BBA 4th Sem Taxation & Laws MCQs 2025
Unit I: Basic Concepts
1. Which of the following is not considered as "Income" under the Income Tax Act, 1961?
a) Salary received
b) Capital receipt
c) Profit from business
d) Rent received
Answer: b) Capital receipt
2. Agricultural income is
a) Fully taxable
b) Fully exempt from tax
c) Partly taxable and partly exempt
d) None of the above
Answer: b) Fully exempt from tax
3. Casual income includes
a) Salary income
b) Business income
c) Winning from lottery
d) Rental income
Answer: c) Winning from lottery
4. The period for which income is calculated for tax purposes is known as
a) Financial Year
b) Previous Year
c) Accounting Year
d) Calendar Year
Answer: b) Previous Year
5. Which of the following is included in Gross Total Income?
a) Exempted income
b) Salary, House property income, and Business income
c) Gifts received from relatives
d) Agricultural income
Answer: b) Salary, House property income, and Business income
Unit II: Basis of Charge
6. The total income of an individual is computed on the basis of his/her
a) Residential status
b) Place of work
c) Citizenship
d) Place of birth
Answer: a) Residential status
7. An individual is considered a resident in India if he/she stays in India for at least
a) 60 days in a financial year
b) 182 days in a financial year
c) 90 days in a financial year
d) 365 days in a financial year
Answer: b) 182 days in a financial year
8. Income which does not form part of total income includes
a) Income from business
b) Agricultural income
c) Salary income
d) Rent received
Answer: b) Agricultural income
9. Which of the following statements is true about tax avoidance?
a) It is illegal
b) It is legally reducing tax liability
c) It is a form of tax evasion
d) None of the above
Answer: b) It is legally reducing tax liability
10. Tax evasion refers to
a) Lawful tax planning
b) Intentionally not paying taxes
c) Claiming all exemptions legally
d) None of the above
Answer: b) Intentionally not paying taxes
UNIT I: Basic Concepts
Income, Agricultural Income, Casual Income
-
Which authority administers the Income Tax Act, 1961?
a) RBI
b) SEBI
c) CBDT
d) Finance MinistryAnswer: c) CBDT
-
Which of the following income is not taxable in India?
a) Business income
b) Salary income
c) Agricultural income
d) Capital gainsAnswer: c) Agricultural income
-
Which of the following is an example of casual income?
a) Salary
b) House rent
c) Winning from lottery
d) Capital gainsAnswer: c) Winning from lottery
-
What is the tax treatment of agricultural income in India?
a) Fully taxable
b) Fully exempt from tax
c) Partially taxable
d) Subject to state government taxationAnswer: b) Fully exempt from tax
-
If a person sells agricultural land and earns profit, under which category will it be classified?
a) Taxable income
b) Capital gains
c) Agricultural income
d) Casual incomeAnswer: c) Agricultural income
Assessment Year, Previous Year
-
What is the term for the year in which income is earned?
a) Assessment year
b) Financial year
c) Previous year
d) Accounting yearAnswer: c) Previous year
-
What is the meaning of the assessment year?
a) The year in which income is earned
b) The year in which earned income is taxed
c) The current year
d) Banking yearAnswer: b) The year in which earned income is taxed
-
If a person earns income between April 1, 2023, and March 31, 2024, what will be the assessment year?
a) 2022-23
b) 2023-24
c) 2024-25
d) 2025-26Answer: c) 2024-25
-
Which year is considered the "earning year" for taxation purposes?
a) Financial year
b) Previous year
c) Assessment year
d) Accounting yearAnswer: b) Previous year
-
What is the difference between the previous year and the assessment year?
a) No difference
b) Income is earned in the previous year and taxed in the assessment year
c) Tax is paid in the previous year and income is earned in the assessment year
d) Only applicable to companies
Answer: b) Income is earned in the previous year and taxed in the assessment year
UNIT II: Basis of Charge
Scope of Total Income, Residence and Tax Liability
-
Which of the following is a key factor in determining tax liability?
a) Citizenship
b) Business type
c) Residential status
d) Family status
Answer: c) Residential status
-
When is a person considered a "resident" in India for tax purposes?
a) If he stays in India for at least 60 days in a financial year
b) If he stays in India for at least 182 days in a financial year
c) If he stays in India for at least 90 days in a financial year
d) If he stays in India for 182 days in the last four years
Answer: b) If he stays in India for at least 182 days in a financial year
-
How many types of residential status exist for tax purposes?
a) One
b) Two
c) Three
d) Four
Answer: c) Three (i) Resident and ordinarily resident, (ii) Resident but not ordinarily resident, (iii) Non-resident)
-
Which of the following incomes is not taxable in India?
a) Income earned in India
b) Income earned outside India but received in India
c) Income earned and received outside India by a non-resident
d) Income received in India from a foreign country
Answer: c) Income earned and received outside India by a non-resident
-
Which income is not included in total income for tax purposes?
a) Salary income
b) Agricultural income
c) Business profits
d) Capital gains
Answer: b) Agricultural income
-
What is tax evasion?
a) Lawfully planning to reduce tax liability
b) Intentionally avoiding tax payment
c) Claiming all possible deductions
d) None of the above
Answer: b) Intentionally avoiding tax payment
-
What is tax avoidance?
a) Illegal non-payment of tax
b) Reducing tax liability through legal means
c) Hiding income
d) Ignoring tax laws
Answer: b) Reducing tax liability through legal means
-
Which of the following is an example of exempt income?
a) Salary
b) Business income
c) Agricultural income
d) Rent received
Answer: c) Agricultural income
-
A person who is a resident and ordinarily resident in India is liable to pay tax on which income?
a) Only Indian income
b) Only foreign income
c) Both Indian and foreign income
d) None of the above
Answer: c) Both Indian and foreign income
-
Which of the following is a capital receipt and not included in taxable income?
a) Salary income
b) Business profits
c) Compensation received for property acquisition
d) Lottery winnings
Answer: c) Compensation received for property acquisition
Answer: b) Investing in government bonds
-
Which of the following is an example of tax planning?
a) Failing to report all income
b) Investing in PPF to claim deduction under Section 80C
c) Hiding foreign bank accounts
d) Not paying GST on business sales
Answer: b) Investing in PPF to claim deduction under Section 80C
-
Which is NOT a legal method of tax saving?
a) Claiming all available deductions
b) Declaring false expenses
c) Investing in tax-exempt bonds
d) Taking a home loan to save tax
Answer: b) Declaring false expenses
Miscellaneous Questions
-
Which of the following is taxable?
a) Amount received from Life Insurance maturity
b) Dividend from a domestic company
c) Winnings from a game show
d) Scholarship for education
Answer: c) Winnings from a game show
-
The Income Tax Act, 1961, came into effect on:
a) 1st April 1950
b) 1st April 1962
c) 1st April 1961
d) 1st April 1975
Answer: b) 1st April 1962
-
Under which section is Agricultural Income exempt from tax?
a) Section 10(1)
b) Section 80C
c) Section 44AB
d) Section 115BB
Answer: a) Section 10(1)
-
Who is liable to pay advance tax?
a) Only salaried employees
b) Only companies
c) Individuals whose tax liability exceeds ₹10,000 in a year
d) Only self-employed persons
Answer: c) Individuals whose tax liability exceeds ₹10,000 in a year
Here are some multiple-choice questions (MCQs) with answers based on Unit I and Unit II of the Indian Income Tax Act, 1961:
Unit I: Basic Concepts
1. Which of the following is not considered as "Income" under the Income Tax Act, 1961?
a) Salary received
b) Capital receipt
c) Profit from business
d) Rent received
Answer: b) Capital receipt
2. Agricultural income is
a) Fully taxable
b) Fully exempt from tax
c) Partly taxable and partly exempt
d) None of the above
Answer: b) Fully exempt from tax
3. Casual income includes
a) Salary income
b) Business income
c) Winning from lottery
d) Rental income
Answer: c) Winning from lottery
4. The period for which income is calculated for tax purposes is known as
a) Financial Year
b) Previous Year
c) Accounting Year
d) Calendar Year
Answer: b) Previous Year
5. Which of the following is included in Gross Total Income?
a) Exempted income
b) Salary, House property income, and Business income
c) Gifts received from relatives
d) Agricultural income
Answer: b) Salary, House property income, and Business income
Unit II: Basis of Charge
6. The total income of an individual is computed on the basis of his/her
a) Residential status
b) Place of work
c) Citizenship
d) Place of birth
Answer: a) Residential status
7. An individual is considered a resident in India if he/she stays in India for at least
a) 60 days in a financial year
b) 182 days in a financial year
c) 90 days in a financial year
d) 365 days in a financial year
Answer: b) 182 days in a financial year
8. Income which does not form part of total income includes
a) Income from business
b) Agricultural income
c) Salary income
d) Rent received
Answer: b) Agricultural income
9. Which of the following statements is true about tax avoidance?
a) It is illegal
b) It is legally reducing tax liability
c) It is a form of tax evasion
d) None of the above
Answer: b) It is legally reducing tax liability
10. Tax evasion refers to
a) Lawful tax planning
b) Intentionally not paying taxes
c) Claiming all exemptions legally
d) None of the above
Answer: b) Intentionally not paying taxes
UNIT I: Basic Concepts
Income, Agricultural Income, Casual Income
-
Which authority administers the Income Tax Act, 1961?
a) RBI
b) SEBI
c) CBDT
d) Finance MinistryAnswer: c) CBDT
-
Which of the following income is not taxable in India?
a) Business income
b) Salary income
c) Agricultural income
d) Capital gainsAnswer: c) Agricultural income
-
Which of the following is an example of casual income?
a) Salary
b) House rent
c) Winning from lottery
d) Capital gainsAnswer: c) Winning from lottery
-
What is the tax treatment of agricultural income in India?
a) Fully taxable
b) Fully exempt from tax
c) Partially taxable
d) Subject to state government taxationAnswer: b) Fully exempt from tax
-
If a person sells agricultural land and earns profit, under which category will it be classified?
a) Taxable income
b) Capital gains
c) Agricultural income
d) Casual incomeAnswer: c) Agricultural income
Assessment Year, Previous Year
-
What is the term for the year in which income is earned?
a) Assessment year
b) Financial year
c) Previous year
d) Accounting yearAnswer: c) Previous year
-
What is the meaning of the assessment year?
a) The year in which income is earned
b) The year in which earned income is taxed
c) The current year
d) Banking yearAnswer: b) The year in which earned income is taxed
-
If a person earns income between April 1, 2023, and March 31, 2024, what will be the assessment year?
a) 2022-23
b) 2023-24
c) 2024-25
d) 2025-26Answer: c) 2024-25
-
Which year is considered the "earning year" for taxation purposes?
a) Financial year
b) Previous year
c) Assessment year
d) Accounting yearAnswer: b) Previous year
-
What is the difference between the previous year and the assessment year?
a) No difference
b) Income is earned in the previous year and taxed in the assessment year
c) Tax is paid in the previous year and income is earned in the assessment year
d) Only applicable to companies
Answer: b) Income is earned in the previous year and taxed in the assessment year
UNIT II: Basis of Charge
Scope of Total Income, Residence and Tax Liability
-
Which of the following is a key factor in determining tax liability?
a) Citizenship
b) Business type
c) Residential status
d) Family status
Answer: c) Residential status
-
When is a person considered a "resident" in India for tax purposes?
a) If he stays in India for at least 60 days in a financial year
b) If he stays in India for at least 182 days in a financial year
c) If he stays in India for at least 90 days in a financial year
d) If he stays in India for 182 days in the last four years
Answer: b) If he stays in India for at least 182 days in a financial year
-
How many types of residential status exist for tax purposes?
a) One
b) Two
c) Three
d) Four
Answer: c) Three (i) Resident and ordinarily resident, (ii) Resident but not ordinarily resident, (iii) Non-resident)
-
Which of the following incomes is not taxable in India?
a) Income earned in India
b) Income earned outside India but received in India
c) Income earned and received outside India by a non-resident
d) Income received in India from a foreign country
Answer: c) Income earned and received outside India by a non-resident
-
Which income is not included in total income for tax purposes?
a) Salary income
b) Agricultural income
c) Business profits
d) Capital gains
Answer: b) Agricultural income
-
What is tax evasion?
a) Lawfully planning to reduce tax liability
b) Intentionally avoiding tax payment
c) Claiming all possible deductions
d) None of the above
Answer: b) Intentionally avoiding tax payment
-
What is tax avoidance?
a) Illegal non-payment of tax
b) Reducing tax liability through legal means
c) Hiding income
d) Ignoring tax laws
Answer: b) Reducing tax liability through legal means
-
Which of the following is an example of exempt income?
a) Salary
b) Business income
c) Agricultural income
d) Rent received
Answer: c) Agricultural income
-
A person who is a resident and ordinarily resident in India is liable to pay tax on which income?
a) Only Indian income
b) Only foreign income
c) Both Indian and foreign income
d) None of the above
Answer: c) Both Indian and foreign income
-
Which of the following is a capital receipt and not included in taxable income?
a) Salary income
b) Business profits
c) Compensation received for property acquisition
d) Lottery winnings
Answer: c) Compensation received for property acquisition
T I: Basic Concepts (Continued)
Income, Agricultural Income, Casual Income
-
Which of the following is NOT considered income under the Income Tax Act, 1961?
a) Salary
b) Business profits
c) Capital receipts
d) Rent received
Answer: c) Capital receipts
-
Which of the following is an example of a capital receipt?
a) Gift from relatives
b) Loan received
c) Salary income
d) Business income
Answer: b) Loan received
-
Lottery winnings are taxed at what rate under Section 115BB?
a) 10%
b) 20%
c) 30%
d) 40%
Answer: c) 30%
-
Which of the following is NOT considered casual income?
a) Prize money from a contest
b) Interest from bank deposits
c) Winning from horse racing
d) Lottery winnings
Answer: b) Interest from bank deposits
-
Which of the following is fully taxable?
a) Agricultural income
b) Salary received in India
c) Gift received from a relative
d) Scholarship received for education
Answer: b) Salary received in India
Assessment Year, Previous Year
-
The financial year for tax purposes in India runs from:
a) January 1 to December 31
b) April 1 to March 31
c) July 1 to June 30
d) October 1 to September 30
Answer: b) April 1 to March 31
-
Which of the following is NOT a correct statement?
a) Assessment year comes after the previous year
b) Financial year and previous year are the same
c) Income is taxed in the previous year
d) Assessment year follows the previous year
Answer: c) Income is taxed in the previous year
-
Which year is also known as the financial year?
a) Assessment year
b) Previous year
c) Accounting year
d) Tax year
Answer: b) Previous year
-
Which of the following income is taxable in the year of receipt, not in the year of earning?
a) Salary
b) Advance salary
c) Casual income
d) Business profits
Answer: c) Casual income
-
In case of salary income, which year is considered for taxation?
a) The year in which salary is due
b) The year in which salary is received
c) Either (a) or (b), whichever is earlier
d) Only the year in which it is received
Answer: c) Either (a) or (b), whichever is earlier
UNIT II: Basis of Charge (Continued)
Scope of Total Income, Residence and Tax Liability
-
Which of the following individuals is NOT considered a resident of India?
a) A person staying in India for 183 days or more in a financial year
b) A person staying in India for 60 days in a year and 365 days in the last 4 years
c) A foreign national visiting India for tourism
d) An Indian citizen working abroad for the last 5 years
Answer: c) A foreign national visiting India for tourism
-
A non-resident in India is taxed on which type of income?
a) Income earned in India
b) Income earned and received outside India
c) Foreign business income
d) None of the above
Answer: a) Income earned in India
-
Which of the following is an example of exempted income?
a) Dividend from Indian companies
b) Business income
c) Income from winning lotteries
d) Salary income
Answer: a) Dividend from Indian companies
-
Income of a resident but not ordinarily resident (RNOR) includes:
a) Only income earned in India
b) Both Indian and foreign income
c) Only foreign income
d) None of the above
Answer: a) Only income earned in India
-
Which of the following is NOT part of total income?
a) Rental income
b) Capital gains
c) Interest earned from savings account
d) Agricultural income
Answer: d) Agricultural income
Tax Avoidance & Tax Evasion
-
Which of the following is an example of tax evasion?
a) Not declaring income in tax return
b) Claiming deductions legally
c) Investing in tax-saving instruments
d) Taking home loan to save tax
Answer: a) Not declaring income in tax return
-
Tax avoidance is:
a) Illegal
b) Legal but unethical
c) A criminal offense
d) Ignoring tax laws
Answer: b) Legal but unethical
-
Which of the following is a legal way to reduce tax liability?
a) Hiding income
b) Investing in government bonds
c) Not filing income tax returns
d) Underreporting sales revenue
Answer: b) Investing in government bonds
-
Which of the following is an example of tax planning?
a) Failing to report all income
b) Investing in PPF to claim deduction under Section 80C
c) Hiding foreign bank accounts
d) Not paying GST on business sales
Answer: b) Investing in PPF to claim deduction under Section 80C
-
Which is NOT a legal method of tax saving?
a) Claiming all available deductions
b) Declaring false expenses
c) Investing in tax-exempt bonds
d) Taking a home loan to save tax
Answer: b) Declaring false expenses
Miscellaneous Questions
-
Which of the following is taxable?
a) Amount received from Life Insurance maturity
b) Dividend from a domestic company
c) Winnings from a game show
d) Scholarship for education
Answer: c) Winnings from a game show
-
The Income Tax Act, 1961, came into effect on:
a) 1st April 1950
b) 1st April 1962
c) 1st April 1961
d) 1st April 1975
Answer: b) 1st April 1962
-
Under which section is Agricultural Income exempt from tax?
a) Section 10(1)
b) Section 80C
c) Section 44AB
d) Section 115BB
Answer: a) Section 10(1)
-
Who is liable to pay advance tax?
a) Only salaried employees
b) Only companies
c) Individuals whose tax liability exceeds ₹10,000 in a year
d) Only self-employed persons
Answer: c) Individuals whose tax liability exceeds ₹10,000 in a year
Income, Agricultural Income, Casual Income
-
Which of the following is an example of income under the head "Income from other sources"?
a) Salary
b) Rent from property
c) Interest on fixed deposits
d) Profits from business
Answer: c) Interest on fixed deposits
-
Which of the following is NOT considered income under Section 2(24) of the Income Tax Act?
a) Profit from business
b) Dividend income
c) Agricultural income
d) Casual income
Answer: c) Agricultural income
-
If a person wins a lottery, how is the income classified?
a) Salary income
b) Income from business
c) Casual income
d) Capital gains
Answer: c) Casual income
-
Under which section of the Income Tax Act are the provisions related to agricultural income stated?
a) Section 10(1)
b) Section 80C
c) Section 44AB
d) Section 115BB
Answer: a) Section 10(1)
-
Which of the following would be treated as agricultural income under the Income Tax Act?
a) Profit from growing trees
b) Profit from dairy farming
c) Rent from agricultural land
d) Income from a factory set up on agricultural land
Answer: c) Rent from agricultural land
Assessment Year, Previous Year
-
In which of the following situations is income considered in the previous year for taxation purposes?
a) A business earns income in the financial year, but it is received the following year
b) A salaried person receives his salary in the financial year
c) A farmer receives income for crops sold the following year
d) All of the above
Answer: b) A salaried person receives his salary in the financial year
-
What is the purpose of the previous year in the context of income tax?
a) To determine the person's income
b) To calculate the total taxable income
c) To declare the amount of taxes due
d) To decide the tax rates applicable for the assessment year
Answer: a) To determine the person's income
-
Which of the following can be considered for determining the tax liability for the assessment year?
a) Only income from the previous year
b) Only income from the current year
c) Both income from the previous year and assessment year
d) Income from the assessment year
Answer: a) Only income from the previous year
-
What is the due date for filing income tax returns for individuals, under normal circumstances?
a) June 30
b) September 30
c) November 30
d) December 31
Answer: b) September 30
-
In which year is the income from a capital gain tax paid?
a) The year in which the property is sold
b) The year in which the income is received
c) The year in which the tax return is filed
d) The year in which the capital gain is calculated
Answer: a) The year in which the property is sold
UNIT II: Basis of Charge (Continued)
Scope of Total Income, Residence and Tax Liability
-
The income of a non-resident Indian is taxable in India on which type of income?
a) Income earned and received only in India
b) Income earned and received both in India and abroad
c) Only income earned in India
d) None of the above
Answer: c) Only income earned in India
-
If a person is a resident but not ordinarily resident (RNOR), which income is taxable?
a) Only foreign income
b) Only Indian income
c) Indian and foreign income
d) None of the above
Answer: b) Only Indian income
-
Which of the following is an example of income that is taxable for a resident but not ordinarily resident (RNOR)?
a) Income earned in India
b) Income earned outside India but received in India
c) Only foreign income
d) None of the above
Answer: a) Income earned in India
-
If an individual qualifies as a resident under the Income Tax Act, how is their global income taxed?
a) Only Indian income
b) Both Indian and foreign income
c) Only foreign income
d) None of the above
Answer: b) Both Indian and foreign income
-
Under the Income Tax Act, how is income from sources outside India taxed for a non-resident?
a) Fully taxable
b) Taxable only in India
c) Exempt from tax in India
d) Taxable in India only if it is received in India
Answer: d) Taxable in India only if it is received in India
-
Which of the following is NOT included in total income for tax purposes?
a) Salary
b) Agricultural income
c) Dividend income from an Indian company
d) Casual income
Answer: b) Agricultural income
-
Which of the following incomes is fully exempt from tax under Section 10 of the Income Tax Act?
a) Salary
b) Agricultural income
c) Dividend from a foreign company
d) Rent from property
Answer: b) Agricultural income
-
A foreign national working in India qualifies as a resident for tax purposes if:
a) He stays in India for more than 182 days in a financial year
b) He stays in India for 90 days or more in a financial year
c) He stays in India for 60 days or more in a financial year
d) He is a citizen of India working abroad
Answer: a) He stays in India for more than 182 days in a financial year
-
Which of the following is a valid exemption under Section 80C?
a) Insurance premiums
b) Agricultural income
c) Capital gains from land
d) Salary from government jobs
Answer: a) Insurance premiums
-
Which of the following is NOT a taxable income?
a) Salary
b) Business income
c) Agricultural income
d) Dividend from Indian companies
Answer: c) Agricultural income
Tax Avoidance & Tax Evasion (Continued)
-
Which of the following is an example of tax avoidance?
a) Concealing income
b) Not filing tax returns
c) Making use of tax-saving investment schemes
d) Hiding assets
Answer: c) Making use of tax-saving investment schemes
-
Tax evasion is an example of:
a) Legal tax planning
b) Illegal tax planning
c) Legal but unethical activity
d) None of the above
Answer: b) Illegal tax planning
-
Which of the following is considered legal tax avoidance?
a) Declaring false income
b) Using legal loopholes to reduce tax liability
c) Not filing tax returns on time
d) Falsifying documents for tax exemptions
Answer: b) Using legal loopholes to reduce tax liability
-
Which section of the Income Tax Act allows deductions for investments under Section 80C?
a) Section 10
b) Section 80C
c) Section 24
d) Section 115BB
Answer: b) Section 80C
-
Which of the following is NOT a recognized form of tax evasion?
a) Not reporting all sources of income
b) Hiding assets from the tax authorities
c) Claiming false deductions
d) Claiming deductions for genuine expenses
Answer: d) Claiming deductions for genuine expenses
-
Which of the following is a criminal offense under the Income Tax Act, 1961?
a) Tax planning
b) Tax avoidance
c) Tax evasion
d) Tax-saving investment
Answer: c) Tax evasion
Miscellaneous Questions (Continued)
-
The maximum amount of income that can be claimed as a deduction under Section 80C is:
a) ₹1,00,000
b) ₹1,50,000
c) ₹2,00,000
d) ₹50,000
Answer: b) ₹1,50,000
-
Interest on a loan taken for higher education qualifies for deduction under:
a) Section 80C
b) Section 80E
c) Section 10
d) Section 24
Answer: b) Section 80E
-
A salaried person can claim deductions on house rent under Section:
a) 80C
b) 10
c) 80GG
d) 24
Answer: c) 80GG
Unit I: Basic Concepts
1. Which of the following is not considered as "Income" under the Income Tax Act, 1961?
a) Salary received
b) Capital receipt
c) Profit from business
d) Rent received
Answer: b) Capital receipt
2. Agricultural income is
a) Fully taxable
b) Fully exempt from tax
c) Partly taxable and partly exempt
d) None of the above
Answer: b) Fully exempt from tax
3. Casual income includes
a) Salary income
b) Business income
c) Winning from lottery
d) Rental income
Answer: c) Winning from lottery
4. The period for which income is calculated for tax purposes is known as
a) Financial Year
b) Previous Year
c) Accounting Year
d) Calendar Year
Answer: b) Previous Year
5. Which of the following is included in Gross Total Income?
a) Exempted income
b) Salary, House property income, and Business income
c) Gifts received from relatives
d) Agricultural income
Answer: b) Salary, House property income, and Business income
Unit II: Basis of Charge
6. The total income of an individual is computed on the basis of his/her
a) Residential status
b) Place of work
c) Citizenship
d) Place of birth
Answer: a) Residential status
7. An individual is considered a resident in India if he/she stays in India for at least
a) 60 days in a financial year
b) 182 days in a financial year
c) 90 days in a financial year
d) 365 days in a financial year
Answer: b) 182 days in a financial year
8. Income which does not form part of total income includes
a) Income from business
b) Agricultural income
c) Salary income
d) Rent received
Answer: b) Agricultural income
9. Which of the following statements is true about tax avoidance?
a) It is illegal
b) It is legally reducing tax liability
c) It is a form of tax evasion
d) None of the above
Answer: b) It is legally reducing tax liability
10. Tax evasion refers to
a) Lawful tax planning
b) Intentionally not paying taxes
c) Claiming all exemptions legally
d) None of the above
Answer: b) Intentionally not paying taxes
UNIT I: Basic Concepts
Income, Agricultural Income, Casual Income
-
Which authority administers the Income Tax Act, 1961?
a) RBI
b) SEBI
c) CBDT
d) Finance MinistryAnswer: c) CBDT
-
Which of the following income is not taxable in India?
a) Business income
b) Salary income
c) Agricultural income
d) Capital gainsAnswer: c) Agricultural income
-
Which of the following is an example of casual income?
a) Salary
b) House rent
c) Winning from lottery
d) Capital gainsAnswer: c) Winning from lottery
-
What is the tax treatment of agricultural income in India?
a) Fully taxable
b) Fully exempt from tax
c) Partially taxable
d) Subject to state government taxationAnswer: b) Fully exempt from tax
-
If a person sells agricultural land and earns profit, under which category will it be classified?
a) Taxable income
b) Capital gains
c) Agricultural income
d) Casual incomeAnswer: c) Agricultural income
Assessment Year, Previous Year
-
What is the term for the year in which income is earned?
a) Assessment year
b) Financial year
c) Previous year
d) Accounting yearAnswer: c) Previous year
-
What is the meaning of the assessment year?
a) The year in which income is earned
b) The year in which earned income is taxed
c) The current year
d) Banking yearAnswer: b) The year in which earned income is taxed
-
If a person earns income between April 1, 2023, and March 31, 2024, what will be the assessment year?
a) 2022-23
b) 2023-24
c) 2024-25
d) 2025-26Answer: c) 2024-25
-
Which year is considered the "earning year" for taxation purposes?
a) Financial year
b) Previous year
c) Assessment year
d) Accounting yearAnswer: b) Previous year
-
What is the difference between the previous year and the assessment year?
a) No difference
b) Income is earned in the previous year and taxed in the assessment year
c) Tax is paid in the previous year and income is earned in the assessment year
d) Only applicable to companies
Answer: b) Income is earned in the previous year and taxed in the assessment year
UNIT II: Basis of Charge
Scope of Total Income, Residence and Tax Liability
-
Which of the following is a key factor in determining tax liability?
a) Citizenship
b) Business type
c) Residential status
d) Family status
Answer: c) Residential status
-
When is a person considered a "resident" in India for tax purposes?
a) If he stays in India for at least 60 days in a financial year
b) If he stays in India for at least 182 days in a financial year
c) If he stays in India for at least 90 days in a financial year
d) If he stays in India for 182 days in the last four years
Answer: b) If he stays in India for at least 182 days in a financial year
-
How many types of residential status exist for tax purposes?
a) One
b) Two
c) Three
d) Four
Answer: c) Three (i) Resident and ordinarily resident, (ii) Resident but not ordinarily resident, (iii) Non-resident)
-
Which of the following incomes is not taxable in India?
a) Income earned in India
b) Income earned outside India but received in India
c) Income earned and received outside India by a non-resident
d) Income received in India from a foreign country
Answer: c) Income earned and received outside India by a non-resident
-
Which income is not included in total income for tax purposes?
a) Salary income
b) Agricultural income
c) Business profits
d) Capital gains
Answer: b) Agricultural income
-
What is tax evasion?
a) Lawfully planning to reduce tax liability
b) Intentionally avoiding tax payment
c) Claiming all possible deductions
d) None of the above
Answer: b) Intentionally avoiding tax payment
-
What is tax avoidance?
a) Illegal non-payment of tax
b) Reducing tax liability through legal means
c) Hiding income
d) Ignoring tax laws
Answer: b) Reducing tax liability through legal means
-
Which of the following is an example of exempt income?
a) Salary
b) Business income
c) Agricultural income
d) Rent received
Answer: c) Agricultural income
-
A person who is a resident and ordinarily resident in India is liable to pay tax on which income?
a) Only Indian income
b) Only foreign income
c) Both Indian and foreign income
d) None of the above
Answer: c) Both Indian and foreign income
-
Which of the following is a capital receipt and not included in taxable income?
a) Salary income
b) Business profits
c) Compensation received for property acquisition
d) Lottery winnings
Answer: c) Compensation received for property acquisition
Income, Agricultural Income, Casual Income
-
Which of the following is NOT considered income under the Income Tax Act, 1961?
a) Salary
b) Business profits
c) Capital receipts
d) Rent received
Answer: c) Capital receipts
-
Which of the following is an example of a capital receipt?
a) Gift from relatives
b) Loan received
c) Salary income
d) Business income
Answer: b) Loan received
-
Lottery winnings are taxed at what rate under Section 115BB?
a) 10%
b) 20%
c) 30%
d) 40%
Answer: c) 30%
-
Which of the following is NOT considered casual income?
a) Prize money from a contest
b) Interest from bank deposits
c) Winning from horse racing
d) Lottery winnings
Answer: b) Interest from bank deposits
-
Which of the following is fully taxable?
a) Agricultural income
b) Salary received in India
c) Gift received from a relative
d) Scholarship received for education
Answer: b) Salary received in India
Assessment Year, Previous Year
-
The financial year for tax purposes in India runs from:
a) January 1 to December 31
b) April 1 to March 31
c) July 1 to June 30
d) October 1 to September 30
Answer: b) April 1 to March 31
-
Which of the following is NOT a correct statement?
a) Assessment year comes after the previous year
b) Financial year and previous year are the same
c) Income is taxed in the previous year
d) Assessment year follows the previous year
Answer: c) Income is taxed in the previous year
-
Which year is also known as the financial year?
a) Assessment year
b) Previous year
c) Accounting year
d) Tax year
Answer: b) Previous year
-
Which of the following income is taxable in the year of receipt, not in the year of earning?
a) Salary
b) Advance salary
c) Casual income
d) Business profits
Answer: c) Casual income
-
In case of salary income, which year is considered for taxation?
a) The year in which salary is due
b) The year in which salary is received
c) Either (a) or (b), whichever is earlier
d) Only the year in which it is received
Answer: c) Either (a) or (b), whichever is earlier
UNIT II: Basis of Charge (Continued)
Scope of Total Income, Residence and Tax Liability
-
Which of the following individuals is NOT considered a resident of India?
a) A person staying in India for 183 days or more in a financial year
b) A person staying in India for 60 days in a year and 365 days in the last 4 years
c) A foreign national visiting India for tourism
d) An Indian citizen working abroad for the last 5 years
Answer: c) A foreign national visiting India for tourism
-
A non-resident in India is taxed on which type of income?
a) Income earned in India
b) Income earned and received outside India
c) Foreign business income
d) None of the above
Answer: a) Income earned in India
-
Which of the following is an example of exempted income?
a) Dividend from Indian companies
b) Business income
c) Income from winning lotteries
d) Salary income
Answer: a) Dividend from Indian companies
-
Income of a resident but not ordinarily resident (RNOR) includes:
a) Only income earned in India
b) Both Indian and foreign income
c) Only foreign income
d) None of the above
Answer: a) Only income earned in India
-
Which of the following is NOT part of total income?
a) Rental income
b) Capital gains
c) Interest earned from savings account
d) Agricultural income
Answer: d) Agricultural income
Tax Avoidance & Tax Evasion
-
Which of the following is an example of tax evasion?
a) Not declaring income in tax return
b) Claiming deductions legally
c) Investing in tax-saving instruments
d) Taking home loan to save tax
Answer: a) Not declaring income in tax return
-
Tax avoidance is:
a) Illegal
b) Legal but unethical
c) A criminal offense
d) Ignoring tax laws
Answer: b) Legal but unethical
-
Which of the following is a legal way to reduce tax liability?
a) Hiding income
b) Investing in government bonds
c) Not filing income tax returns
d) Underreporting sales revenue
Answer: b) Investing in government bonds
-
Which of the following is an example of tax planning?
a) Failing to report all income
b) Investing in PPF to claim deduction under Section 80C
c) Hiding foreign bank accounts
d) Not paying GST on business sales
Answer: b) Investing in PPF to claim deduction under Section 80C
-
Which is NOT a legal method of tax saving?
a) Claiming all available deductions
b) Declaring false expenses
c) Investing in tax-exempt bonds
d) Taking a home loan to save tax
Answer: b) Declaring false expenses
Miscellaneous Questions
-
Which of the following is taxable?
a) Amount received from Life Insurance maturity
b) Dividend from a domestic company
c) Winnings from a game show
d) Scholarship for education
Answer: c) Winnings from a game show
-
The Income Tax Act, 1961, came into effect on:
a) 1st April 1950
b) 1st April 1962
c) 1st April 1961
d) 1st April 1975
Answer: b) 1st April 1962
-
Under which section is Agricultural Income exempt from tax?
a) Section 10(1)
b) Section 80C
c) Section 44AB
d) Section 115BB
Answer: a) Section 10(1)
-
Who is liable to pay advance tax?
a) Only salaried employees
b) Only companies
c) Individuals whose tax liability exceeds ₹10,000 in a year
d) Only self-employed persons
Answer: c) Individuals whose tax liability exceeds ₹10,000 in a year
Income, Agricultural Income, Casual Income
-
Which of the following is NOT included in the definition of income?
a) Salary
b) Business profits
c) Gifts from relatives
d) Rental income
Answer: c) Gifts from relatives
-
Casual income includes:
a) Business profits
b) Salary
c) Winning from lotteries
d) Interest from fixed deposits
Answer: c) Winning from lotteries
-
What is the tax rate for casual income like lottery winnings?
a) 20%
b) 25%
c) 30%
d) 40%
Answer: c) 30%
-
Which of the following is NOT considered agricultural income?
a) Income from growing crops
b) Income from selling agricultural land
c) Income from renting agricultural land
d) Income from a farmhouse used for agriculture
Answer: b) Income from selling agricultural land
-
Which of the following is fully taxable?
a) Dividend from an Indian company
b) Agricultural income
c) Gifts from close relatives
d) Winning from horse races
Answer: d) Winning from horse races
Assessment Year, Previous Year
-
Which of the following years is also known as the "earning year" for tax purposes?
a) Assessment year
b) Previous year
c) Financial year
d) Accounting year
Answer: b) Previous year
-
The period from April 1, 2024, to March 31, 2025, is known as:
a) Previous Year 2023-24
b) Assessment Year 2023-24
c) Previous Year 2024-25
d) Assessment Year 2024-25
Answer: c) Previous Year 2024-25
-
The year in which income is assessed and taxed is called:
a) Financial year
b) Previous year
c) Assessment year
d) Accounting year
Answer: c) Assessment year
-
A taxpayer earns income in FY 2023-24. It will be assessed in:
a) AY 2023-24
b) AY 2024-25
c) FY 2024-25
d) AY 2025-26
Answer: b) AY 2024-25
UNIT II: Basis of Charge (Continued)
Scope of Total Income, Residence and Tax Liability
-
Residential status for tax purposes is determined under which section of the Income Tax Act?
a) Section 2(1)
b) Section 6
c) Section 10
d) Section 80C
Answer: b) Section 6
-
A resident and ordinarily resident (ROR) in India is taxed on:
a) Income earned in India only
b) Income earned outside India only
c) Both Indian and foreign income
d) None of the above
Answer: c) Both Indian and foreign income
-
A non-resident Indian (NRI) is taxed on:
a) Only Indian income
b) Only foreign income
c) Both Indian and foreign income
d) No income
Answer: a) Only Indian income
-
Which of the following is NOT taxable for an individual resident in India?
a) Salary received in India
b) Business profits from India
c) Income from a foreign business outside India
d) Rent from property in India
Answer: c) Income from a foreign business outside India
-
A person is considered an Indian resident if he stays in India for:
a) 182 days or more in a financial year
b) 60 days in a financial year
c) 90 days in a financial year
d) 200 days in a financial year
Answer: a) 182 days or more in a financial year
Tax Avoidance & Tax Evasion
-
Tax evasion is:
a) Legal
b) Illegal
c) A good financial practice
d) Recommended for saving money
Answer: b) Illegal
-
Tax planning refers to:
a) Using legal methods to reduce tax liability
b) Avoiding taxes illegally
c) Hiding income
d) Underreporting income
Answer: a) Using legal methods to reduce tax liability
-
Which of the following is an example of tax avoidance?
a) Investing in tax-saving bonds
b) Not reporting business profits
c) Not paying GST
d) Hiding income in foreign accounts
Answer: a) Investing in tax-saving bonds
-
A person deliberately misreporting income is guilty of:
a) Tax planning
b) Tax evasion
c) Tax avoidance
d) Tax exemption
Answer: b) Tax evasion
Miscellaneous Questions
-
Which of the following incomes is tax-free in India?
a) Lottery winnings
b) Interest on savings bank accounts
c) Agricultural income
d) Business profits
Answer: c) Agricultural income
-
The Income Tax Act, 1961, applies to:
a) Individuals only
b) Companies only
c) All persons including individuals, companies, HUFs, and firms
d) None of the above
Answer: c) All persons including individuals, companies, HUFs, and firms
-
What is the tax treatment of gifts received from close relatives?
a) Fully taxable
b) Fully exempt
c) Taxed at 10%
d) Taxed at 20%
Answer: b) Fully exempt
-
Which of the following is NOT included in total income?
a) Salary
b) Business income
c) Capital gains
d) Agricultural income
Answer: d) Agricultural income
-
Which of the following income is exempt from tax?
a) Rental income
b) Capital gains
c) Scholarship for education
d) Professional fees
Answer: c) Scholarship for education
-
The basic exemption limit for individual taxpayers (below 60 years) under the new tax regime is:
a) ₹2,50,000
b) ₹3,00,000
c) ₹5,00,000
d) ₹7,00,000
Answer: b) ₹3,00,000
-
Which of the following is NOT a taxable income?
a) Salary income
b) Business income
c) Agricultural income
d) Rental income
Answer: c) Agricultural income
a) 1st April 1961
b) 1st April 1962
c) 1st April 1956
d) 1st April 1971
Answer: a) 1st April 1961
a) To prevent tax evasion
b) To collect revenue for government expenditure
c) To increase foreign investment
d) To regulate businesses
Answer: b) To collect revenue for government expenditure
a) Indirect Tax System
b) Progressive Tax System
c) Regressive Tax System
d) Proportional Tax System
Answer: b) Progressive Tax System
a) Section 2(24)
b) Section 10
c) Section 14
d) Section 80C
Answer: a) Section 2(24)
a) Previous Year
b) Financial Year
c) Assessment Year
d) Accounting Year
Answer: c) Assessment Year
a) It is the year in which income is earned
b) It is the year in which income is assessed
c) It is always one year ahead of the assessment year
d) It is the same as the assessment year
Answer: a) It is the year in which income is earned
a) 2022-23
b) 2023-24
c) 2024-25
d) 2025-26
Answer: b) 2023-24
a) Section 2(9)
b) Section 2(31)
c) Section 3
d) Section 5
Answer: c) Section 3
a) Legal ways to minimize tax
b) Illegal ways to reduce or avoid tax
c) Government incentives to reduce tax
d) None of the above
Answer: b) Illegal ways to reduce or avoid tax
a) Paying less tax by lawful means
b) Not paying tax at all
c) Evading tax illegally
d) Filing false tax returns
Answer: a) Paying less tax by lawful means
a) Concealing income
b) Investing in tax-saving instruments
c) Claiming legitimate deductions
d) Following tax laws properly
Answer: a) Concealing income
a) Tax evasion
b) Tax planning
c) Tax compliance
d) Agricultural income
Answer: b) Tax planning
Note: GAAR primarily targets aggressive tax avoidance, not evasion.
a) Section 2(31)
b) Section 2(9)
c) Section 10
d) Section 80C
Answer: a) Section 2(31)
a) Individual
b) Hindu Undivided Family (HUF)
c) Company
d) All of the above
Answer: d) All of the above
a) A person who pays tax
b) A person who is liable to pay tax
c) A person who has filed a tax return
d) None of the above
Answer: b) A person who is liable to pay tax
a) HUF
b) Firm
c) Family
d) AOP (Association of Persons)
Answer: c) Family
a) Income before deductions
b) Income after deductions
c) Tax-free income
d) None of the above
Answer: a) Income before deductions
a) Gross Total Income - Exemptions
b) GTI - Deductions
c) GTI + Tax Refunds
d) GTI + Agricultural Income
Answer: b) GTI - Deductions
a) Salary
b) House Property
c) Business or Profession
d) All of the above
Answer: d) All of the above
a) Total Assessed Income
b) Net Income
c) Net Taxable Income
d) None of the above
Answer: c) Net Taxable Income
a) Gross Total Income
b) Taxable Income
c) Exempted Income
d) Tax Liability
Answer: a) Gross Total Income
a) Fully taxable
b) Partially taxable
c) Fully exempt
d) Taxed at a fixed rate
Answer: c) Fully exempt
a) Lottery winnings
b) Gift from parents
c) Betting gains
d) Race winnings
Answer: b) Gift from parents
a) Normal rates
b) 20%
c) 30%
d) 50%
Answer: c) 30%
a) Place of birth
b) Citizenship
c) Number of days stayed in India
d) Income earned
Answer: c) Number of days stayed in India
a) At least 60 days
b) At least 90 days
c) At least 182 days
d) At least 365 days
Answer: c) At least 182 days
a) Resident
b) Non-Resident
c) Ordinary Resident
d) None of the above
Answer: b) Non-Resident
a) Section 2(24)
b) Section 6
c) Section 10
d) Section 14
Answer: b) Section 6
a) Resident and Ordinarily Resident (ROR)
b) Resident but Not Ordinarily Resident (RNOR)
c) Non-Resident (NR)
d) None of the above
Answer: a) Resident and Ordinarily Resident (ROR)
a) A person who has been an NR for 9 out of 10 previous years
b) A person who has been in India for 730 days or less in 7 preceding years
c) Both (a) and (b)
d) None of the above
Answer: c) Both (a) and (b)
a) Citizenship
b) Days of stay in India
c) PAN card
d) Amount of tax paid
Answer: b) Days of stay in India
a) Section 10
b) Section 14
c) Section 24
d) Section 80C
Answer: a) Section 10
a) Agricultural Income
b) Gift from employer
c) Interest from Fixed Deposit
d) Salary from private employment
Answer: a) Agricultural Income
a) Fully Taxable
b) Partially Taxable
c) Fully Exempt
d) Exempt up to ₹50,000
Answer: c) Fully Exempt
a) Taxable
b) Exempt
c) Partially Exempt
d) None of the above
Answer: b) Exempt
a) ₹5 Lakh
b) ₹10 Lakh
c) ₹20 Lakh
d) ₹25 Lakh
Answer: c) ₹20 Lakh
Note: As per amendments, the limit is ₹20 Lakh as of recent updates.
a) Income from Salary
b) Income from Agriculture
c) Income from Business and Profession
d) Income from Capital Gains
Answer: b) Income from Agriculture
a) The minor child himself
b) The parents (higher earning parent)
c) The guardian
d) The school of the child
Answer: b) The parents (higher earning parent)
a) Firm itself
b) Partners
c) HUF
d) Company
Answer: a) Firm itself
a) Salary
b) Other Sources
c) Business and Profession
d) Capital Gains
Answer: b) Other Sources
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