taxes types, methods & budgeting process section 3 MCQ Questions & Answers Detailed Explanation
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The following question based on Taxes Types, Methods & Budgeting Process topic of indian economy mcq
(a) Extending maturity of debt by raising the interest payable on rate maturing debt
(b) Raising taxes to provide funds to repay the maturing bonds
(c) Selling new bonds and using proceeds to pay off holders of maturity bonds
(d) Print additional paper currency to meet maturing obligations
The correct answers to the above question in:
Answer: (c)
Refinancing means replacing an existing loan with a new loan that pays off the debt of the old loan. So, when a governments debt (public debt) is due, to refinance it, the govt can issue/sell new bonds to raise money.
Alternative definition of refinance: A refinance occurs when an individual or business revises the interest rate, payment schedule, and terms of a previous credit agreement. Debtors will often choose to refinance a loan agreement when the interest rate environment has substantially changed, causing potential savings on debt payments from a new agreement. A refinance involves the re-evaluation of a person or business's credit terms and credit status.
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Read more taxes types methods budgeting process Based Indian Economy Questions and Answers
Question : 1
‘Fiscal Drag’ expresses the impact of inflation on which of the following ?
a) Black money
b) Fiscal Deficit
c) Tax Revenue and GDP
d) Investment
Answer »Answer: (c)
Fiscal drag is an economics term referring to a situation where a government’s net fiscal position (equal to its spending less any taxation) does not meet the net savings goals of the private economy. Fiscal drag is a concept where inflation and earnings growth may push more taxpayers into higher tax bracket.
Question : 2
Consider the following statements. In India, taxes on transactions in Stock exchanges and Futures Markets are
- Levied by the union
- Collected by the States
a) Both 1 and 2
b) Neither 1 nor 2
c) Only 1
d) Only 2
Answer »Answer: (c)
Question : 3
Which one of the following is the major source of gross tax revenue (GTR) for the Government of India?
a) Customs duty
b) Income tax
c) Corporation tax
d) Service tax
Answer »Answer: (c)
Corporation tax in India is the major source of Gross Tax Revenue (GTR) for the Government of India. It provides higher tax collection in comparison to income tax, custom duty and service tax.
Question : 4
Which of the following are revenue receipts of Central Government budget?
- RBI paying dividend to govt. of India
- PSUs paying dividend to govt. of India
- PSUs earnings
- Proceeds from sale of govt. land
a) (i) & (ii) only
b) (i), (ii) & (iii) only
c) (i) only
d) All of the above
Answer »Answer: (a)
Dividend paid by PSUs is revenue receipts of govt. of India. RBI is also a body corporate and owned by govt. of India and its dividend is also revenue receipts for govt. of India.
PSUs business earnings are not part of govt. of India receipts rather it belongs to the PSU. Sale of govt. the land will be a capital receipt for govt. because govt’s assets get reduced.
Question : 5
Which one of the following agencies assigns the Agricultural Income Tax to states in India?
a) Agriculture Finance Corporation
b) Inter – State council
c) National Development Council
d) Finance commission
Answer »Answer: (d)
Agricultural income tax to states in India is assigned by the Constitution of India.
The agency responsible for it is the Finance Commission whose function is the distribution of net proceeds of taxes between the Centre and the States, to be divided as per their respective contributions to the taxes.
Finance commission: It is mainly to give its recommendation on the distribution of tax revenues between the union & the states and amongst the states themselves.
Interstate council: It is established to facilitate coordination of policies and their implementation between the Union & the state govt.
IFC: Its main objective is to foster a measurable increase in the availability of agriculture finance in IFC’s client portfolio globally.
Question : 6
The Grants-in-aid given by the Central Government to the State Governments and local bodies for creation of capital assets are classified in the Union budget under?
a) Capital Expenditure
b) Both Revenue and Capital expenditure
c) Revenue expenditure
d) None of the above
Answer »Answer: (c)
Grants in aid by the Centre to the States will always be revenue expenditure for the Centre. Whether States spend it on capital expenditure or revenue expenditure, does not matter.
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