Practice Taxes types methods budgeting process - indian economy mcq Online Quiz (set-1) For All Competitive Exams
Q-1) Kelkar Committee, in its second report, has recommended to reduce corporate tax to
(a)
(b)
(c)
(d)
Q-2) When was the Wealth tax first introduced in India?
(a)
(b)
(c)
(d)
Q-3) Value Added Tax was first introduced in India in
(a)
(b)
(c)
(d)
Q-4) Which among the following are true for Central Sales Tax? - It is levied on interstate trade.
- It is levied in the Union Territories.
- It is levied in the SEZ.
Select the correct answer from the codes given below.
(a)
(b)
(c)
(d)
Q-5) Who had suggested an imposition of ‘expenditure tax’ in India for the first time?
(a)
(b)
(c)
(d)
Q-6) What has been kept under the purview of Goods and Services Tax (GST)?
(a)
(b)
(c)
(d)
Q-7) Consider the following statements regarding Forex Reserves:
- The country’s Forex Reserves fully covers the external debt
- The country’s Forex Reserves fully covers its one-year imports of goods and services
Select the correct answer using the code given below:
(a)
(b)
(c)
(d)
The country’s forex reserves as of the end of Feb 2020 stood at $476 billion, but India’s external debt crossed 557 billion USD as of June 2019 (and it is still increasing with time).
So, at any point in time, if we want to pay off the complete external debt, it is not possible as forex reserve is only $476 billion.
(As all external debt is denominated in foreign currencies and hardly $1 billion is in rupee debt (Masala bonds), so it has to be paid only through our Forex reserve).
Since the ratio of Forex to External debt is $476/ 557 = 85%, that means our forex reserves don’t cover the external debt.
If it would have been greater than 100% then we say that our external debt is fully covered (with forex reserves).
The country’s one-year imports are around $630 billion (2018-19). So again, our forex reserves don’t fully cover imports also.
Q-8) Which of the following is associated with fiscal policy?
(a)
(b)
(c)
(d)
Fiscal policy is the use of government revenue collection (taxation) and expenditure (spending) to influence the economy. The two main instruments of fiscal policy are changes in the level and composition of taxation and government spending in various sectors.
Q-9) Consider the following statements regarding the presentation of the Budget in the Parliament:
- Finance Bill is introduced on the very first day when the Finance Minister presents Budget in the Parliament
- Appropriation Bill is introduced after the voting on demand for grants is over
Select the correct answer using the code given below:
(a)
(b)
(c)
(d)
The budget is discussed in two stages - the general discussion followed by a detailed discussion.
1st Feb 31st March Detailed Discussion On 1st Feb, the Finance bill is also introduced after the budget presentation.
Q-10) Consider the following statements regarding inverted duty structure in GST:
- It is the result of several tax slabs in our GST structure
- It creates problem in claiming input tax credit
Select the correct answer using the code given below:
(a)
(b)
(c)
(d)
The term ‘Inverted Duty Structure’ refers to a situation where the rate of tax on inputs purchased is more than the rate of tax on outward supplies (or finished products).
This is the result of several tax rates of 0%, 5%, 12%, 18% and 28% in our GST structure.
For example, on "Paper" we have a 5% GST rate but on Books (a finished product) we have a 0% GST rate, so it is a classic case of inverted duty structure.
This creates a problem in claiming input tax credit as the supplier in the chain pays taxes on inputs purchased but he does not collect taxes from the outward supplies.
Q-11) Who had suggested an imposition of ‘expenditure tax’ in India for the first time?
(a)
(b)
(c)
(d)
Suggestion for the imposition of expenditure tax in India for the first time was given by Kaldor on 1956.
Q-12) The largest tax collected at the federal government level is the:
(a)
(b)
(c)
(d)
Roughly 80% comes from the individual income tax and the payroll taxes that fund the social insurance programmes.
Another 11% comes from corporate income tax and the rest is a form of a mixed course.
Q-13) With reference to the ‘Prohibition of Benami Property Transactions Act, 1988 (PBPT Act)’, consider the following statements:
- A property transaction is not treated as a Benami transaction if the owner of the property is not aware of the transaction.
- Properties held by Benami are liable for confiscation by the Government.
- The Act provides for three authorities for investigations but does not provide for any appellate mechanism.
Which of the statements given above is/are correct?
(a)
(b)
(c)
(d)
The act provides is an appellate tribunal, and they’re required to finish the case within one year.
So #3 is wrong, by elimination, we are left with A and B.
So, C is most appropriate because IT dept (therefore, Government) can seize the Benami properties.
Q-14) Consider the following statements about the Agriculture Income Tax
- Agriculture Income Tax is levied and collected by the Union Government.
- Agriculture Income Tax is levied throughout the country in India.
Which of the statements given above is/are correct?
(a)
(b)
(c)
(d)
Agricultural income tax is levied on the income from Agriculture.
At present agriculture is subjected to – two direct taxes and they are Agricultural Income Tax and Land Tax.
They are levied by the state governments. Not all states levy agricultural income tax.
Q-15) The Government of India earns maximum revenue from
(a)
(b)
(c)
(d)
The Government of India earns maximum revenue from Union Excise Duty which is the indirect tax levied and collected on the goods manufactured in India and consumed within the country.
Custom Duty: It is a variation of Indirect tax and is applicable on all goods imported and a few Goods exported out of the country.
Corporation tax: It is a direct tax imposed by jurisdiction on the income or capital of Income.
Q-16) Consider the following statements regarding 'Contingency Fund of India'
- The fund is at the disposal of the president of India
- The fund is at the disposal of the Prime Minister of India
- The funds spent shall ultimately be approved by the parliament
- The funds spent are recouped from the Consolidated Fund of India
Select the correct answer using the code given below:
(a)
(b)
(c)
(d)
This fund is in the nature of an imprest (a fixed fund for a specific purpose) account and is kept at the disposal of the President of India (by the Secretary to the Government of India, Ministry of Finance, Department of Economic Affairs) to enable the government to meet unforeseen expenses pending authorization by the Parliament.
The money is used to provide immediate relief to victims of natural calamities and also to implement any new policy decision taken by the Government pending its approval by the Parliament.
Q-17) Consider the following statements regarding the use of Aadhar for benefit transfer:
- The money can be drawn only from the Consolidated Fund of India
- The States can also use Aadhar to transfer benefits from the Consolidated Fund of States
- The central government can make Aadhar mandatory for authentication to provide any subsidy
- It can be used for the transfer of benefit to individuals who are residing in India for more than 182 days
Select the correct answer using the code given below:
(a)
(b)
(c)
(d)
The Aadhaar (Targeted Delivery of Financial and other Subsidies, Benefits and Services) Act 2016 is an Act to provide for, as good governance, efficient, transparent, and targeted delivery of subsidies, benefits and services, the expenditure for which is incurred from the Consolidated Fund of India or Consolidated Fund of States (States were allowed to transfer benefit through an amendment done 2019) to individuals residing in India (for more than 182 days) through assigning of unique identity numbers.
As per section 7 of the Aadhar Act:
“The Central Government or, as the case may be, the State Government may, for the purpose of establishing the identity of an individual as a condition for receipt of a subsidy, benefit or service for which the expenditure is incurred from, or the receipt therefrom forms part of, the Consolidated Fund of India, require that such individual undergo authentication, or furnish proof of possession of Aadhaar number or in the case of an individual to whom no Aadhaar number has been assigned, such individual makes an application for enrolment: Provided that if an Aadhaar number is not assigned to an individual, the individual shall be offered alternate and viable means of identification for delivery of the subsidy, benefit or service.”
Pursuant to the Act, the government made Aadhaar Regulations 2016:
“Any Central or State department or an agency which requires an individual to undergo authentication or furnish proof of possession of Aadhar number as a condition of receipt of any subsidy, benefit or service pursuant to Section 7 of the Aadhar Act, shall ensure enrolment of its beneficiaries who are yet to be enrolled, through appropriate measures.”
Q-18) Consider the following statements regarding the Corporate Income Tax which the government reduced effectively to 25.17%:
- It is applicable for Indian Companies
- It is applicable for domestic companies
- It is applicable only if the companies are not availing of various exemptions
- The above rate is including Cess and Surcharge
Select the correct answer using the code given below:
(a)
(b)
(c)
(d)
Indian Company means a company registered in India under The Company’s Act 2013. A Foreign Company means a company registered outside India.
A Domestic Company means an Indian Company or it can be a Foreign Company but it should have made arrangements for the declaration and payment of Dividends in India under the Income Tax Act 1961.
The 25.17% tax rate is applicable to Domestic Companies only.
Standard Tax Rate = 22%
Surcharge = 10% of 22% = 2.2%
Cess = 4% of (22% + 2.2%) = 0.968%
Effective Tax Rate = 22% + 2.2% + 0.968% = 25.168% = 25.17%
This rate of 25.17% is applicable to those companies which do not opt for various exemptions provided by the government (and hence there will be no MAT). Govt. gives a lot of tax exemptions because of which even if the official tax rate was 30% plus cess and surcharge, effectively the tax rate was 25-26% after claiming various exemptions.
But it was giving a wrong image to the outside world that India has such a high rate of 30%. So, govt. removed the exemptions and brought the official tax rate down to 25.17%.
To promote manufacturing, for new manufacturing firms set up after 1st October 2019 and commencing its operations before 31st March 2023, the Standard Corporate Income Tax is 15% (after Cess and Surcharge it will be 17.01%).
Q-19) Consider the following statements regarding the import of goods and services in India:
- They are treated as inter-state supplies
- Customs duty and IGST both are applicable
- Only IGST is applicable
- Imports are zero-rated
Select the correct answer using the code given below:
(a)
(b)
(c)
(d)
Exports, imports and movement of goods from one state to another state is treated as an interstate supply for the purpose of GST.
On imports, first customs duty is imposed and then Integrated GST (IGST) is also imposed.
Q-20) Consider the following statements regarding the “Inverted Duty Structure” in international trade:
- It makes domestic manufactured goods less competitive against finished product imports in the domestic market.
- Finished goods are taxed at a higher rate than the raw materials
- Raw materials are taxed at a higher rate than the finished products
- This has reference to Customs Duty
Select the correct answer using the code given below:
(a)
(b)
(c)
(d)
When the import duty on raw materials is quite higher than the import duty on finished goods then it makes the domestic manufacturers less competitive because then traders start importing manufactured goods in the country rather than manufacturing the goods domestically.
India levies the highest duties on the import of raw rubber and one of the lowest duties on the import of finished rubber goods i.e. tyres. This has created an inverted duty structure.