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 social science government and taxes types of tax types of taxes government budget and taxation

Levy of excise duty on a product has_____.

  1. income and substitution effect thus causing reduction in demand

  2. income effect only

  3. substitution effect only

  4. black marketing of the goods
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Levying an excise duty increases the price of a product, which reduces the consumer's real purchasing power (income effect) and encourages them to switch to cheaper alternatives (substitution effect), leading to lower demand.

Multiple choice social science government and taxes types of tax types of taxes government budget and taxation

In a developing economy ________ plays a role.

  1. no taxation

  2. regressive taxation

  3. progressive taxation

  4. proportional taxation
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Developing economies often utilize progressive taxation to reduce income inequality and fund public infrastructure. This system ensures that those with higher incomes pay a higher percentage of their earnings in taxes.

Multiple choice social science government and taxes types of tax types of taxes government budget and taxation

A tax that takes away a higher proportion of ones income, as the income rises is termed as __________.

  1. Progressive Tax

  2. Proportional tax

  3. Regressive tax

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

A progressive tax is defined by a system where the tax rate increases as the taxable amount increases. This means higher earners pay a larger proportion of their income compared to lower earners.

Multiple choice social science government and taxes types of tax types of taxes government budget and taxation

Which of the following taxes are included in price?

  1. Direct tax

  2. Wealth tax

  3. Income tax

  4. Indirect tax
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Indirect taxes are collected by intermediaries (like sellers) and passed on to the government. Because they are added to the cost of goods and services, they are effectively included in the final price paid by the consumer.

Multiple choice social science government and taxes types of tax types of taxes government budget and taxation

Find the correct statement.

  1. Share of direct is more than indirect tax in total tax revenue of Government

  2. Share of indirect is more than direct tax in total tax revenue of Government

  3. GST is direct tax

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

Historically, indirect taxes have accounted for a larger share of total tax revenue in India compared to direct taxes, although this balance has shifted over time.

Multiple choice social science government and taxes types of tax types of taxes government budget and taxation

Whether the registered person will get immunity from interest & late fee leviable if assessment order passed u/s 62(1) is withdrawn?

  1. Taxable person will get immunity only from late fee u/s 47.

  2. No, taxable person will still be liable for interest u/s Section 50 and late fee u/s Section 47. Therefore, no immunity has been provided for the same.

  3. Taxable person will get immunity from late fee u/s 47 as well as interest u/s 50.

  4. Taxable person will get immunity only from interest u/s 50.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The Taxable person will get immunity only from interest u/s 45. No, the taxable person will still be liable for interest under section Sec 45 and late fee under section Sec 42. Therefore, no immunity has been provided for the same. 

Where the taxable person is incapable to conclude the value of goods or services or both or establish the rate of tax applicable thereto, he may request the proper officer in writing giving reasons for payment of tax on a temporary basis and the proper officer shall pass an order, within a period not later than ninety days from the date of receiving of such request, allow the expense of tax on temporary basis at such rate or on such value as may be particular by him.

 Thus, the correct option is D.

Multiple choice social science government and taxes types of tax types of taxes government budget and taxation

Recently, India shifted to a new method for measuring its national income. The new method classifies taxes into 'product' and 'production'. Select the statements given below which are correct about these taxes. using the code—
1. Both of the taxes arc imposed on the producers.
2. While product taxes are variable, the production taxes are fixed.
3. Land revenue. profession tax, stamps and registration fees are some of the examples of production taxes in India.
4. Sales tax, excise duty, service tax, export and import taxes are the examples of product taxes in India.

  1. 1 and 2

  2. 1,2 and 3

  3. 2,3 and 4

  4. 1,2,3 and 4
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation
While the product taxes are imposed on the producers they are ultimately paid by the consumers of the goods and sen icesthese taxes are linked to the production volumes of the producers (so they are variable). Production taxes are paid by producers are not linked to the volume of their productions that is why they are 'fixed cost- of production.

Multiple choice social science government and taxes types of tax types of taxes government budget and taxation

Revenue of the state governments is raised from the following sources, except ____________.

  1. entertainment tax

  2. expenditure tax

  3. agricultural income tax

  4. land revenue
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

In India, agriculture is not considered as commercial activity, it is considered as activity of subsistence from hundreds of years. Other areas such as entertainment, expenditure, and land revenue can be seen as business activities for purpose of profit making. This is the main reason for being exclusion of agricultural revenue out side taxation.

Multiple choice social science government and taxes types of tax types of taxes government budget and taxation

Excise duty tax is levied on the _______.

  1. import of goods

  2. export of goods

  3. production of goods

  4. sale of goods
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

  • Excise duty is a tax on manufacture or production of goods. Excise duty on alcohol and narcotic substances is collected by the State Government and is called State Excise duty. The Excise duty on rest of goods is called Central Excise duty.
  • Sales Tax is different from the Excise duty as former is a tax on the act of sale while the latter is a tax on the act of manufacture or production of goods.

Multiple choice social science government and taxes types of tax types of taxes government budget and taxation

Among the tax revenues of the Central government, the leading source is _____.

  1. income tax

  2. corporation tax

  3. union excise tax

  4. custom duty
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

  • The Union excise duties are the leading source of revenue for the Central Government and are levied on commo­dities produced within the country (exclu­ding those commodities on which State excise is levied e.g. liquors and narcotic drugs).
  • The most important commodities from the revenue point of view are sugar, cotton, mill cloth, tobacco, motor spirit, matches and cement.