Wonderland Limited has excess cash of ₹20 lakhs, which it wants to invest in short term marketable securities. Expenses relating to investment will be ₹50,000. The securities invested will have an annual yield of 9%. The

CS Professional · Goods and Services Tax (GST) and Corporate Tax Planning · PYQS · June 2025
Wonderland Limited has excess cash of ₹20 lakhs, which it wants to invest in short term marketable securities. Expenses relating to investment will be ₹50,000. The securities invested will have an annual yield of 9%. The company seeks your advice: (i) as to the period of investment so as to earn a pre-tax income of 5%. (discuss)

Answer & Explanation:

Answer 6(b)(i) i. Pre-tax Income required on investment of ₹20,00,000 Let the period of Investment be 'P' and return required on investment ₹1,00,000 (₹20,00,000 x 5%) Accordingly, (₹20,00,000 * 9/100 * P/12) - ₹50,000 = ₹1,00,000 P = 10 months

Topics: Corporate Tax Planning

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