Unit 7 : Retirement Planning
This quiz is based on Chapter 7 of CPFA book
Questions and Answers
- 1.
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?
- A.
No, Not Applicable
- B.
Yes, Only from 2004 till 2006
- C.
Yes, since 2003 and thereafter
- D.
Yes, since 2004 and thereafter
Correct Answer
D. Yes, since 2004 and thereafterExplanation
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.Rate this question:
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- 2.
The Employees Provident Fund & Miscellaneous Provisions Act, 1952" (EPF Act) once applicable statutorily covers the following employees.
- A.
All Employees irrespective of the Salary
- B.
All Employees earning Salary equal to or less than Rs.6,500 p.m.
- C.
Employees irrespective of the Salary who have voluntary joined the scheme
- D.
All Employees so selected at the discretion of the Employer
Correct Answer
B. 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.Rate this question:
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- 3.
Employees Pension Scheme, 1995 (EPS) defines "past service" as ________.
- A.
Service rendered by the employee upto the date of exit from service
- B.
Service rendered by the employee upto the EPS came into force
- C.
Service rendered by the employee with an earlier employer
- D.
Service rendered by the employee from the date of joining Employees Family Pension Fund till the EPS came into force
Correct Answer
D. Service rendered by the employee from the date of joining Employees Family Pension Fund till the EPS came into forceExplanation
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.Rate this question:
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- 4.
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
- A.
Her views are untenable, since Retirement Planning has to be undertaken as early as possible
- B.
Her views are tenable
- C.
No comments, since a Certified Financial Planner never debates
- D.
None of the above
Correct Answer
A. Her views are untenable, since Retirement Planning has to be undertaken as early as possibleExplanation
Retirement planning is necessary for both males and females, regardless of age or marital status. It is important to start planning for retirement as early as possible to ensure financial security in the future. Relying solely on a spouse to take care of retirement is not a wise decision, as circumstances can change and it is important to have individual financial independence. Therefore, Rohini's views are untenable, and she should consider starting retirement planning early to secure her financial future.Rate this question:
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- 5.
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)
- A.
Minimum deposit at any time in a year Rs. 500 and Maximum Rs. 70,000
- B.
Minimum deposit at any time in a year Rs. 500 and Maximum Rs. 1,00,000
- C.
Minimum deposit at any time in a year Rs. 5000 and Maximum Rs. 1,00,000
- D.
Minimum deposit at any time in a year Rs. 100 and Maximum Rs. 1,00,000
Correct Answer
B. Minimum deposit at any time in a year Rs. 500 and Maximum Rs. 1,00,000Explanation
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.Rate this question:
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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.
- A.
Taxable, Exempt, Exempt, (TEE)
- B.
Exempt, Taxable, Exempt (ETE)
- C.
Exempt, Exempt, Taxable (EET)
- D.
Exempt, Exempt, Exempt (EEE)
Correct Answer
D. 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.Rate this question:
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- 7.
"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
- A.
All are true except 6
- B.
Only 1,2 & 3 are true
- C.
Only 1,2, 3 & 4 are true
- D.
Only 1,2, & 5 are true
Correct Answer
C. Only 1,2, 3 & 4 are trueExplanation
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."Rate this question:
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- 8.
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
- A.
Rs. 1250
- B.
Rs. 541
- C.
Rs. 833
- D.
Rs. 1241
Correct Answer
C. Rs. 833Explanation
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.Rate this question:
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- 9.
. "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
- A.
Only 1 & 2 are true
- B.
Only 1,2 & 3 are true
- C.
Only 1,2, & 5 are true
- D.
Only 1,2, 3 & 5 are true
Correct Answer
B. Only 1,2 & 3 are trueExplanation
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.Rate this question:
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- 10.
If a person receives gratuity and commuted pension then _________ of the commuted amount of pension is tax free
- A.
One third
- B.
Half
- C.
Full
- D.
One fourth
Correct Answer
A. One thirdExplanation
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.Rate this question:
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- 11.
Which one of the following is a method of estimating retirement income?
- A.
Weighted average method
- B.
Completed cost method
- C.
Proportion method
- D.
Replacement of income method
Correct Answer
D. Replacement of income methodExplanation
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.Rate this question:
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- 12.
A scheme providing pension benefits as per Income Tax provisions is called:
- A.
Superannuation Scheme
- B.
Retirement Scheme
- C.
Retirement Income Scheme
- D.
Pension Scheme
Correct Answer
A. Superannuation SchemeExplanation
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.Rate this question:
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