Taxation MCQ Quiz - Objective Question with Answer for Taxation - Download Free PDF

The correct answer is Finance Minister, Union Minister of State for Finance.

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• The 54th GST Council Meeting was held to discuss major changes in GST rates and compliance measures.

Key Points

• The GST Council is a constitutional body established under Article 279A of the Indian Constitution.
• The Council is chaired by the Union Finance Minister.
• It includes the Union Minister of State for Finance as a member.
• All state Finance Ministers or any other minister nominated by each state government are also members.

Additional Information

• GST Council
  • Established under Article 279A by the 101st Constitutional Amendment Act, 2016.
  • Recommends GST rates, exemptions, model laws, etc.
  • Ensures uniformity in tax structure across the country.
• Union Finance Minister
  • Chairs the GST Council.
  • Currently: Nirmala Sitharaman (as of 2024).
• State Representation
  • Each state nominates a minister to represent them in the Council.
  • Ensures cooperative federalism in tax governance.
• Decision Making
  • Decisions require a 75% majority of weighted votes.
  • Central Government has one-third weightage; States together have two-thirds.

The correct answer is A, B, and C.

Key Points

• Agricultural Land Tax is one of the primary sources of land revenue in India, levied on income generated from agricultural land.
• Water Tax is a tax levied on the use of irrigation water, contributing significantly to land revenue in agricultural regions.
• Non-agricultural Land Assessment involves the assessment and taxation of land used for non-agricultural purposes such as industrial, commercial, or residential purposes.
• These taxes form a critical revenue source for state governments, particularly in regions where agriculture and land-based economic activities dominate.
• Land revenue is collected and managed by state governments as per the Constitution of India, which lists it under the State List.

Additional Information

• Land Revenue System: The land revenue system in India dates back to ancient times and was formalized during British rule through systems like Zamindari, Ryotwari, and Mahalwari.
• Constitutional Provision: Land revenue falls under the State List in the Seventh Schedule of the Indian Constitution, giving states exclusive power to legislate on it.
• Modern Use: Revenue collected through these sources is often used for state welfare programs, infrastructure development, and rural development initiatives.
• Challenges in Collection: Issues such as under-assessment, evasion, and lack of updated land records can reduce the efficiency of land revenue collection.
• Digitization of Land Records: Programs like the Digital India Land Records Modernization Programme (DILRMP) aim to create a transparent, efficient, and updated land revenue collection system.

The correct answer is Direct tax.

Key Points

• Income tax is classified as a direct tax because it is levied directly on the income or profits of individuals, businesses, or other entities.
• Unlike indirect taxes, which are collected by intermediaries (e.g., retailers), direct taxes are paid directly by the taxpayer to the government.
• The Income Tax Act, 1961, governs the levy, collection, and administration of income tax in India.
• Income tax rates in India are progressive, meaning higher income levels are taxed at higher rates, ensuring equity in taxation.
• Income tax contributes significantly to government revenues, funding infrastructure, public welfare schemes, and other developmental projects.

Additional Information

• Direct Tax:
  • Examples of direct taxes include income tax, corporate tax, and wealth tax.
  • These taxes are progressive, meaning individuals with higher incomes pay a larger proportion of their income as tax.
  • Direct taxes are considered equitable as they are based on the taxpayer's ability to pay.
• Indirect Tax:
  • Indirect taxes are collected by intermediaries and passed on to the government (e.g., GST, customs duty).
  • Unlike direct taxes, they are regressive as they affect all consumers equally, irrespective of income levels.
• Professional Tax:
  • It is a state-imposed tax levied on income earned through professions, trades, or employment.
  • Professional tax rates vary across Indian states, with a maximum cap of ₹2,500 annually.
• Service Tax:
  • It was an indirect tax levied on services provided in India, which has now been subsumed under GST since July 1, 2017.

The correct answer is 101st Amendment.

Key Points

• The 101st Constitutional Amendment Act was passed by the Parliament of India in August 2016.
• This amendment led to the introduction of the Goods and Services Tax (GST), which came into effect from 1st July 2017.
• GST replaced multiple indirect taxes like VAT, service tax, excise duty, etc., with a single tax regime.
• The amendment aimed to streamline the tax structure and enhance the efficiency of the tax system in India.
• The GST Council was established under this amendment to make recommendations on various GST-related issues.

Additional Information

• Goods and Services Tax (GST)
  • GST is a comprehensive, multi-stage, destination-based tax that is levied on every value addition.
  • It is divided into Central GST (CGST), State GST (SGST), Integrated GST (IGST), and Union Territory GST (UTGST).
  • GST has subsumed numerous indirect taxes such as excise duty, VAT, service tax, and more.
  • It simplifies the taxation system and reduces the cascading effect of taxes by allowing seamless input tax credit.
  • The GST regime aims to create a unified market and promote economic growth by reducing tax evasion and enhancing transparency.
• GST Council
  • The GST Council is a constitutional body established under Article 279A.
  • It comprises the Union Finance Minister, the Union Minister of State for Finance, and the Finance Ministers of all states.
  • The council is responsible for making recommendations on aspects like tax rates, exemptions, thresholds, and other matters related to GST.
  • Decisions in the GST Council are made by a majority of not less than three-fourths of the weighted votes of the members present.
• Input Tax Credit (ITC)
  • ITC allows businesses to claim the tax paid on purchase of goods and services used for business purposes.
  • It helps in reducing the overall tax liability and ensures that tax is paid only on the value addition.
  • ITC is available for both goods and services under the GST regime.
• GST Rates
  • GST has multiple rates ranging from 0%, 5%, 12%, 18%, to 28%, based on the type of goods and services.
  • Luxury items and sin goods attract higher tax rates, whereas essential goods and services are taxed at lower rates.

The correct answer is New Delhi.

Key Points

• The Secretariat of the Goods and Services Tax (GST) Council is located in New Delhi, India.
• The GST Council Secretariat was established to assist the GST Council in the discharge of its functions.
• It plays a crucial role in coordinating between the central government and various state governments regarding GST matters.
• The Secretariat provides administrative and logistical support for the GST Council meetings and other related activities.

Additional Information

• Goods and Services Tax (GST)
  • GST is an indirect tax that has replaced many indirect taxes in India such as excise duty, VAT, services tax, etc.
  • It is a single tax on the supply of goods and services, right from the manufacturer to the consumer.
  • GST is a destination-based tax, meaning it is collected from the point of consumption rather than the point of origin.
  • There are three types of GST in India: CGST (Central GST), SGST (State GST), and IGST (Integrated GST).
• GST Council
  • The GST Council is a constitutional body for making recommendations to the Union and State Governments on issues related to GST.
  • The Council is chaired by the Union Finance Minister and includes the Union Minister of State for Finance and the Finance Ministers of all the states.
  • Decisions in the GST Council are taken by a three-fourth majority of the votes cast, with the central government having one-third of the votes and the state governments having two-thirds.
• GST Network (GSTN)
  • GSTN is a non-profit organization established to manage the entire IT system of the GST portal, which is the common and shared IT infrastructure between the central and state governments, taxpayers, and other stakeholders.
  • It facilitates the registration, payment, and return filing processes under GST.
  • GSTN ensures data security and confidentiality of taxpayer information.
• Impact of GST
  • GST has simplified the tax structure by subsuming various indirect taxes under a single regime.
  • It has helped in reducing the cascading effect of taxes, thereby lowering the overall tax burden on goods and services.
  • GST has improved the ease of doing business by providing a common national market and reducing complexities related to tax compliance.

The correct answer is 1 July 2017.Key Points

• ​GST was passed as the 101st Amendment Act of 2016.
• GST (Goods and Services Tax): is a comprehensive indirect tax on the manufacture, sale and consumption of goods and services throughout India.
• The four basic rate structures of GST are 5%. 12%, 18% and 28%.

Additional Information

• The motto of GST - is "One Nation, One Tax, One Market".
• Three types of taxes in Indian GST are State GST(SGST)/ Union Territory GST(UTGST), Central GST(CGST) and Integrated GST(IGST).
• GST bill was passed by Rajya Sabha on 3rd August 2016.
• GST bill was passed by Lok Sabha on 8th August 2016.
• GST bill was signed by President on 8th September 2016.
• GST came into effect from 1st July 2017.
• Articles deals with the formation of the GST council is 279A.
• The Chairman of the GST council is Union Finance Minister.
• The first Chairman of the GST council is Arun Jaitley. 
• The concept of GST was first presented in Parliament by P. Chidambaram in 2005. 
• India has chosen the Canadian model of dual GST. 
• The first country to introduce GST: France in 1954.

The correct answer is Revenue Receipts.Key Points

• Non-tax revenue refers to the income generated by the government from sources other than taxes, such as fees, fines, and grants.
• It is a part of revenue receipts, which are the inflows of funds to the government from all sources.
• The approximations of non-tax revenue receipts from a range of sources, including interest, fees, fines, and other miscellaneous receipts collected during the exercise of sovereign functions, regulatory and license fees, and user fees for goods and services made available to the public.

Additional Information

• Revenue expenditure refers to the expenses incurred by the government on day-to-day activities and welfare programs.
  • Revenue expenditures are basically the same as operating expenses because they comprise the costs necessary to cover a business's continuous operating costs.
• Capital expenditure is the spending on long-term investments such as infrastructure and equipment.
  • A company uses capital expenditures to pay for the purchase, upkeep, and improvement of tangible assets like real estate, machinery, buildings, plants, and technology.
• Capital receipts are the funds raised by the government through borrowings and disinvestment of assets.
  • Income that increases liabilities or decreases financial assets is referred to as a capital receipt.
  • They also make mention of cash inflows.
  • Both debt and non-debt receipts are considered capital receipts.

The correct answer is 101st Amendment.

Key Points

• The 101st Constitutional Amendment Act was passed by the Parliament of India in August 2016.
• This amendment led to the introduction of the Goods and Services Tax (GST), which came into effect from 1st July 2017.
• GST replaced multiple indirect taxes like VAT, service tax, excise duty, etc., with a single tax regime.
• The amendment aimed to streamline the tax structure and enhance the efficiency of the tax system in India.
• The GST Council was established under this amendment to make recommendations on various GST-related issues.

Additional Information

• Goods and Services Tax (GST)
  • GST is a comprehensive, multi-stage, destination-based tax that is levied on every value addition.
  • It is divided into Central GST (CGST), State GST (SGST), Integrated GST (IGST), and Union Territory GST (UTGST).
  • GST has subsumed numerous indirect taxes such as excise duty, VAT, service tax, and more.
  • It simplifies the taxation system and reduces the cascading effect of taxes by allowing seamless input tax credit.
  • The GST regime aims to create a unified market and promote economic growth by reducing tax evasion and enhancing transparency.
• GST Council
  • The GST Council is a constitutional body established under Article 279A.
  • It comprises the Union Finance Minister, the Union Minister of State for Finance, and the Finance Ministers of all states.
  • The council is responsible for making recommendations on aspects like tax rates, exemptions, thresholds, and other matters related to GST.
  • Decisions in the GST Council are made by a majority of not less than three-fourths of the weighted votes of the members present.
• Input Tax Credit (ITC)
  • ITC allows businesses to claim the tax paid on purchase of goods and services used for business purposes.
  • It helps in reducing the overall tax liability and ensures that tax is paid only on the value addition.
  • ITC is available for both goods and services under the GST regime.
• GST Rates
  • GST has multiple rates ranging from 0%, 5%, 12%, 18%, to 28%, based on the type of goods and services.
  • Luxury items and sin goods attract higher tax rates, whereas essential goods and services are taxed at lower rates.

The correct answer is option 4.

Key Points The GST Council is chaired by the Union Finance Minister. Hence option 4 is the correct answer. 

Additional Information

• The GST Council is a constitutional body under Article 279A of the Indian Constitution.
• It was formed to make decisions on matters related to the Goods and Services Tax (GST).
• The Chairperson is the Union Finance Minister, and its members include:
• State Finance Ministers or nominated ministers from each state.
• The Minister of State for Finance at the central level.

The correct answer is Direct tax.

Key Points

• Income tax is classified as a direct tax because it is levied directly on the income or profits of individuals, businesses, or other entities.
• Unlike indirect taxes, which are collected by intermediaries (e.g., retailers), direct taxes are paid directly by the taxpayer to the government.
• The Income Tax Act, 1961, governs the levy, collection, and administration of income tax in India.
• Income tax rates in India are progressive, meaning higher income levels are taxed at higher rates, ensuring equity in taxation.
• Income tax contributes significantly to government revenues, funding infrastructure, public welfare schemes, and other developmental projects.

Additional Information

• Direct Tax:
  • Examples of direct taxes include income tax, corporate tax, and wealth tax.
  • These taxes are progressive, meaning individuals with higher incomes pay a larger proportion of their income as tax.
  • Direct taxes are considered equitable as they are based on the taxpayer's ability to pay.
• Indirect Tax:
  • Indirect taxes are collected by intermediaries and passed on to the government (e.g., GST, customs duty).
  • Unlike direct taxes, they are regressive as they affect all consumers equally, irrespective of income levels.
• Professional Tax:
  • It is a state-imposed tax levied on income earned through professions, trades, or employment.
  • Professional tax rates vary across Indian states, with a maximum cap of ₹2,500 annually.
• Service Tax:
  • It was an indirect tax levied on services provided in India, which has now been subsumed under GST since July 1, 2017.

The Correct answer is Section 194P.

Key Points

• Section 194P was introduced in the Finance Act 2021 and became applicable from 1st April 2021.
• This section provides relief to senior citizens aged 75 years and above, exempting them from filing income tax returns under certain conditions.
• The exemption applies only if the senior citizen has income exclusively from pension and interest earned on deposits in the same bank where the pension is credited.
• The bank, in such cases, is required to deduct the applicable tax at source (TDS) after considering deductions under Chapter VI-A like Section 80C, 80D, etc., ensuring no tax liability remains.
• This provision aims to simplify tax compliance for elderly individuals who might face challenges in filing returns due to age or health-related reasons.
• It is applicable only for banks that have been notified by the government for this purpose, ensuring proper implementation.
• Senior citizens must submit a declaration to the bank confirming their eligibility under this section.

Additional Information

• Section 139A
  • Section 139A of the Income Tax Act deals with the requirement of obtaining a PAN (Permanent Account Number).
  • PAN is mandatory for certain transactions such as opening a bank account, filing income tax returns, and making financial transactions above a specific limit.
  • This section helps in identifying taxpayers and linking their financial transactions.
• Section 234C
  • Section 234C pertains to the payment of interest for default or delay in payment of advance tax.
  • If a taxpayer fails to pay advance tax installments as required, interest is levied under this section.
  • It ensures timely payment of taxes by taxpayers and prevents accumulation of tax liability.
• Section 80C
  • Section 80C allows taxpayers to claim deductions up to ₹1.5 lakh for specified investments and expenses.
  • Eligible investments include PPF, ELSS, NSC, FD (5 years), etc.
  • This section encourages savings and investments by offering tax benefits.

The correct answer is A, B, and C.

Key Points

• Agricultural Land Tax is one of the primary sources of land revenue in India, levied on income generated from agricultural land.
• Water Tax is a tax levied on the use of irrigation water, contributing significantly to land revenue in agricultural regions.
• Non-agricultural Land Assessment involves the assessment and taxation of land used for non-agricultural purposes such as industrial, commercial, or residential purposes.
• These taxes form a critical revenue source for state governments, particularly in regions where agriculture and land-based economic activities dominate.
• Land revenue is collected and managed by state governments as per the Constitution of India, which lists it under the State List.

Additional Information

• Land Revenue System: The land revenue system in India dates back to ancient times and was formalized during British rule through systems like Zamindari, Ryotwari, and Mahalwari.
• Constitutional Provision: Land revenue falls under the State List in the Seventh Schedule of the Indian Constitution, giving states exclusive power to legislate on it.
• Modern Use: Revenue collected through these sources is often used for state welfare programs, infrastructure development, and rural development initiatives.
• Challenges in Collection: Issues such as under-assessment, evasion, and lack of updated land records can reduce the efficiency of land revenue collection.
• Digitization of Land Records: Programs like the Digital India Land Records Modernization Programme (DILRMP) aim to create a transparent, efficient, and updated land revenue collection system.

The correct answer is Earned Income Tax Credit.

Key Points

• The Earned Income Tax Credit (EITC) is a refundable tax credit for low- to moderate-income working individuals and families, particularly those with children.
• The credit amount depends on the recipient's income and the number of children they have.
• It is designed to encourage and reward work as well as offset federal payroll and income taxes.
• Eligible individuals can receive a tax refund even if they do not owe any taxes.

Important Points

• The EITC is available only to those who work and earn income, and it varies based on marital status, number of children, and income level.
• It has been credited with lifting millions of people out of poverty each year, particularly children.
• The EITC was first enacted in 1975 under President Gerald Ford, and it has been expanded multiple times since.
• To claim the EITC, individuals must file a tax return, even if they do not owe any tax or are not required to file.

Additional Information

• Temporary Assistance to Needy Families (TANF): This is a federal assistance program that provides financial help to low-income families. It is designed to help needy families achieve self-sufficiency through temporary financial assistance and work opportunities.
• Food Stamps: Officially known as the Supplemental Nutrition Assistance Program (SNAP), it provides financial assistance for purchasing food to low- and no-income people. It aims to alleviate hunger and malnutrition.
• Supplemental Security Income (SSI): This is a federal income supplement program funded by general tax revenues (not Social Security taxes) designed to help aged, blind, and disabled people, who have little or no income. It provides cash to meet basic needs for food, clothing, and shelter.

The correct answer is To pay on his wish.

Key Points

• To be honest, informed, and compliant:

  • This is a fundamental responsibility of the taxpayer. A taxpayer should always provide accurate information in tax filings, adhere to applicable laws, and stay informed about any changes in tax regulations.

• To keep accurate records:

  • Taxpayers are required to maintain accurate records of income, expenses, and other financial transactions. These records are important for filing taxes and ensuring compliance in case of audits.

• To know what your representative does on your behalf:

  • If a taxpayer uses a tax representative (e.g., accountant or tax professional), they must ensure that the representative follows legal requirements and actions are in the taxpayer's best interest. The taxpayer is responsible for the actions of the representative.

• To pay on his wish:

  • This is incorrect because paying taxes is not based on personal choice or wish. Taxes are to be paid as per the due dates and amounts specified by the tax authorities, and failure to do so can result in penalties or legal consequences.

The correct answer is 1 July 2017.Key Points

• ​GST was passed as the 101st Amendment Act of 2016.
• GST (Goods and Services Tax): is a comprehensive indirect tax on the manufacture, sale and consumption of goods and services throughout India.
• The four basic rate structures of GST are 5%. 12%, 18% and 28%.

Additional Information

• The motto of GST - is "One Nation, One Tax, One Market".
• Three types of taxes in Indian GST are State GST(SGST)/ Union Territory GST(UTGST), Central GST(CGST) and Integrated GST(IGST).
• GST bill was passed by Rajya Sabha on 3rd August 2016.
• GST bill was passed by Lok Sabha on 8th August 2016.
• GST bill was signed by President on 8th September 2016.
• GST came into effect from 1st July 2017.
• Articles deals with the formation of the GST council is 279A.
• The Chairman of the GST council is Union Finance Minister.
• The first Chairman of the GST council is Arun Jaitley. 
• The concept of GST was first presented in Parliament by P. Chidambaram in 2005. 
• India has chosen the Canadian model of dual GST. 
• The first country to introduce GST: France in 1954.