Economics · General Awareness

Indian Taxation System

2,325 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 business organisation import and export procedure export trade procedures and formalities of exports and imports import and export

The government has progressively moved towards a uniform basic excise rate of _______ but exemptions and surcharges still affect the actual rate.

  1. 4%

  2. 16%

  3. 10%

  4. 20%
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Historically, the CENVAT (Central Value Added Tax) rate in India was standardized at 16% for a significant period before subsequent reforms.

Multiple choice organisation of commerce and management government organisation departmental undertakings meaning and features of departmental undertaking forms, comparison and cases of public enterprises classification of commercial organisations

The funds earned are a direct income for the government.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The revenue earned by the departmental undertakings goes directly to the treasury and hence is a source of income for the government. 

Multiple choice meaning and importance of taxes government and taxes tax civics economics

Which of the following statements is correct?

  1. Income tax was abolished in India in $1991$.
  2. Gift tax was abolished in India in $1998$, but income tax on gift (received) without adequate consideration was partially reintroduced in April $2004$.

  3. No states have adopted VAT system of indirect taxation.
  4. Estate duty was abolished in $1995$.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The Gift Tax Act was repealed in 1998, but the Finance Act of 2004 reintroduced taxation on gifts received without adequate consideration under the Income Tax Act. The other statements contain incorrect dates or claims regarding tax history in India.

Multiple choice meaning and importance of taxes government and taxes tax civics economics

As part of the Taxation Reforms in 1991, the rates of taxation were reduced in respect of_______________.

  1. Corporate Income Tax

  2. Personal Income Tax

  3. Customs Duties

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

The 1991 taxation reforms in India aimed to broaden the tax base and improve compliance by reducing high rates across various categories, including corporate income tax, personal income tax, and customs duties.

Multiple choice meaning and importance of taxes government and taxes tax civics economics

Which of the following is not an effect of simplification of procedural aspects in Taxation?

  1. Improvement in tax compliance

  2. Increased revenue generation for the Government

  3. More work for Tax Authorities and Taxpayers

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

Simplification of tax procedures is intended to reduce the burden on taxpayers and authorities, thereby improving compliance and revenue. It does not result in more work for them.

Multiple choice meaning and importance of taxes government and taxes tax civics economics

Which of the following is not part of the Taxation Reforms in 1991?

  1. Increase in Basic Exemption Limits for Individuals & Hindu Undivided Families (HUFs)

  2. Reduction & rationalization of Income Tax Rates

  3. Compulsory filing of returns in respect of Individuals having income below Basic Exemption Limits

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

Taxation reforms in 1991 focused on rationalizing rates and improving compliance. Compulsory filing for those below the exemption limit contradicts the goal of simplifying the process for small taxpayers.

Multiple choice meaning and importance of taxes government and taxes tax civics economics

________ is not a Direct Tax.

  1. Income Tax

  2. Wealth Tax

  3. Gift Tax

  4. Entertainment Tax
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Income tax, wealth tax and gift tax are all direct taxes. Entertainment tax is an indirect tax. It is a tax on any kind of entertainment activities. It might include cinema, theaters etc. Entertainment falls in List 2 of the Seventh Schedule of the Constitution of India and is exclusively reserved as a revenue source for the state governments.

Multiple choice meaning and importance of taxes government and taxes tax civics economics

Which of the following is not part of the Taxation Reforms in 1991?

  1. General policy for introduction of State-level VAT

  2. Rationalisation of Excise Duties towards CENVAT concept

  3. Reduction in the peak rate of Customs Duties

  4. Increase in Customs, Excise and Sales Tax Rates
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The 1991 reforms aimed to reduce the tax burden to stimulate the economy. Increasing customs, excise, and sales tax rates would be contrary to the liberalization and rationalization policies of that era.

Multiple choice meaning and importance of taxes government and taxes tax civics economics

Which one of the following sources of Central revenue belongs to the category of Indirect taxes?

  1. Corporation tax

  2. Customs

  3. Wealth tax

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

Custom Duty is a indirect tax for goods when import or export. The tax is collected by Central Board of Indirect Taxes and Customs.

Multiple choice meaning and importance of taxes government and taxes tax civics economics

If final goods attracts an excise duty of Rs. 8000 and Rs. 1050 has already been paid on inputs then the firm will pay the 7000 towards excise duty. It is paying tax according to

  1. VAT

  2. CENVAT

  3. MODVAT

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

The firm pays tax according to the MODVAT system. MODVAT means Modified Value added tax.This was an excise duty scheme introduced in 1986 for allowing relief to final manufacturers on the excise duty borne by their suppliers of raw material. This scheme has now been replaced by the CENVAT Scheme.

Multiple choice meaning and importance of taxes government and taxes tax civics economics

MODVAT is:

  1. Modern Value Added Tax

  2. Modified Value Added Tax

  3. Monopoly Value Added Tax

  4. Method of Deduction of VAT
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

MODVAT (modified value added tax) was introduced in India in 1986. MODVAT was re-named as CENVAT. The system was termed as MODVAT, as it was restricted upto manufacturing stage and credit of only excise duty paid on manufacturing products (and corresponding CVD paid on imported goods) was available.

Multiple choice meaning and importance of taxes government and taxes tax civics economics

If final good attracts an excise duty of Rs. 8000 and Rs. 1000 has already been paid on inputs then the firm will pay the Rs. 7,000 towards excise duty. It is paying tax according to________.

  1. VAT

  2. CENVAT

  3. MODVAT

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

Under CENVAT scheme the credit of the excise duty/additional duty of customs paid on inputs and capital goods and service tax paid on input services allowed to be utilized for the payment of the excise duty on the final products or service tax on output services in order to avoid cascading effect of the duty/tax. 

Multiple choice business economics and quantitative methods public economics components of budget and budgetary procedure government budget and taxation government budget and economy

Taxes levied on personal income, profits of the corporate, wealth and property is termed as ________ tax.

  1. indirect

  2. service tax

  3. direct

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

Direct tax are the tax where the final burden of the tax is borne by the person on whom it is imposed. These taxes are directly paid by the person on whom it is imposed to the government. For example- income tax, corporate tax etc. 

Multiple choice business economics and quantitative methods public economics components of budget and budgetary procedure government budget and taxation government budget and economy

Which among the following is a source of non-tax revenue for the government?

  1. Gifts and grants

  2. Fees, fines and penalties

  3. Interest and dividend on investments

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

Non-tax receipts of the government are all those revenue receipts of the government that is not a part of tax receipts of the government be it a direct tax or indirect tax. For example - fees, fines, escheats, gifts and grants, interest and dividends on investment, etc.