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.

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Indian Taxation System Questions

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 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

According to the income tax rule in India depreciation is to be charged on the basis of which one of these.

  1. Written down value method

  2. Accounting book-value method

  3. Discounted cash flow method

  4. Pay back method
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

According to the income tax rule, 1961 depreciation is to be charged on the basis of written down value method in India which meant depreciation percentage charge would be applied on the written down value that came after all such depreciation from previous years. 

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.

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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.

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

If a firm produces goods with Rs. 10,000 and the cost of raw materials is Rs. 10,000 and the firm will pay tax on Rs. 4000. 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
A Correct answer
Explanation

The firm is paying tax according to the VAT system. VAT stands for Value Added Tax, which is a type of tax that is assessed incrementally, based on the increase in value of a product or service at each stage of production or distribution. 

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Investment in funds like ELSS are admissible for deduction under section $80\text{C}$ of income tax.

  1. True

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

Investments in Equity Linked Saving Schemes or ELSS qualify for tax deduction under Section $80C$ of the Income Tax Act. The maximum tax deduction allowed under Section $80C$ is Rs 1.5 lakh under Section $80C$.

Multiple choice income tax direct taxes commerce black money and tax evasion meaning of tax

Gratuity received by a government employee is ______.

  1. Fully exempted

  2. Partly exempted

  3. Fully taxable

  4. Exempted up to Rs:1,00,000
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Gratuity is a sum of money paid by an employer to an employee for services rendered in the company. However, gratuity is paid only to employees who complete 5 or more years with the company. It can be understood as a form of tip paid by employer to the employee for services offered in the company. Any employee under the state government, central government or local authority receives gratuity amount than the amount is fully exempt from Income Tax.