taxes types, methods & budgeting process section 1 MCQ Questions & Answers Detailed Explanation

MOST IMPORTANT indian economy mcq - 6 EXERCISES

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The following question based on Taxes Types, Methods & Budgeting Process topic of indian economy mcq

Questions : PAN card issued by the Income Tax Department can’t be used for which of the following purpose?

(a) proof of registered tax payer

(b) proof of address

(c) proof of identity

(d) proof of date of birth

The correct answers to the above question in:

Answer: (b)

Permanent Account Number (PAN)card is a unique alphanumeric combination. It is issued by the Indian Income Tax Department. It serves as an important ID proof, date of birth proof and proof of taxpayer.

However, it can’t be used for the purpose of address proof, as the address is not mentioned on the PAN card.

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Read more taxes types methods budgeting process Based Indian Economy Questions and Answers

Question : 1

Consider the following statements:

  1. Tax revenue as a per cent of GDP of India has steadily increased in the last decade.
  2. Fiscal deficit as a per cent of GDP of India has steadily increased in the last decade.
Which of the statements given above is/are correct ?

a) Both 1 and 2

b) 1 only

c) 2 only

d) Neither 1 nor 2

Answer: (d)

From the official Economic Survey 2014-15, we get following data If we go only by the strict interpretation of above graph then answer should be “D”

Question : 2

Which of the following best explains the cascading effect of taxation?

  1. When tax imposition leads to a disproportionate increase in prices by an extent more than the rise in the tax.
  2. When tax imposition leads to a disproportionate decrease in prices by an extent more than the rise in the tax.
  3. When tax imposition leads to a disproportionate decrease in imports.
  4. When tax imposition leads to a disproportionate decrease in exports.

a) 4 only

b) 1 only

c) 2 and 3 only

d) 3 and 1 only

Answer: (b)

“Taxation over taxes” or “cascading-effect” of the taxes adds to the deadweight loss i.e. slump in total surplus of a supply chain consisting of the supplier, manufacturer, retailer and consumer.

Due to cascading tax imposition leads to a disproportionate increase in prices by an extent more than the rise in the tax.

Question : 3

Indicate the sequence of the following in terms of the implementation.

  1. Income Tax
  2. Expenditure Tax
  3. Value Added Tax
  4. Fringe Benefits Tax
Codes:

a) 2, 3, 4, 1

b) 1, 3, 2, 4

c) 1, 2, 3, 4

d) 3, 4, 1, 2

Answer: (c)

  1. Income Tax (1860);
  2. Expenditure Tax (1956);
  3. Value Added Tax (1996-97) &
  4. Fringe Benefits Tax (2005).

Question : 4

Which of the following are part of capital budget of Govt. of India?

  1. Issuance of Sovereign Gold Bonds
  2. Receipt from Gold Monetization
Select the correct answer using the code given below:

a) (ii) only

b) Both (i) & (ii)

c) (i) only

d) Neither (i) nor (ii)

Answer: (b)

In the case of Sovereign Gold Bonds, the government issues/creates the gold bond and in return, it gets money from the public.

This money will come under capital receipt because the gold bond is a kind of liability for the govt. which the govt. must pay in future. Principal payment will come under capital expenditure and interest payment will come under revenue expenditure.

The physical gold which the govt. receives from the pubic in case of gold monetization scheme becomes a liability for the govt. (in return for the physical gold, govt issues a paper which is basically liability for the govt.) which the govt. will have to pay in future either in physical gold form or in cash.

Question : 5

Which among the following are the sources of revenue for the central Government?

  1. Corporate Tax
  2. Profit from Public Enterprises
  3. Sale of National Savings Certificates
  4. Loans received from the World Bank
  5. Excise duties
Select the correct answer from the codes given below.

a) 2, 3 and 4

b) 3, 4 and 5

c) 1, 2 and 3

d) All of the above

Answer: (d)

Question : 6

Who had suggested an imposition of ‘expenditure tax’ in India for the first time?

a) Kaldor

b) R.J. Chelliah

c) Kalecki

d) Gautam Mathur

Answer: (a)

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