English: Cloze Test for Upcoming Exams – Set 156

Directions(1-10): In the passage given below there are 10 blanks. Every blank has four alternative words given in options (A),(B),(C), and (D). You have to tell which word is APPROPRIATE according to the context. If all are appropriate then mark your answer as “E”.

The Centre’s decision to bring back the long-term capital gains tax (LTCG) on equities, which was scrapped in 2004-05, seems to be a ___1___ move to plug the widening fiscal deficit ahead of an election year. With investors in equities enjoying terrific returns over the last few years, it is not a surprise that they have become targets for the government to secure additional revenue. The decision to announce the ___2___ of 10% tax on gains of over ₹1 lakh made on any form of investment in listed equities and mutual funds with a holding period of over one year will hit the average middle class investor. Not surprisingly, the sharp fall in both the Nifty and the Sensex after Budget day has been linked to the new tax, along with the government’s abandonment of fiscal goals. But given that the sell-off was part of a wider correction in global stock indices, it may be hard to draw a definite conclusion on the exact impact of the LTCG. The Centre has justified the new tax arguing that it helps avoid the ___3___ of its tax base and levels the playing field between financial assets and investment in manufacturing.
One legitimate ___4___ is whether raising the tax burden on equities, rather than lowering the tax and other barriers to investing in alternative assets, is the right way to address the ___5___ effect of taxes. Further, the smaller differential between short and long-term capital gains tax itself will discourage the long-term holding of stocks in favour of short-term trading activity. While this might serve to improve liquidity in Indian markets and add to the government’s ___6___, it is also likely to discourage to some extent the growing culture of investing in equities for the long run. Besides, the securities transaction tax (STT), which was introduced ___7___ the LTCG in 2004 and penalises the buying of stocks for purposes other than just intra-day trading, has been left untouched by the government. The double ___8___ of the STT and LTCG will further privilege short-term trading in stocks over long-term investment. Being the only country in the world to impose both the STT and LTCG, India is also likely to become a little less attractive to foreign investors when compared to its peers. A complete ___9___ of the new tax is too much to expect — Finance Secretary Hasmukh Adhia has justified the higher tax levy saying that the capital gains accrue from zero effort. Despite the constraints, the government would do well to at least soften the negative impact of the new tax by allowing indexation (allowing a set-off based on inflation rate) of capital gains and removing the STT on equity investments. Tough love for the well-off is not a bad strategy for a pre-election Budget, but it is important to be careful about maintaining India’s ___10___ in the global money markets in the process.

  1. advised
    hasty
    tardy
    deliberate
    All are Correct
    Option B

     

  2. abdicate
    candor
    imposition
    entreat
    All are Correct
    Option C

     

  3. erosion
    building
    restitution
    accrual
    All are Correct
    Option A

     

  4. afflict
    reassure
    ignore
    concern
    All are Correct
    Option D

     

  5. discipline
    distortionary
    deformation
    charisma
    All are Correct
    Option B

     

  6. appropriate
    deduct
    revenue
    disbursement
    All are Correct
    Option C

     

  7. so much
    fullest extent
    completely
    in lieu of
    All are Correct
    Option D

     

  8. whammy
    opportunity
    fortune
    probability
    All are Correct
    Option A

     

  9. dissipation
    squandering
    rollback
    profligacy
    All are Correct
    Option C

     

  10. anonymity
    mendacity
    credibility
    corruption
    All are Correct
    Option C

     


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