Q1. Which of the following is a direct tax?
(a) Goods and Services Tax (GST)
(b) Customs duty
(c) Income Tax
(d) Excise duty
Answer: (c)
Explanation: Direct taxes are levied on income, wealth or profits of individuals and entities; Income Tax is a classic example of a direct tax.
Q2. The Constitution of India empowers the Union Government to levy tax on:
(a) Agricultural income
(b) Sales tax
(c) Income other than agricultural income
(d) Professional tax
Answer: (c)
Explanation: Under Article 246 and the Union List, the Centre can levy tax on income other than agricultural income, which remains a state subject.
Q3. Which indirect tax was subsumed under GST?
(a) Stamp duty
(b) Property tax
(c) Service tax
(d) Wealth tax
Answer: (c)
Explanation: Service tax was an indirect tax levied on services and was merged into GST w.e.f. 1 July 2017.
Q4. Under the Income Tax Act, 1961, a person is considered a resident if he stays in India for:
(a) 60 days in the previous year and 365 days in the preceding 4 years
(b) 182 days in the previous year
(c) 90 days in the previous year and 365 days in the preceding 4 years
(d) Both (a) and (b)
Answer: (d)
Explanation: Section 6 of the Income Tax Act defines a resident as someone satisfying either condition: 182 days in the previous year OR 60 days in the previous year plus 365 days in the 4 preceding years.
Q5. Which of the following is NOT a feature of a progressive tax system?
(a) Tax rate increases with increase in taxable income
(b) Higher income groups bear a larger share of tax burden
(c) Tax liability is same proportion of income for all earners
(d) Aimed at reducing income inequality
Answer: (c)
Explanation: A progressive tax imposes a higher percentage rate on higher incomes; a same proportion for all earners describes a proportional (flat) tax.
Q6. The Central Goods and Services Tax (CGST) Act, 2017 levies tax on:
(a) Interstate supply of goods and services
(b) Import of goods only
(c) Intra‑state supply of goods and services
(d) Export of services
Answer: (c)
Explanation: CGST is levied on intra‑state supplies; the Centre shares the revenue with the respective State GST (SGST).
Q7. Which authority is responsible for the administration of the Income Tax Act, 1961?
(a) Comptroller and Auditor General of India
(b) Reserve Bank of India
(c) Central Board of Direct Taxes (CBDT)
(d) Goods and Services Tax Network
Answer: (c)
Explanation: CBDT, functioning under the Department of Revenue, Ministry of Finance, administers direct taxes including Income Tax.
Q8. Under GST, the term “zero‑rated supply” refers to:
(a) Supplies exempt from tax without input tax credit
(b) Supplies taxed at 0% with eligibility to claim input tax credit
(c) Supplies taxed at 5%
(d) Supplies not covered under GST law
Answer: (b)
Explanation: Zero‑rated supplies (e.g., exports, SEZ supplies) attract GST at 0% but allow the supplier to claim ITC on inputs.
Q9. Which of the following incomes is fully exempt from income tax under Section 10 of the Income Tax Act?
(a) Salary income
(b) Interest on Public Provident Fund (PPF)
(c) Income from house property
(d) Capital gains on sale of shares
Answer: (b)
Explanation: Interest earned on PPF is exempt under Section 10(11) of the Income Tax Act.
Q10. The concept of “Minimum Alternate Tax (MAT)” applies to:
(a) Individuals with income below the exemption limit
(b) Companies showing book profit but paying little or no tax due to exemptions
(c) Partnership firms only
(d) Cooperative societies
Answer: (b)
Explanation: MAT ensures that companies with substantial book profits pay a minimum tax even if their taxable income is low due to exemptions/deductions.
Q11. Which schedule of the GST Act specifies the rates of tax for goods and services?
(a) Schedule I
(b) Schedule II
(c) Schedule III
(d) Schedule IV
Answer: (b)
Explanation: Schedule II of the CGST/SGST Act classifies activities as supply of goods or services; tax rates are notified separately but are based on this classification.
Q12. TDS (Tax Deducted at Source) under the Income Tax Act is primarily meant to:
(a) Increase the tax burden on salaried employees
(b) Collect tax in advance from the source of income
(c) Replace advance tax payments for all assesses
(d) Exempt small traders from filing returns
Answer: (b)
Explanation: TDS ensures tax is deducted at the point of income generation (e.g., salary, interest) and deposited with the government, improving compliance.
Q13. Which of the following is an example of an indirect tax that is levied on the manufacture of goods?
(a) Service tax
(b) VAT
(c) Excise duty
(d) Stamp duty
Answer: (c)
Explanation: Excise duty is levied on the production or manufacture of goods within the country (now largely subsumed under GST, except for certain items like petroleum).
Q14. Under the Income Tax Act, the basic exemption limit for an individual below 60 years of age for FY 2023‑24 (AY 2024‑25) is:
(a) ₹2,50,000
(b) ₹3,00,000
(c) ₹5,00,000
(d) ₹2,00,000
Answer: (a)
Explanation: For individuals below 60 years, the basic exemption limit remains ₹2,50,000 for the financial year 2023‑24.
Q15. Input Tax Credit (ITC) under GST cannot be claimed on:
(a) Capital goods used for making taxable supplies
(b) Input services used for business
(c) Goods used for personal consumption
(d) Raw materials used in manufacturing
Answer: (c)
Explanation: ITC is allowed only for inputs/input services used in the course or furtherance of business; personal consumption excludes eligibility.
Q16. Which of the following statements about surcharge on income tax is correct?
(a) Surcharge is levied on the total income of all assesses
(b) Surcharge is calculated on the amount of tax payable, not on income
(c) Surcharge applies only to corporate taxpayers
(d) Surcharge is abolished after the introduction of GST
Answer: (b)
Explanation: Surcharge is an additional charge on the amount of income tax payable (e.g., 10% surcharge if taxable income exceeds ₹50 lakh).
Q17. The term “declared goods” under the Central Sales Tax (CST) Act, 1956 refers to:
(a) Goods exempt from CST
(b) Goods declared as essential by the Central Government for which CST rate is limited
(c) Goods exported outside India
(d) Goods manufactured in SEZ
Answer: (b)
Explanation: Declared goods are those declared by Parliament to be of special importance in inter‑state trade; CST on such goods is capped at a lower rate.
Q18. Which of the following is a characteristic of a regressive tax?
(a) Tax rate rises as income rises
(b) Tax burden as a percentage of income is higher for low‑income earners
(c) Tax is levied only on wealth
(d) Tax proceeds are used exclusively for capital expenditure
Answer: (b)
Explanation: Regressive taxes take a larger percentage of income from low‑income groups (e.g., certain excise duties on essential goods).
Q19. Under GST, the composition scheme is available to taxpayers whose aggregate turnover in the preceding financial year does not exceed:
(a) ₹50 lakhs
(b) ₹1.5 crores
(c) ₹2 crores
(d) ₹5 crores
Answer: (b)
Explanation: The composition scheme (lower tax rates, minimal compliance) is open to small taxpayers with turnover up to ₹1.5 crore (₹75 lakh for special category states).
Q20. Which authority issues advance rulings under GST?
(A) Authority for Advance Rulings (AAR) under the Customs Act
(B) Authority for Advance Rulings (AAR) under the GST Act
(C) Income Tax Settlement Commission
(D) Securities and Exchange Board of India
Answer: (B)
Explanation: The GST law provides for an Authority for Advance Rulings (AAR) and an Appellate Authority for Advance Rulings (AAAR) to determine tax liability in advance.
Q21. Which of the following incomes is taxable under the head “Income from Other Sources”?
(a) Salary received from an employer
(b) Rent from a house property
(c) Interest on savings bank account
(d) Profit from sale of a residential house
Answer: (c)
Explanation: Interest on savings bank account is taxable under “Income from Other Sources” (Section 56), unless exempt under specific provisions.
Q22. The term “tax holiday” in the context of direct taxes refers to:
(a) A period when no tax returns need to be filed
(b) A specified period during which certain profits are exempt from tax
(c) A holiday declared by the Income Tax Department for its employees
(d) A reduction in GST rates for festive season
Answer: (b)
Explanation: Tax holidays are provisions (e.g., Section 10AA, 80-IA) that exempt income of certain undertakings for a defined initial period to promote investment.
Q23. Which of the following is NOT a mandatory document to be filed under GST for a regular taxpayer?
(a) GSTR‑1 (details of outward supplies)
(b) GSTR‑3B (summary return)
(c) GSTR‑9 (annual return)
(d) GSTR‑5A (for OIDAR services)
Answer: (d)
Explanation: GSTR‑5A is filed by Online Information and Database Access or Retrieval (OIDAR) service providers; regular taxpayers file GSTR‑1, GSTR‑3B, and GSTR‑9.
Q24. Under the Income Tax Act, long‑term capital gain on listed equity shares held for more than 12 months is taxed at:
(a) 10% without indexation (if gain exceeds ₹1 lakh)
(b) 15% with indexation
(c) 20% with indexation
(d) Exempt fully
Answer: (a)
Explanation: LTCG on listed equity shares and equity‑oriented funds exceeding ₹1 lakh in a financial year is taxed at 10% without the benefit of indexation (Section 112A).
Q25. The “Equalisation Levy” introduced in India primarily targets:
(a) Domestic manufacturers
(b) Foreign e‑commerce companies providing digital services to Indian customers
(c) Agricultural income
(d) Export of goods
Answer: (b)
Explanation: Equalisation Levy (6% on certain B2B digital services and 2% on e‑commerce supply/services) aims to tax significant digital presence of non‑resident companies lacking a permanent establishment in India.
