Economics · General Awareness

Indian Taxation System

2,347 Questions

The Indian taxation system comprises direct and indirect levies including income tax, goods and services tax, and property tax. Understanding these tax structures is crucial for general awareness sections in banking and government exams. The practice set covers central and state tax collections, exemptions, and capital gains rules.

Goods and Services TaxIncome tax rulesProperty tax assessmentsTax exemptionsCentral versus state taxes

Indian Taxation System Questions

Multiple choice

Which of the following statements is correct as per the Unoin Budget 2011-2012?

  1. Additional deduction of Rs. 20,000 for investment in long-term infrastructure bonds proposed to be extended for two more years.

  2. Lower rate of 10 per cent tax on dividends received by an Indian company from its foreign subsidiary.

  3. Weighted deduction on payments made to National Laboratories, Universities and Institutes of Technology to be enhanced to 200 per cent.

  4. A net revenue loss of Rs. 15,500 crore estimated as a result of direct tax proposals.
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Weighted deduction on payments made to National Laboratories, Universities and Institutes of Technology to be enhanced to 200 per cent.

Multiple choice

Which of the proposals regarding indirect tax is correct as per the Unoin Budget 2011-2012?

  1. Central Excise Duty to be maintained at standard rate of 10 per cent.

  2. Lower rate of Central Excise Duty enhanced from 4 per cent to 6 per cent.

  3. Basic Custom Duty for specified agricultural machinery reduced from 5 per cent to 4 per cent.

  4. A net revenue gain of Rs. 14,300 crore estimated as a result of indirect tax proposals.
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Central Excise Duty to be maintained at standard rate of 10 per cent.

Multiple choice

Match about Sector-wise impect of the Union Budget 2011-2012:

Sector: Proposal: A. Oil Sector i. 10% Excise Duty B. Cigarrettes ii. Propose to raise service tax C. Air travel iii. No additional taxes D. Textiles iv. No tax changes

  1. (A, i), (B, ii), (C, iii), (D, iv)

  2. (A, ii), (B, i), (C, iii), (D, iv)

  3. (A, i), (B, ii), (C, iv), (D, iii)

  4. (A, iv), (B, iii), (C, ii), (D, i)
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

 10% excise duty on branded garments.

Multiple choice

Which one of the following proposals is incorrect about change in the salary earners as per the Union Budget 2011-2012?

  1. Salary earners having an income of less than Rs. 5 lakh will not have to file tax returns.

  2. The exemption from filing tax returns come into effect from the assessment year 2012-13.

  3. In case such a salary earner has income from other sources like dividend, interest etc. and does not want to file returns, he will have to disclose such income to his employer for tax deduction.

  4. The Form 16 issued to salaried employees will be treated as Income Tax Return.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

 The exemption from filing tax returns come into effect from the assessment year 2011-12.

Multiple choice

Which of the following is not a source of income to a municipality?

  1. House tax and water tax

  2. Taxes on cycle, rickshaw and other vehicles

  3. Grant from the State Government

  4. Income tax
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Income tax is a central government tax in India, not a source of revenue for local municipal bodies. Municipalities rely on property taxes, vehicle taxes, and state grants.

Multiple choice

Which of the following taxes are included in prices?

  1. Direct taxes

  2. Indirect taxes

  3. Progressive taxes

  4. Regressive taxes
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

 An indirect tax is a tax that increases the price of goods so that consumers are actually paying the tax by paying more for the products. An indirect tax is most often thought of as a tax that is shifted from one taxpayer to another, by way of an increase in the price of the goods.

Multiple choice

Excise duty is levied on

  1. incomes of the individual

  2. production of goods

  3. export and import of goods

  4. income of the corporate

Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

 Excise duty is levied on the production of goods.

Multiple choice

Directions: Read the passage given below and answer the question that follows it.

Cigarettes constitute a mere 20% of tobacco consumption in India and fewer than 15% of the 200 million tobacco users consume cigarettes. Yet these 15% contribute nearly 90% of the tax revenues to the exchequer from the tobacco sector. The punitive cigarette taxation regime has kept the tax base narrow and reducing taxes will expand this base.

Which of the following best bolsters the conclusion that reducing duties will expand the tax base?

  1. The cigarette manufacturers' association has decided to indulge in aggressive promotion.

  2. There is a likelihood that tobacco consumers will shift to cigarette smoking if cigarette prices were to reduce.

  3. The cigarette manufacturers are lobbying for a reduction on duties.

  4. An increase in duties on non-cigarette tobacco may lead to a shift in favour of cigarette smoking.

  5. None of these
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Option (3) is correct.

Multiple choice

Discounts and rebates are offered on

  1. the base price of product

  2. the total invoice price

  3. the base price plus all taxes

  4. all of the above
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Discounts and rebates can be applied to various components of the pricing structure depending on the agreement, making 'all of the above' the most comprehensive answer.

Multiple choice

ABC Traders paid a total of Rs. 40,000, by way of cheques, as Advance Tax during the year. On 31st March 2011, ABC Traders made a provision of Rs. 85,000 as the firm's tax. Which of the following entries need not be passed in the account book?

  1. Dr. advance tax and Cr. bank A/c.

  2. Dr. profit and loss A/c and Cr. provision for taxation A/c.

  3. Dr. provision for taxation A/c, Cr. advance tax A/c and bank A/c.

  4. Dr. income tax A/c and Cr. bank A/c.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

 No need to open Income Tax a/c for the payment of Income Tax.