taxes types, methods & budgeting process section 2 MCQ Questions & Answers Detailed Explanation

Answer: (b)

The parameters for the distribution of taxes among the states (horizontal distribution) for FFC are

1. Income Distance (45%),
2. Population (2011 Census) (15%),
3. Demographic Performance (12.5%),
4. State Area (15%),
5. Forest Cover (10%),
6. Tax effort (2.5%).

Answer: (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.

Answer: (c)

MODVAT e.g. modified value added tax is related to Value added tax e.g. VAT.

Answer: (d)

The Minimum Alternative Tax (MAT) was introduced for the first time in the Budget for the year 1996-97.

Minimum alternate tax or MAT is a tax levied on firms/ companies or limited liability partnerships (LLPs) making abundant profits as well as distributing dividends to its shareholders who leveraging on the features of the Indian Taxation system do not contribute towards the government’s taxation kitty.

Thus, for such corporates, a minimal tax amounting to some fixed percentage of book profits i.e. profits according to accounting records is charged as minimal alternative tax (MAT).

Answer: (c)

Fiscal Deficit is equal to total borrowing and the borrowing is part of capital receipts which create debt. So fiscal deficit is equal to debt creating capital receipts.

Answer: (b)

Corporation Tax, Wealth Tax and Income Tax are in the category of direct tax.