Breaking News

Thursday, October 01, 2020

Income Tax MCQs | Income Tax Laws and Practice MCQs | Objective Questions and Answers

Income tax Multiple Choice Questions (MCQs) with answers


In this page you get income tax objective types questions with answers which are asked in various exams of Dibrugarh University, Gauhati University and Assam University.

Also, we will try to cover income tax objective type questions and answers which are asked in UGC Net, CMA, CA, CS and other competitive exams.

Table of Contents

1. Income Tax Multiple Choice Questions (MCQs) with answers – Dibrugarh University 6th Sem General

a) Fill in the blanks

b) True or False

2. Direct Tax Laws I MCQs with answers – Dibrugarh University 5th Sem Speciality

a) Multiple choice questions and answers

b) True or false

3. Direct Tax Laws II MCQs with answers – Dibrugarh University 6th Sem Speciality

a) Fill in the blanks

b) True or False

 INCOME TAX MULTIPLE CHOICE QUESTIONS AND ANSWERS (MCQs)
DIRBUGARH UNIVERSITY B.COM 6TH SEM GENERAL COURSE

Fill in the blanks:

1)      The income tax was introduced in India for the first time in 1860 by British rulers.

2)      Under Section Sec. 10(16), the full amount of scholarship granted to meet the cost of education is exempted.

3)      The value of perquisites is chargeable to tax under the head Salaries.

4)      Income from house property held by a local authority shall be exempted.

5)      If an HUF is controlled from India even partially, it will be residential assessee.

6)      Unrecognized Provident Fund is that fund which is not recognized by the commissioner of Income tax.

7)      The rent fixed under the Rent Control Act where so ever applicable is called standard rent.

8)      An income under the head capital gain to a registered Trade Union is taxable.

9)      A new business was commenced on 01.01.2019. The first ‘previous year’ in this case shall be 01.01.2019 to 31.03.2019.

10)   Residential status is to be determined for income calculation.

11)   Dividend declared by a domestic company shall be exempted from tax.

12)   Deduction for interest on loan taken for construction of self-occupied house after 01.04.1999 is allowed up to actual amount or Rs. 2, 00,000 whichever is less.

13)   Assessee means a person by whom any tax or any other sum of money is payable under the Income-tax Act.

14)   Agricultural income from land situated in India is fully exempted under Section 10 (1) of the Income-tax Act.

15)   Statutory Provident Fund is the oldest type of fund.

16)   House Property Income = Annual Value of Building – Specified Deductions u/s 24.

17)   The status of Reserve Bank of India as a person is ROR as per the Income-tax Act.

18)   Income which accrues or arises in London from a business controlled from India is taxable in the case of Resident (Ordinarily and not-ordinarily).

19)   An income under the head capital gain to a trade union is taxable.

20)   Employer-employee relationship is necessary to term any receipt as salary.

21)   According to Income-Tax Act, 1961, the previous year is that year in which year income is earned to be taxable in the next year.

22)   Gross total income of an assessee consists of income from salaries, income from house property, profits and gains of business or professions, capital gains and from other sources.

23)   As per the Income Tax Act, 1961, agriculture income in India is exempted to tax.

24)   Capital Gain arises from the transfer of any capital asset.

25)   A new business was commenced on 11.11.2011. The first previous year in this case shall be 11.11.2011 to 31.03.2012.

26)   Residential status is to be determined for the previous year.

27)   Dividend declared by domestic company shall be exempted.

28)   Deduction from interest on loan taken for construction of self occupied house after 1.4.1999 is allowed upto actual amount or Rs.2, 00,000, whichever is less.

29)   Income-tax Act, 1961 consists of 298 sections, sub-sections and rules and total 23 chapters.

30)   Agricultural income is fully exempted from tax u/s 10 (1) and as such does not form part of total income.

31)   For the assessment year 2020-21 as assessee can avail deduction u/s 80C up to the extent of 1, 50,000.

32)   Housing property income of a local authority is exempt for taxation under income from house property.

33)   Distribution of assets in kind by a company to its shareholders on its liquidation is not as a transfer of capital assets.

State whether the following statements are true or false:

1)      Tax liability of an assessee depends upon his residential status.                                         TRUE

2)      Daily and other allowance received by a Member of Parliament is not considered for income tax.     TRUE

3)      Only Salaries paid to MPs and MLAs are taxable under the head “Income from other sources.”   TRUE

4)      Income from subletting house will be chargeable under the head ‘income from other sources’. TRUE

5)      Municipal tax is a deduction from net annual value.                 FALSE, FROM GAV

6)      Capital gain arises from the transfer of any capital assets.                     TRUE

7)      Total income of a person is determined on the basis of citizenship in India. FALSE, RESIDENTIAL STATUS

8)      Income Tax is calculated on the basis of residential status of assessee.                           True

9)      Salary is taxable on due basis or on receipt basis, whichever is earlier.                             True

10)   House or property used by the political party is exempted from House Property Tax.                              True

11)   An Income Tax Inspector is appointed by the Central Government.                                 True

12)   Body of individuals should consist of individuals only.                              TRUE

13)   A resident in India cannot become resident in any other country for the same assessment year.  False

14)   Casual income received by the assessee is fully exempt.       False, Fully taxable @30%

15)   Municipal tax due is allowed as deduction for computation of income from house property.  False

16)   Total income of a person is determined on the basis of his citizenship in India.   False, Residential status

17)   ‘Leave Travel Concession’ is a tax-free perquisite for one journey in a block of 4 years.  False, two journey

18)   Tiffin allowance is fully exempted allowance.                              False, taxable

19)   Capital gain arises from the transfer of any capital asset.                       True

20)   Tax is levied on total income of assessee.                     False, Taxable income

21)   The full form of EPZ is Export Promotion Zone.           False, Export Processing Zone  

22)   House rent allowance is a fully taxable allowance.    False    

23)   Actual rent is the rent which is actually received by the owner of the house from the tenant.              True

24)   The income tax was introduced in Indian for the first time in 1860 by British rulers.

25)   Section 10 (10) of the Income-tax Act relates to Gratuity.

26)   Advance salary received shall be taxable in the year of its receipts.

27)   Cost of improvement incurred after acquisition is to be treated as part of the cost.

28)   A company cannot enjoy the status of not ordinary resident.              True, only individual and HUF

29)   The full amount of scholarship granted to meet the cost of education is exempted from tax.  True, Sec. 10(16)

30)   Taxable gratuity = Gratuity received – Arrear.                             False

31)   The annual value of a house property is to be determined according to the provisions of Section 32 of the Income-tax Act.                False, sec. 23

32)   The residential status of an assessee may change from year to year.               True

33)   Any amount withdrawn from the Statutory Provident Fund is exempt from tax.        True

34)   Entertainment allowance is fully taxable irrespective of any expenditure incurred on entertainment of guests or customers.                    True

35)   House Property Income = Annual Value of Building – Specified deductions u/s 22.                    False

36)   Income-tax Act, 1961 came into force from April 1, 1962 in whole of the country.       True

37)   Agricultural income from land situated in India is fully taxable.                            False

38)   Recognized Provident Fund was started in the year 1925.     False, SPF was started in 1925

39)   Bank interest is an example of taxable interest u/s 56(1) of the Income-tax Act, 1961.             False

DIRECT TAX LAW I MULTIPLE CHOICE QUESTIONS AND ANSWERS (MCQs)
DIRBUGARH UNIVERSITY B.COM 5TH SEM SPECIALITY COURSE

Choose the correct answers to the following:

1. Residential status is to be determined for

a)      Previous year.

b)      Assessment year.

c)       Accounting year.

2. The daily allowance received by a Member of the Parliament is

a)      Taxable.

b)      Exempt.

c)       Included in total income for rate purposes.

3. C is entitled to hostel expenditure allowance @ Rs. 600 p.m. per child for 3 children. It will be exempt to the extent of

a)      Rs. 1,800/-

b)      Rs. 900/-

c)       Rs. 600/-      p.m

4. The ceiling limit of deduction u/s 24 (b) in respect of Interest of Loan taken on 01.06.2014 for construction of a self-occupied house is

a)      Rs. 1,50,000/-

b)      Rs. 30,000/-

c)       No limit.

5. For the assessment year 2017-18 rebate under Section 87A is available in the case of the residential individual, if his taxable income is

a.       Rs. 3,00,000 or less.

b.      Rs. 4,00,000 or less.

c.       Rs. 5,00,000 or less.

6. If title of ownership of a house property is under dispute in a court of law, the decision as to who is the owner rests with?

a.       Government of India.

b.      State Government.

c.       Income Tax Department.

7. An appeal against the order of the assessing officer lies with

a.       Commissioner (Appeals) [Sec 246A].

b.      Principal Commissioner of Income Tax.

c.       Joint Commissioner of Income Tax.

8. As per National Pension System, it is mandatory for persons entering the government service on or after January 1, 2004 to contribute

a.       20% of salary every month towards NPS.

b.      15% of salary every month towards NPS.

c.       10% of salary every month towards NPS.  (Salary = Basic +DA)

9. Perquisites or benefits or any other remuneration received from other than the employer, would be taxable under the head.

a.       Income from Salaries.

b.      Income from House Property.

c.       Income from Other Sources.

10. Artificial Juridical person’s example is

a.       State Bank of India, Dibrugarh.

b.      Delhi University.

c.       Guwahati Municipal Corporation.

11. Tribal areas/Scheduled areas allowances as specified in rule 2BB, exemption to State, Assam and other similar States are subject to limit of

a.       Rs. 500 per month.

b.      Rs. 200 per month.

c.       Rs. 100 per month.

12. Mohan is entitled to education allowance @ 6,000 p.a. per child for 3 children. It will be exempted to the extent of

a.       Rs. 4,000.

b.      Rs. 2,400.

c.       Rs. 1,200.

13. The contribution made by the Central Government in the previous year, to the account of an employee under a pension scheme referred to in

a)      Section 80C.

b)      Section 80CCC.

c)       Section 80CCD

14. Where an assessee uses his property for carrying on any business or profession, no income is chargeable to tax under the head

a)      Income from Salaries.

b)      Income from House Property.

c)       Income from Other Sources.

15. The Appellate Tribunal, constituted by the Central Government, functions under the Ministry of Law, consists of which of the following two classes of members?

a)      Judicial and accountant.

b)      Commissioners and accountant.

c)       Inspector of income tax and accountant.

16. Statutory Provident Fund is set up under the provisions of the

a)      Provident Fund Act, 1952

b)      Provident Fund Act, 1925

c)       Income-tax Act, 1961

17. One can deposit in Public Provident Fund subject to

a)      Minimum Rs. 500 and maximum Rs. 1,50,000 per annum.

b)      Minimum Rs. 600 and maximum Rs. 2,00,000 per annum.

c)       Minimum Rs. 700 and maximum Rs. 2,50,000 per annum.

18. Example of an Association of Persons (AoP) is

a)      A village Panchayat.

b)      Mark fed.

c)       Reliance Industries Limited.

19. Pankaj is entitled to hostel allowance @ Rs. 500 p.m. per child for 3 children. It will be exempted to the extent of

a)      Rs. 7,200.

b)      Rs. 12,000.

c)       Rs. 16,400.

20. Underground allowance granted to an employee who is working in uncongenial, unnatural climate in underground mines is exempted to the limit of

a)      Rs. 1,000 per month.

b)      Rs. 800 per month.

c)       Rs. 600 per month.

21. Income tax is applicable to

a.       Whole of India except the State of Jammu and Kashmir.      

b.      Whole of India.

c.       Whole of India except the State of Sikkim.

22. Under the Income-tax Act, the incidence of taxation depends on

a.       The citizenship of the tax-payer.

b.      The age of the tax-payer.

c.       The residential status of the tax-payer.

23. Embezzlement of cash by a cashier is

a.       A revenue loss.

b.      A casual loss.

c.       A capital loss.

24. Leave travel concession is a tax-free perquisite

a.       For one journey in a block of four years.

b.      For one journey per year.

c.       For two journeys in a block of four years.

25. Income which accrues or arises outside India and also received outside India is taxable in case of

a.       Resident only.

b.      Not ordinarily resident.

c.       Both ordinarily resident and not ordinarily resident.

26. Rent received from agricultural land is

a.       Fully exempted. Because it is an agricultural income

b.      Partially exempted.

c.       Not exempted.

27. Leave travel concession is a tax-free perquisite.

a.       For one journey per year.

b.      For one journey in a block of 4 years.

c.       For two journeys in a block of 4 years.

28. An assessee has borrowed money for purchase of a house, and interest is payable outside India. Such interest shall

a.       Be allowed as deduction.

b.      Not be allowed as deduction.

c.       Be allowed as deduction, if the tax is deducted at source.

29. Total income of a person is determined on the basis of his:

(i)     Residential status in India.

(ii)    Citizenship in India.

(iii)   Both of the above.

30. Where the income of an individual includes the income of minor children, such individual shall be entitled to an exemption of

(i)      Rs. 2,000/-

(ii)    Rs. 1,500/- per minor child.

(iii) Rs. 1,500/- per minor child or to the extent of income of the minor child included in the total income of the assessee, whichever is less.

31. D owns a house in which he lives. His employer reimburses to him the electricity bill amounting to Rs. 6,000/-. It shall be a perquisite for

(i)      Specified employee only.

(ii)    Employee other than specified employees.

(iii) Both specified and other employees.

32. Which of the following new Income Tax authorities has been provided w.e.f 01.06.2013?

(i)     Principal Chief Commissioner of Income Tax.

(ii)    Chief Commissioner of Income Tax.

(iii)   Joint Commissioner of Income Tax.

State whether the following statements are True or False

1.       A company shall be ‘non-resident’ if its place of effective management is situated wholly or partially outside India during the relevant accounting year.            False, 100% outside India

2.       Statutory Provident Fund is set up under the provision of the Provident Fund Act, 1952.        False, 1925

3.       Any income derived by the SAARC fund for regional project is exempt from tax.                       True

4.       Income is taxable under the head Income from House Property only if the assessee is not the owner of a house property.                               False

5.       The total income of individual leaving India up to the date of his departure shall be chargeable to tax in that assessment year.             True

6.       Scholarship received by students must be financed by the government.       False

7.       Any income received by any person for or on behalf of the New Pension System Trust (established on February 27, 2008) will not be chargeable to tax.                   True

8.       Interest on borrowed capital is allowable as deduction if capital is borrowed for the purpose of purchase, construction, repair, renewal, etc.                           True

9.       A person may have dual residential status, i.e., he may be resident of one or more countries in a relevant previous year.   True

10.   Salary also includes income tax of employee paid by employer.         True

11.   Fair rental value is based on the rent prevailing for similar type of accommodation in same or similar type of locality.                 True

12.   Public Provident Fund (PPF) offers self-employed people the benefit to enjoy deduction u/s 80C. True        

13.   Indian income is always taxable in India irrespective of the residential status of the tax payer. True

14.   Scholarship granted by government to students to meet the cost of education is not exempted from tax. False , any kind of scholarship is exempted-10(16)

15.   Salary paid to a partner is chargeable under the head ‘salaries’.         False,

16.   Employer’s contribution towards approved superannuation fund is chargeable to tax in the hands of employees to the extent such contribution exceeds Rs. 1.5 lakh per assessment year.   False, above 100000

17.   Capital receipts cannot be treated as taxable incomes.                           True

18.   Scholarship received by a student to meet the cost of education is casual income.    False

19.   No person other than individual or HUF can be ‘not ordinarily resident in India’.         True

20.   A has two house properties. Both are self-occupied. The annual value of both houses will be nil.   True

21.   Body of individuals should consist of individuals only.                              True

22.   Once a person is a resident in a previous year, he shall be deemed to be resident for subsequent previous year also.                       False

23.   Retrenchment compensation received by a workman at the time of his retrenchment is exempt under Section 10 (10B) to the maximum extent of Rs. 5,00,000.                               True

24.   Municipal tax is a deduction from net annual value.                 False, from Gross Annual value

25.   A resident in India cannot become a resident in any other country for the same assessment year.    False

26.   An income under the head ‘Capital Gains’ to a trade union is taxable.                             True

27.   If rent is paid for a house situated in New Delhi, the house rent allowance shall be exempted to the maximum extent of 40% of salary.                False, 50%

28.   The circulars issued by the CBDT are binding on the income-tax authorities.                 True

29.   Once a person is a resident in a previous year, he shall be deemed to be resident for subsequent previous year also.                       False

30.   Scholarship received by a student to meet the cost of education is casual income.  False

31.   Compensation received at the time of voluntary retirement is exempt to the maximum extent of    Rs. 5,00,000/-            True

32.   Municipal tax is a deduction from net annual value.                                 False, from Gross Annual value

33.   Body of individuals should consist of individuals only.                              True

34.   No person other than individual or HUF can be ‘not ordinarily resident in India’.                         True

35.   Casual income received by assessee is fully exempt.                               False, taxed @30%

36.   Monthly pension received by a Government employee is taxable.   True

37.   A new business was set up on 15.10.2013 and it commenced its business from 01.12.2013. The first previous year in this case shall be 15.10.2013 to 31.03.2014.

38.   Monthly pension received by a government employee is fully taxable.

39.   Dividend received by a company from a domestic company is exempt.

40.   Total income of a person is determined on the basis of residential status in India.

DIRECT TAX LAW II MULTIPLE CHOICE QUESTIONS AND ANSWERS (MCQs)
DIRBUGARH UNIVERSITY B.COM 6TH SEM SPECIALITY COURSE

Fill in the blanks:

1.       Income received as rent from sub-letting would be taxable under the head Income from other sources.

2.       Salary, bonus, interest, commission or remuneration received by a partner and allowed as deduction u/s 40(b) is taxable under the head PGBP.

3.       Long-term capital loss can be carried forward for 8 (Eight) succeeding previous years to be set off only from long-term capital gains.

4.       All those assets to which one rate of depreciation is applicable are known as block of assets.

5.       100% of advertisement expenses exceeding Rs. 10,000 paid in cash in a single day are disallowed expenses on computation of profit from business.

6.       Payment exceeding Rs. 10, 000 (Rs. 35,000 in case of transport operator) must be made by crossed cheque or bank draft.

7.       Cost Inflation Index (CII) for the Assessment Year, 2020 – 21 is 289.

8.       Speculation loss to be carried forward for 4 (four) succeeding previous years [Section 73(4)]

9.       When total depreciation is more than available profits, the excess is called unabsorbed depreciation.

10.   No loss can be set off from casual income.

11.   Business loss cannot be set off from salary income.

12.   Short-term capital loss on particular assessment year can be set off in the same assessment year from STCG and LTCG only.

13.   Long term capital loss can be set off only from long term capital gains and not from any other income.

14.   For claiming exemption under Section 54, the assessee should construct the residential property within 3 years after the date of transfer.

15.   Interest on units of a Mutual Fund on or after April 1, 2003 shall be exempt.  [According to Sec. 10(35), any income from units of mutual funds are exempted from]

16.   Where a part of the block of assets is sold for a price less than the opening WDV plus cost of assets, if any, acquired during the year, the balance amount shall be treated as WDV at the end for charging depreciation.

17.   Dividend declared by a domestic company shall be exempted.

18.   Wealth tax is no longer applicable from the assessment year 2016 - 17 onwards.

19.   For claiming exemption u/s 54B, the asset transferred should be rural agricultural land and should be used for at least 2 (two) years.

20.   Loss on account of owning and maintaining race horses can be carried forward for 4 (four) years and set off under the same head only.

21.   Deduction under Section 80D for health insurance premium paid can be claimed by an individual and HUF.

22.   Long-term capital gain = Net transfer price – Indexed cost of acquisition and Improvement.

23.   For computing depreciation under the Income-tax Act, 1961 intangible assets are included under 25% block.

24.   Salary, bonus, commission or remuneration due to or received by a working partner from the firm is taxable under the head Profits and Gains from Business and Profession.

25.   Conversion of debentures into shares shall not be regarded as Transfer for capital gain purpose.

26.   If no system of accounting is followed, interest on securities is taxable on due basis.

27.   Loss under the head ‘house property income’ can be carried forward for 8 years.

State whether the following statements are true or false:

1.       Preliminary expenditure incurred after 31.03.2008 are allowed deduction in 10 equal installments.   False, Under Sec. 35D preliminary expenses are allowed deduction in 5 equal installments.

2.       Conversion of debentures into shares shall not be regarded as transfer for capital gain purpose.       True

3.       If no system of accounting is followed, interest on securities is taxable on receipts basis.       (Note: Interest on securities may be taxed on due or receipts basis depending upon the system of accounting. If the assessee follows cash system of accounting, interest is taxable on receipts basis, otherwise it shall be taxable on due basis. If no system of accounting is followed, it will always be taxable on “due” basis.)           

4.       Loss on account of owning and maintaining the racehorse can be carried forward indefinitely.            False (Note: According to provisions of section 74A(3), the losses incurred by an assessee from the activity of owning and maintaining race horses can be set-off against the income from the activity of owning and maintaining race horses only. Such loss can be carried forward for a maximum period of 4 assessment years for being set-off against the income from the activity of owning and maintaining race horses in the subsequent years.)

5.       Rent paid by a partnership firm to one of its partners for using his house for the business of the firm is an admissible deduction.    True, Allowed as deduction provided rent is substantial

6.       Term Capital Asset u/s 2(14) includes only tangible asset.      False, it includes both tangible and intangible assets.

7.       With effect from Assessment Year, 1999-2000 loss under the head house property can be carried forward for 8 succeeding previous years to be set off from income under the head house property only.         True

8.       Any income arising from transfer of long-term capital asset, being shares and the transaction of sale of such securities is entered into a recognised Stock Exchange in India on or after 01.10.2004 shall be fully exempted.     False

9.       Reserve or Provision for bad and doubtful debt will be fully allowed to be debited u/s 36.     False

10.   From the Assessment Year, 2006-07, speculation loss shall be carried forward for 4 succeeding previous years.                         True

11.   Income by way of Interest on Securities held as stock-in-trade is taxable under the head income from other sources.       False, PGBP

12.   Capital Assets means property of any kind held by an assessee whether or not connected with his business or profession.         False

13.   Provision for bad and doubtful debts is an allowable deduction in computing business income.          False

14.   As per Section 73(1) of the Income tax Act, the loss arising out of speculation business can be set off against profit from non-speculative business.                    False, Only speculative gain within 4 years

15.   Interest on capital or loan received by a partner from a firm is taxable under the head ‘income from other sources’.              False

16.   Conversion of personal effect into stock-in-trade shall be subjected to capital gain. False

17.   Winning from lotteries, cross-word puzzles, horse races and other races, card games, etc., are casual income and hence exempt.                        False

18.   Loss under the head ‘income from house property’ can be carried forward even if the return is not furnished before the due date prescribed u/s 139 (1).                        True

19.   The income earned from a smuggling business is taxable under the head of income from business and profession.                                         True, Whether business is legal or illegal it is taxable

20.   Stock-in-trade, raw materials, consumable stores held by the assessee for his business and profession is capital asset.                    False, excluded from capital asset

21.   Short-term capital loss can be set off from either short-term capital gain or long-term capital gain.  True

22.   Income from card game, horse race, gambling is taxable under the head of income from other sources.  True

23.   Business outside India and business in India stand on the same footing for the purpose of computation of income from business and profession u/s 28 of the Act.                                False

24.   Indexation of cost of capital asset is a must for all types of capital assets in computing income from capital gains.                                False

25.   Short-term capital loss can be set off from short-term as well as out of long-term capital gains.          True

26.   The income earned from a smuggling business is taxable under the head of income from business and profession.         False, Loss of illegal business cannot be set off against legal business.

27.   The business of purchase and sale of shares not to be treated as speculation business.          True

28.   Stock-in-trade, raw materials, consumable stores held by the assessee for his business and profession is capital asset.            False

29.   Unabsorbed depreciation which could not be set off in the same assessment year can be carried forward for 8 years.  False, carried forward till complete absorption and set off from any income

30.   Exemption under Section 54F shall not be allowed if the assessee, on the date of transfer, owns any residential house.          False, disallowed if assessee owns more than one residential house

31.   Income under the head ‘income from other sources’ is taxable on due basis.              True ((Note: Income from other sources may be taxed on due or receipts basis depending upon the system of accounting. If the assessee follows cash system of accounting, interest is taxable on receipts basis, otherwise it shall be taxable on due basis. If no system of accounting is followed, it will always be taxable on “due” basis.)           

32.   A business loss can be carried forward and set off in the subsequent assessment year whether the business on account of which this loss has arisen is continued or not.               True

 

No comments:

Post a comment

Kindly give your valuable feedback to improve this website.

Note: only a member of this blog may post a comment.

Popular Posts for the Day