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 enterprise(s) utilise the earned revenue as a source of income for the government, as it goes directly to the government treasury?

a. A departmental undertaking. b. A statutory corporation. c. A government company.

  1. Only a

  2. Only b

  3. Only c

  4. Both a and c
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

This is the correct answer. Departmental undertakings utilise the earned revenue as a source of income for the government, as it goes directly to the government treasury

Multiple choice

Corporate tax is imposed by

  1. Central Government

  2. State Government

  3. both Central Government and State Government

  4. Local Government

  5. Muncipal corporation
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Central government is the government of a nation-state and is a characteristic of a unitary state.

Multiple choice

Which one of the following is not a feature of “Value Added Tax”?

  1. It is multi-point destination-based system of taxation.

  2. It is a tax levied on value additoin at each stage of transaction in production/distribution chain.

  3. It is a tax on the final consumption of goods or services and must ultimately be borne by the consumer.

  4. It is basically a subject of the Central Government and the State Governments are only a facilitator for its successful implementation.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

VAT is multistage sale tax with credit for taxes paid of business purchases. It is non-cascading. VAT is the indirect tax on the consumption of the goods, paid by its original producers upon the change in goods or upon the transfer of the goods to its ultimate consumers. It is based on the value of the goods, added by the transferor. It is the tax in relation to the difference of the value added by the transferor and not just a profit. Option (4) is incorrect. VAT is a State subject, for which the States are independent in taking decisions. At the same time, the States have freedom for making appropriate variations in their respective State laws consistent with this basic design.

Multiple choice

About the Service Tax, read the following statements and Answer the correct ones: i. It is imposed by the Union government as part of its residuary powers. ii. It is not shared with the States. iii. Finance Commission recommends how it is distributed between Centre and States iv. Finance Commission recommends how it is divide between the Centre and States and among the States

  1. i only

  2. i & iv only

  3. ii & iii only

  4. ii & iv only
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

 (b)

Multiple choice

Based on the Finance Bill 2016, power to arrest in service tax evasion is restricted to

  1.         situations where the taxpayer has collected the tax, but not deposited it to the exchequer
  2.         situations where the taxpayer has collected the tax, but not reported in books of accounts
  3.         situations where the taxpayer has collected the tax, but not deposited above a threshold of Rs. 2 crore

Which of the statements given above are correct?

  1. 1 and 2 only

  2. 1 and 3 only

  3. 2 and 3 only

  4. 1, 2 and 3
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Statement 1: It is correct. Recently, Finance Minister announced withdrawal of tax exemptions from a host of services including those provided by lawyers to other advocates, including on arbitral tribunals, even as he exempted financial regulators and others from service tax. The Finance Bill 2016 proposes that the power to arrest in service tax evasion is being restricted only to situations where the taxpayer has collected the tax, but not deposited it to the exchequer. Statement 2: It is incorrect. Tax administration does not rely solely upon taxpayer declarations, business records, and books of account to determine tax liability, etc. Statement 3: It is correct. The Finance Bill 2016 also proposes that the power to arrest in service tax evasion is being restricted to situations where the taxpayer has collected the tax, but not deposited it to the exchequer, and that too above a threshold of Rs. 2 crore.

Multiple choice

What was the American colonists' primary objection to the taxes imposed by the Stamp Act?

  1. It was the 1st time the British tried to control them.

  2. It set the rate so high that it harmed the colonial economy.

  3. It had not been approved by colonial representatives.

  4. It interfered with merchants' right to free trade.
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The core of the colonists' objection was the principle of 'no taxation without representation.' They believed that only their own colonial legislatures had the right to tax them.

Multiple choice

What type of item did the Stamp Act tax?

  1. Stamps

  2. Paper

  3. Tea

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

The Stamp Act of 1765 required colonists to pay a tax on various printed materials, including legal documents, newspapers, playing cards, and pamphlets. It was essentially a tax on paper goods.

Multiple choice economics economic thoughts economics thoughts of great thinkers economic thinking economic thought

Which of the following is a type of tax exemption proposed by Kautilya as an incentive to increase productivity?

  1. International taxes on exports.

  2. Relief from taxes to be paid to Zamindars.

  3. Aatithya charges - for the products imported from foreign states.

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

Kautilya suggested 'Aatithya' (hospitality) charges or tax incentives for foreign trade to encourage productivity and market growth.

Multiple choice

Individual Income Tax

  1. 12th

  2. 20th

  3. 27th

  4. 16th
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The 16th Amendment, ratified in 1913, gave Congress the legal authority to levy a federal income tax without apportioning it among the states based on population.

Multiple choice history kings and kingdoms of the early medieval period rashtrakutas the rashtrakutas south indian kingdoms

Which of the following were the most important taxes?

  1. Taxes of crops

  2. Taxes of traders

  3. Taxes of crafts persons

  4. Taxes of hunters
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Taxes on crops were the most important. This was because most people were farmers. Usually, the tax was fixed at 1/6th of what was produced. This was known as bhaga or a share.

Multiple choice history kings and kingdoms of the early medieval period rashtrakutas the rashtrakutas south indian kingdoms

During mahajanapadas, usually, the tax was fixed at 1/6th of what was produced. This was known as _____.

  1. Bali

  2. Hissa

  3. Bhaga

  4. All of the above
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The rulers of mahajanapadas were engaged in building forts, maintaining huge armies for the protection of their territory and the subjects. They needed more resources which could be obtained from taxes. Taxes on crops were the most important. Usually, the tax was fixed at 1/6th of what was produced. This was known as bhaga or share.

Multiple choice economics circular flow of income and methods of calculating national income expenditure method and income method methods of measuring national income national income accounting

Old age pension is _________ income.

  1. earned

  2. transfer

  3. increased

  4. none of the above
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Old age pension is paid to people after retirement who no longer provide any productive services in exchange. The government in this case collects taxes from working population and provide pension to older population in the form of government expenditure.

The pension is income for those who receive it, however, no new income is generated in the economy, hence it is a transfer payment.