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

The tax levied by the union government on income of individuals is known as _____.

  1. personal income tax

  2. interest tax

  3. wealth tax

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

 Personal Income Tax (PIT) is a direct tax levied on income of a person. A person means an individual, an ordinary partnership, a non-juristic body of person and an undivided estate. In general, a person liable to PIT has to compute his tax liability, file tax return and pay tax, if any, accordingly on a calendar year basis.

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

Which of the following is/are indirect tax(es)?

  1. Customs duty

  2. Excise duty

  3. Corporation tax

  4. Both (A) & (B)
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Indirect taxes are those where the burden can be shifted to another person, typically through the price of goods or services. Both Customs duty and Excise duty are classic examples of indirect taxes, making option D the correct choice.

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

__________ is a direct tax; _________ is an indirect tax.

  1. Sales tax ; Gift tax

  2. Income tax; Service tax

  3. Gift tax ; Wealth tax

  4. Excise duty ; Sales tax
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Income tax is a direct tax because the burden cannot be shifted, while service tax is an indirect tax collected on services provided. Option B correctly identifies these categories.

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.