs.2 lakh

118. Ideally clients portfolio should contain _______ assets (a) Specialised (b) Unique (c) Diversified 119. Retirement clients portfolio should contain (a) (b) (c) (d) (e) High return High risk assets Highly illiquid assets Low percentage of high return high risk assets High percentage of safe & liquid assets C&D

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120. What are the income generating source after retirement (a) (b) (c) (d) (e) (f) Rental income from Real estate Interested from annuities, monthly income schemes Interest / Dividend income from investment Income by doing part time job Liquidating real estate or stocks & other assets like gold, silver, etc. All the above.

121. The assets in the portfolio are selected in a way to meet (a) (b) (c) (d) (e) Clients objective after retirement Health of self & spouse Financial obligation other than personal care Stability of income All of the above.

122.What caution should be taken while recommending the risky investment instruments to retire. (a) The proportion of these assets should be bare minimum in the retirees portfolio, as the losses should not be recovered (b) The proportion of risky assets may

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Solution Mock Test II Question Answer Question Answer Question Answer Question Answer Question Answer
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 A C C A B A C B C A B A B D B D A B D B A C B C A A C C C C 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 D D A C B A C B C B B A C B C C C B B D C A D A B A A A D D 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 B C H B B D D B D D C C A C B C B A C D C C A A B A A C B E 91 92 93 94 95 96 97 98 99 100 101 102 103 104 105 106 107 108 109 110 111 112 A B C D E 113 A B C A A C D A D D A&B A B A A A A C D B D A C D B D B C B C B B 114 115 116 117 A B C 118 119 120 121 122 A B C B A B C E F E A

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