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

Illegal income includes ______ while transfer income includes ________.

  1. cost, price

  2. taxes, payments

  3. none of the above

  4. betting, scholarships
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Illegal income (like betting) is generally excluded from national income calculations, while transfer payments (like scholarships) are also excluded as they do not represent production of goods or services.

Multiple choice commercial applications single entry system introduction to single entry system and difference between single entry and double entry system meaning and featuresof incomplete records meaning of incomplete records, reasons for incompleteness and its limitations ascertaining profit or loss from incomplete records preparation of final accounts from incomplete records preparation of statement of affairs double entry system

Income -tax of the sole trader paid is shown ___________.

  1. Debited to profit and Loss A/c

  2. Debited to Trading A/c

  3. Debited to his Capital A/c

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

For a Sole Proprietor, income tax is not an expense incurred to generate revenue hence it is not treated as an expense to be paid out of profits. In this case, income tax is treated as a personal expense resulting in drawings from the business concluding to a reduction of capital.

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 elements of business advertising and brand promotion distinction between advertising and sales promotion meaning and importance of personal selling personal selling concept,types, objectives, advantages and criticism of advertising distinction between advertising and personal selling meaning, objectives, merits and demerits of advertising

Which of the following is a selling expense?

  1. Any tax/freight is paid on purchases

  2. General salaries paid to laborers

  3. Tax & freight paid on sale

  4. Interest on deposits
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Selling expenses are costs incurred to sell products. Tax and freight paid on sales are direct costs associated with the distribution and sale of goods.

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

$NDP _{MP}$ - Indirect Taxes+ Subsides =

  1. $NNP _{MP}$
  2. $NDP _{FC}$
  3. $NNP _{FC}$

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

NDPMP is defined as the market value of final goods and services produced in the domestic territory of a country by its residents and non residents in an accounting year less depreciation. NDPMP= GDPMP-Depreciation

NNPFC= NDPMP-Indirect taxes+Subsidies
NNPFC is defined by total factor incomes earned by the factors of production.