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 commerce goods and services tax goods and service tax study of gst goods and services tax (gst)

The advantages of GST accruing to the Central/State Government are listed as:

  1. A unified common national market to boost Foreign Investment and Make in India campaign.

  2. Improving the overall investment climate in the country which will benefit the development of states.

  3. Uniform SGST and IGST rates to reduce the incentive for tax evasion.

  4. All of the above
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation
  • Simple and easy to administer
GST replaces multiple indirect taxes at the Central and State levels. Backed with a robust end-to-end IT system, GST would be simpler and easier to administer than all other indirect taxes of the Centre and State. All the management of GST would be handled by the GSTN.
  • Better control on leakage
Because of the Advanced IT platform, it would be difficult to evade GST. The system of GST also promotes the tax payment.A businessman can claim tax credit only if it has the tax invoice for the purchase. If it doesn’t have tax invoice of a purchase, It has to bear whole tax. Thus, a retailer would ask tax invoice from the dealer and in return dealer would ask tax invoice from the manufacturer.The in-built mechanism in the design of GST incentivizes tax compliance by the traders.
  • Higher revenue efficiency
GST is expected to decrease the cost of tax collection. It will lead to higher revenue efficiency. The duplication of indirect tax collection would end after the GST. It would finally decrease the cost of revenue collection. Both, the centre and state government would benefit.
Multiple choice commerce goods and services tax goods and service tax study of gst goods and services tax (gst)

The GST Council dictates __________.

  1. tax rate

  2. tax exemption

  3. tax laws

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

The GST council is the key decision-making body that will take all important decisions regarding the GST. The GST Council dictates tax rate, tax exemption, the due date of forms, tax laws, and tax deadlines, keeping in mind special rates and provisions for some states.

Multiple choice commerce goods and services tax goods and service tax study of gst goods and services tax (gst)

Among the following types of taxes, find the one which is Indirect.

  1. Gift Tax

  2. Corporate Income Tax

  3. GST

  4. Wealth Tax
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation
An indirect tax is a tax which is imposed on one person and is paid partly or wholly by another party. This means that the effect or incidence of an indirect tax is not upon the party who pays the tax but on someone else. For example, sales tax is imposed on the sales of a business. This tax is collected by the seller from his customers and paid to the government. Here the seller does not bear the impact of the tax, rather he simply collects the tax and deposits the same with the sales tax department. The impact of the tax is borne by the customer who actually purchases the goods. Since this tax is paid not by the buyer himself, but by the seller, it is called indirect tax. Other examples of indirect taxes are value added tax, excise duty, service tax, GST etc
Multiple choice commerce goods and services tax goods and service tax study of gst goods and services tax (gst)

In India tax evasion is high at:

  1. 20 %

  2. 15%

  3. 30%

  4. 18%
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation
India's top tax rate is currently 30 per cent. But it is not just the rich evading their taxes. Less than 3 per cent of Indians file income-tax returns at all, and officials said only about 1.5 million taxpayers claim they earn more than one million rupees per year. In the current year, of the 76 lakh individual assesses who declared income of above Rs 5 lakh, 56 lakh are in the salaried class.
Multiple choice civics direct taxes black money and tax evasion meaning of tax public revenue : direct and indirect taxes income tax

Which of the following is direct tax?

  1. Excise duty

  2. Sales tax

  3. Income tax

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

Direct taxes are those which are those which are paid directly to the government by the taxpayer.These taxes are not paid deducted and paid on behalf of the taxpayer.Key examples of direct taxes are Income tax, Wealth tax and Corporation tax.

Multiple choice civics direct taxes black money and tax evasion meaning of tax public revenue : direct and indirect taxes income tax

Find the tax which is Direct Tax among the following 

  1. Personal income tax

  2. Excise Duty

  3. Sales Tax

  4. Service Tax
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

A direct tax is paid by a person upon whom it is legally imposed; its effect is borne by the tax payer, for example, income tax. Income tax is paid by an individual, a Hindu undivided family, a company, a firm, and local bodies etc. on their incomes. The effect of this tax is borne by these tax payers themselves, the tax payer cannot shift the incidence of the tax upon somebody else. In other words a direct tax is demanded from the very person who it is intended or devised for.

Multiple choice civics direct taxes black money and tax evasion meaning of tax public revenue : direct and indirect taxes income tax

Which of the following is treated as a direct tax?

  1. Sales Tax

  2. VAT

  3. Income Tax

  4. All of these
Reveal answer Fill a bubble to check yourself
B,C Correct answer
Explanation

A direct tax is paid by an individual or organization to the entity that levied the tax. 


Direct taxes include income tax, property tax, corporate tax, estate tax, gift tax, value-added tax (VAT), sin tax, and taxes on assets.
Sales tax is paid by the seller or retailer which is nothing but an intermediary between customer and government and that is why sales tax is an indirect tax. 

Multiple choice civics direct taxes black money and tax evasion meaning of tax public revenue : direct and indirect taxes income tax

Which one of the following is not a merit of direct taxes?

  1. They are imposed according to the ability of the person to pay.

  2. These taxes create civil consciousness.

  3. The revenue is income elastic.

  4. They do not require maintenance of accounts.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Direct taxes do need maintenance of accounts. For example for filing Income Tax returns, there needs to be proper maintenance of accounts so that the figures mentioned is proper and the tax calculated is error free.

Multiple choice civics direct taxes black money and tax evasion meaning of tax public revenue : direct and indirect taxes income tax

Which of the following statements is correct?

  1. Excise duty is levied on sales volume.
  2. Custom duties have been drastically cut down since $1991$.

  3. VAT has been adopted by only 3 states in India.

  4. Agriculture contributes the maximum to the direct tax revenues in India.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The correct statement is that custom duties have been drastically cut down since 1991. Others are wrong because excise duty is levied on production, VAT has been adopted by some states in India and agriculture contributes nil to the direct tax revenues in India.

Multiple choice civics direct taxes black money and tax evasion meaning of tax public revenue : direct and indirect taxes income tax

When the burden of the tax falls on the person on whom the tax is imposed, it is called__________.

  1. Direct tax

  2. Indirect tax

  3. VAT

  4. MODVAT
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

When the burden of the tax falls on the person on whom the tax is imposed, it is called Direct Tax. The effect of this tax is borne by these tax payers themselves, the tax payer cannot shift the incidence of the tax upon somebody else. In other words a direct tax is demanded from the very person who it is intended or devised for.

Multiple choice civics direct taxes black money and tax evasion meaning of tax public revenue : direct and indirect taxes income tax

Under Sec 107(A) the Central Board of Direct Taxes in Consideration of an application by a company may reduce the amount of minimum distribution upto a maximum amount not exceeding _____ of the statutory percentage

  1. 10 percent

  2. 15 percent

  3. 20 percent

  4. 25 percent
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Under the relevant tax provisions, the Board may reduce the minimum distribution requirement by up to 20 percent of the statutory percentage.

Multiple choice civics direct taxes black money and tax evasion meaning of tax public revenue : direct and indirect taxes income tax

Non-Tax revenue includes

  1. Currency and coinage

  2. Dividends and profits

  3. Grants-in-aid

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

Non Tax Revenue Receipts are those revenue receipts which are not generated by Taxing the public. 

  • Money which the Government earns as “Dividends and profits” from its profit making public enterprises (PSUs).
  • Interest which the Government earns on the money lent by it to external or internal borrowers. Thus this revenue receipts may be in foreign currency as well as Indian Rupees.
  • The money which the government receives out of its fiscal services such as stamp printing, currency printing, medal printing etc.
  • Money which the Government earns from its “General Services” such as power distribution, irrigation, banking services, insurance, and community services etc. which make the part of the Government business.
  • Money which the government accrues as fees, fines, penalties etc.
  • Grants the Government of India receives from the external sources. In case of the state Governments, it may be the internal grant from the central Government.