Unit 7 : Retirement Planning

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  • 1/12 Questions

    Rohini, aged 20 years debates that Retirement Planning is required for Males as well as for those who are above 45 years, she says that she is young, she wants to enjoy life and after marriage her spouse will take care of her retirement. As a Financial Planner address her and provide an appropriate advice

    • Her views are untenable, since Retirement Planning has to be undertaken as early as possible
    • Her views are tenable
    • No comments, since a Certified Financial Planner never debates
    • None of the above
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About This Quiz

This quiz in Unit 7: Retirement Planning assesses knowledge on various aspects of retirement planning including provident funds, pension schemes, and tax benefits. It is designed for professionals seeking CPFA certification, focusing on practical application of laws like EPF Act 1952 and Income Tax Act 1961.

Unit 7 : Retirement Planning - Quiz

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  • 2. 

    Which one of the following is a method of estimating retirement income?

    • Weighted average method

    • Completed cost method

    • Proportion method

    • Replacement of income method

    Correct Answer
    A. Replacement of income method
    Explanation
    The replacement of income method is a method of estimating retirement income. This method involves calculating the amount of income that an individual will need during retirement in order to maintain their current standard of living. It takes into account factors such as current income, expected expenses during retirement, and any additional sources of income such as pensions or social security. By using this method, individuals can determine how much they need to save and invest in order to ensure a comfortable retirement.

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  • 3. 

    If a person receives gratuity and commuted pension then _________ of the commuted  amount of      pension is tax free

    • One third

    • Half

    • Full

    • One fourth

    Correct Answer
    A. One third
    Explanation
    If a person receives gratuity and commuted pension, one-third of the commuted amount of pension is tax-free. This means that only a portion of the commuted pension is exempt from taxation, specifically one-third of the total amount received. The remaining two-thirds would be subject to taxation.

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  • 4. 

    .  "Defined Contribution Plans" are the following: 1. Annuity Plan available in the market 2. New Pension Scheme, 2004 3. Provident Fund 4. Gratuity as per Payment of Gratuity Act,1972 5. Gratuity not as per Payment of Gratuity Act,1972

    • Only 1 & 2 are true

    • Only 1,2 & 3 are true

    • Only 1,2, & 5 are true

    • Only 1,2, 3 & 5 are true

    Correct Answer
    A. Only 1,2 & 3 are true
    Explanation
    The correct answer is "Only 1,2 & 3 are true". This means that out of the options given, only options 1, 2, and 3 are considered to be defined contribution plans. Option 1 refers to an annuity plan available in the market, option 2 refers to the New Pension Scheme introduced in 2004, and option 3 refers to the Provident Fund. Option 4, which is gratuity as per the Payment of Gratuity Act, 1972, is not considered a defined contribution plan. Option 5, which is gratuity not as per the Payment of Gratuity Act, 1972, is also not considered a defined contribution plan.

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  • 5. 

    M/s Dyota Solutions Ltd. had 12,18, 19, 20, 22, 29 & 15 numbers of employees in the years 2001, 2002, 2003, 2004, 2005, 2006 & 2007 respectively. Does "The Employees Provident Fund & Miscellaneous Provisions Act, 1952" apply to the Company?

    • No, Not Applicable

    • Yes, Only from 2004 till 2006

    • Yes, since 2003 and thereafter

    • Yes, since 2004 and thereafter

    Correct Answer
    A. Yes, since 2004 and thereafter
    Explanation
    The Employees Provident Fund & Miscellaneous Provisions Act, 1952 applies to M/s Dyota Solutions Ltd. since 2004 and thereafter because the Act covers companies that have 20 or more employees. In the given years, the company had 20 or more employees starting from 2004, so the Act applies to them from that year onwards.

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  • 6. 

    Mr. Anthony Gonzalvis is  working with SEBI wants to open a PPF A/c (Public Provident Fund) with State Bank of India, but is concerned about the provisions of "The Income Tax Act, 1961" with regard to its Contribution, Accumulation and Withdrawal. As a Financial Planner address her concern and provide an appropriate advise with reference to I.T Act, 1961.

    • Taxable, Exempt, Exempt, (TEE)

    • Exempt, Taxable, Exempt (ETE)

    • Exempt, Exempt, Taxable (EET)

    • Exempt, Exempt, Exempt (EEE)

    Correct Answer
    A. Exempt, Exempt, Exempt (EEE)
    Explanation
    The correct answer is "Exempt, Exempt, Exempt (EEE)". Under the provisions of the Income Tax Act, 1961, the contributions made to a PPF account are eligible for tax exemption under Section 80C. The accumulated balance in the PPF account is also exempt from tax, including the interest earned. Additionally, the withdrawal from the PPF account after the completion of the lock-in period is also tax exempt. Therefore, all three aspects of the PPF account, namely contribution, accumulation, and withdrawal, are exempt from tax, making it a suitable investment option for Mr. Anthony Gonzalvis.

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  • 7. 

    Ms. Kolaveri is a Self Employed Professional conducting her own coaching classes "M/s Raaga Classes" wants to open a PPF A/c (Public Provident Fund) with State Bank of India. As a Financial Planner advise her with regard to the same and do factor in the provisions of Sec 80-C of the Income TaxAct, 1961. (assume that this question is asked by her in December 2011)

    • Minimum deposit at any time in a year Rs. 500 and Maximum Rs. 70,000

    • Minimum deposit at any time in a year Rs. 500 and Maximum Rs. 1,00,000

    • Minimum deposit at any time in a year Rs. 5000 and Maximum Rs. 1,00,000

    • Minimum deposit at any time in a year Rs. 100 and Maximum Rs. 1,00,000

    Correct Answer
    A. Minimum deposit at any time in a year Rs. 500 and Maximum Rs. 1,00,000
    Explanation
    The correct answer is "Minimum deposit at any time in a year Rs. 500 and Maximum Rs. 1,00,000." This is because the Public Provident Fund (PPF) allows a minimum deposit of Rs. 500 and a maximum deposit of Rs. 1,00,000 in a year. This information is important for Ms. Kolaveri as she wants to open a PPF account with State Bank of India. Additionally, it is mentioned that the provisions of Sec 80-C of the Income Tax Act, 1961 should be considered, but the details of these provisions are not provided in the given question.

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  • 8. 

    Employees Pension Scheme, 1995 (EPS) defines "past service" as ________.

    • Service rendered by the employee upto the date of exit from service

    • Service rendered by the employee upto the EPS came into force

    • Service rendered by the employee with an earlier employer

    • Service rendered by the employee from the date of joining Employees Family Pension Fund till the EPS came into force

    Correct Answer
    A. Service rendered by the employee from the date of joining Employees Family Pension Fund till the EPS came into force
    Explanation
    The correct answer is "Service rendered by the employee from the date of joining Employees Family Pension Fund till the EPS came into force." This means that "past service" refers to the period of time during which the employee was a member of the Employees Family Pension Fund before the implementation of the Employees Pension Scheme in 1995.

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  • 9. 

    A scheme providing pension benefits as per Income Tax provisions is called:

    • Superannuation Scheme

    • Retirement Scheme

    • Retirement Income Scheme

    • Pension Scheme

    Correct Answer
    A. Superannuation Scheme
    Explanation
    A scheme providing pension benefits as per Income Tax provisions is called a Superannuation Scheme. This scheme is designed to provide retirement benefits to employees by setting aside a portion of their income during their working years. The contributions made to the scheme are tax-deductible, and the accumulated funds are used to provide a regular income to the employee after retirement. This scheme helps individuals secure their financial future and ensure a stable income during their retirement years.

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  • 10. 

    The Employees Provident Fund & Miscellaneous Provisions Act, 1952" (EPF Act) once applicable statutorily covers the following employees.

    • All Employees irrespective of the Salary

    • All Employees earning Salary equal to or less than Rs.6,500 p.m.

    • Employees irrespective of the Salary who have voluntary joined the scheme

    • All Employees so selected at the discretion of the Employer

    Correct Answer
    A. All Employees earning Salary equal to or less than Rs.6,500 p.m.
    Explanation
    The correct answer is "All Employees earning Salary equal to or less than Rs.6,500 p.m." because the EPF Act covers employees who earn a salary equal to or less than Rs.6,500 per month. This means that all employees who fall within this salary range are required to be covered by the EPF scheme as per the statutory provisions of the act.

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  • 11. 

    "Defined Benefit Plans" are the following. 1. Gratuity 2. Employees Pension Scheme 3. Leave Encashment 4. VRS 5. Provident Fund 6. Annuity Plans available in the market

    • All are true except 6

    • Only 1,2 & 3 are true

    • Only 1,2, 3 & 4 are true

    • Only 1,2, & 5 are true

    Correct Answer
    A. Only 1,2, 3 & 4 are true
    Explanation
    Defined Benefit Plans are retirement plans where the employer promises to pay a specified benefit amount to the employee upon retirement. Gratuity, Employees Pension Scheme, Leave Encashment, and VRS (Voluntary Retirement Scheme) are all examples of Defined Benefit Plans. Provident Fund and Annuity Plans available in the market are not considered Defined Benefit Plans. Therefore, the correct answer is "Only 1, 2, 3 & 4 are true."

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  • 12. 

    Mr. Ramalinga Raju joins a private limited company covered under the PF Act. The employer contributes for all the employees only up to the specified salary limit. His monthly salary consists of Rs.10,000 as basic, Rs.5,000 as DA and 10% of the basic as HRA, calculate the EPS contribution

    • Rs. 1250

    • Rs. 541

    • Rs. 833

    • Rs. 1241

    Correct Answer
    A. Rs. 833
    Explanation
    The EPS (Employee Pension Scheme) contribution is calculated based on the employee's basic salary. In this case, Mr. Ramalinga Raju's basic salary is Rs. 10,000. The employer contributes 8.33% of the basic salary towards the EPS. Therefore, the EPS contribution would be 8.33% of Rs. 10,000, which is equal to Rs. 833.

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  • Current Version
  • Jun 21, 2024
    Quiz Edited by
    ProProfs Editorial Team
  • Jun 16, 2012
    Quiz Created by
    Btuhin
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