BBA 4th Semester Taxation And Laws MCQ Unit 4

MCQs on Aggregation of Income, Set Off, and Carry Forward of Losses under Income Tax Act, 1961

Section A: Aggregation of Income

What is meant by clubbing of income under the Income Tax Act, 1961?

a) Combining income of two or more persons

b) Including income of one person in the income of another

c) Taxing income at a higher rate

d) Deducting expenses from income

Answer: b) Including income of one person in the income of another

Explanation: Clubbing of income refers to including the income of one person (e.g., spouse, minor child) in the total income of another person under Section 64 to prevent tax evasion.

Under which section is clubbing of income of a spouse addressed?

a) Section 60

b) Section 64

c) Section 70

d) Section 80

Answer: b) Section 64

Explanation: Section 64 deals with the clubbing of income, such as income from assets transferred to a spouse or minor child without adequate consideration.

If a husband transfers an asset to his wife without adequate consideration, the income from such asset is clubbed in whose income?

a) Wife’s income

b) Husband’s income

c) Both husband and wife equally

d) None of them

Answer: b) Husband’s income

Explanation: Income from assets transferred without adequate consideration to a spouse is clubbed in the transferor’s income under Section 64(1)(iv).

Income of a minor child is clubbed with the income of:

a) The parent with higher income

b) The parent with lower income

c) Both parents equally

d) The minor child’s income

Answer: a) The parent with higher income

Explanation: As per Section 64(1A), the income of a minor child is clubbed with the parent whose total income (before clubbing) is higher.

Which of the following incomes of a minor child is exempt from clubbing?

a) Income from fixed deposits

b) Income from manual work or skill

c) Income from investments

d) Income from gifts

Answer: b) Income from manual work or skill

Explanation: Income earned by a minor from manual work, skill, or talent is not clubbed with the parent’s income.

What is the exemption limit for income of a minor child clubbed with a parent’s income?

a) Rs. 1,000 per child

b) Rs. 1,500 per child

c) Rs. 2,000 per child

d) Rs. 2,500 per child

Answer: b) Rs. 1,500 per child

Explanation: Section 10(32) provides an exemption of up to Rs. 1,500 per minor child for income clubbed with the parent’s income.

Aggregation of income is done to compute:

a) Gross Total Income

b) Total Income

c) Taxable Income

d) Net Income

Answer: a) Gross Total Income

Explanation: Aggregation of income involves adding incomes under all heads (after set-off) and clubbing provisions to arrive at Gross Total Income.

Which section deals with the transfer of income without transfer of assets?

a) Section 60

b) Section 61

c) Section 62

d) Section 63

Answer: a) Section 60

Explanation: Section 60 provides that income transferred without transferring the asset is clubbed in the transferor’s income.

Income from a revocable transfer of an asset is clubbed under which section?

a) Section 60

b) Section 61

c) Section 64

d) Section 70

Answer: b) Section 61

Explanation: Income from a revocable transfer of an asset is clubbed with the transferor’s income under Section 61.

Clubbing provisions are primarily introduced to:

a) Increase tax revenue

b) Prevent tax evasion

c) Simplify tax calculations

d) Encourage investments

Answer: b) Prevent tax evasion

Explanation: Clubbing provisions under Section 64 aim to prevent taxpayers from reducing their tax liability by transferring income or assets to family members.

Section B: Set Off of Losses

Set off of losses means:

a) Carrying forward losses to future years

b) Adjusting losses against income in the same year

c) Deducting losses from taxable income

d) Ignoring losses for tax purposes

Answer: b) Adjusting losses against income in the same year

Explanation: Set off involves adjusting losses under one head against income under the same or other heads in the same assessment year.

Which section governs intra-head set off of losses?

a) Section 70

b) Section 71

c) Section 72

d) Section 74

Answer: a) Section 70

Explanation: Section 70 allows set off of losses from one source under a head against income from another source under the same head.

Which section governs inter-head set off of losses?

a) Section 70

b) Section 71

c) Section 72

d) Section 74

Answer: b) Section 71

Explanation: Section 71 allows set off of losses under one head against income under another head in the same assessment year.

Loss from house property can be set off against:

a) Income from salary only

b) Income from any other head

c) Income from capital gains only

d) Income from business only

Answer: b) Income from any other head

Explanation: Loss from house property can be set off against income from any other head up to Rs. 2,00,000 in a year.

What is the maximum amount of house property loss that can be set off in a year?

a) Rs. 1,00,000

b) Rs. 1,50,000

c) Rs. 2,00,000

d) Rs. 2,50,000

Answer: c) Rs. 2,00,000

Explanation: Section 71B limits the set off of house property loss against other heads to Rs. 2,00,000 per assessment year.

Business loss can be set off against:

a) Income from salary

b) Income from any head except salary

c) Income from capital gains only

d) Income from house property only

Answer: b) Income from any head except salary

Explanation: Business loss (other than speculative) can be set off against income from any head except salary under Section 71.

Speculation business loss can be set off against:

a) Any business income

b) Speculation business income only

c) Any head of income

d) Capital gains only

Answer: b) Speculation business income only

Explanation: As per Section 73, speculation loss can only be set off against profits from speculation business.

Short-term capital loss can be set off against:

a) Long-term capital gains only

b) Short-term capital gains only

c) Both short-term and long-term capital gains

d) Any head of income

Answer: c) Both short-term and long-term capital gains

Explanation: Short-term capital loss can be set off against both short-term and long-term capital gains under Section 70.

Long-term capital loss can be set off against:

a) Short-term capital gains

b) Long-term capital gains only

c) Any head of income

d) Business income only

Answer: b) Long-term capital gains only

Explanation: Long-term capital loss can only be set off against long-term capital gains under Section 74.

Loss under the head ‘Income from Other Sources’ can be set off against:

a) Income from any head

b) Income from other sources only

c) Income from business only

d) Income from salary only

Answer: a) Income from any head

Explanation: Loss under ‘Income from Other Sources’ can be set off against income from any head in the same assessment year under Section 71.

Section C: Carry Forward of Losses

Which section governs the carry forward of business losses?

a) Section 70

b) Section 71

c) Section 72

d) Section 74

Answer: c) Section 72

Explanation: Section 72 allows the carry forward of business losses (other than speculation) for eight assessment years.

For how many years can business losses be carried forward?

a) 4 years

b) 6 years

c) 8 years

d) Indefinitely

Answer: c) 8 years

Explanation: Business losses can be carried forward for eight subsequent assessment years under Section 72.

Which loss cannot be carried forward if the return is not filed within the due date under Section 139(1)?

a) House property loss

b) Business loss

c) Capital loss

d) Both b and c

Answer: d) Both b and c

Explanation: Business and capital losses cannot be carried forward if the return is not filed by the due date under Section 139(1).

House property loss can be carried forward for:

a) 4 years

b) 6 years

c) 8 years

d) Indefinitely

Answer: c) 8 years

Explanation: Loss from house property can be carried forward for eight years under Section 71B.

Speculation loss can be carried forward for:

a) 4 years

b) 6 years

c) 8 years

d) Indefinitely

Answer: a) 4 years

Explanation: Speculation loss can be carried forward for four assessment years under Section 73.

Long-term capital loss can be carried forward for:

a) 4 years

b) 6 years

c) 8 years

d) Indefinitely

Answer: c) 8 years

Explanation: Long-term capital loss can be carried forward for eight assessment years under Section 74.

Unabsorbed depreciation can be carried forward:

a) For 4 years

b) For 8 years

c) Indefinitely

d) For 6 years

Answer: c) Indefinitely

Explanation: Unabsorbed depreciation can be carried forward indefinitely under Section 32(2).

Which loss can be carried forward even if the return is not filed on time?

a) Business loss

b) Capital loss

c) House property loss

d) Speculation loss

Answer: c) House property loss

Explanation: House property loss can be carried forward even if the return is filed late, unlike business or capital losses.

Capital expenditure on scientific research can be carried forward for:

a) 4 years

b) 8 years

c) Indefinitely

d) 6 years

Answer: c) Indefinitely

Explanation: Unabsorbed capital expenditure on scientific research can be carried forward indefinitely under Section 35.

Loss from a discontinued business can be carried forward:

a) If the business is revived

b) For 8 years

c) Indefinitely

d) Cannot be carried forward

Answer: b) For 8 years

Explanation: Loss from a discontinued business can be carried forward for eight years under Section 72, provided it is set off against business income.

Section D: Mixed Questions

Which of the following cannot be set off in the same assessment year?

a) Business loss against salary income

b) House property loss against business income

c) Capital loss against other sources income

d) Speculation loss against non-speculative income

Answer: a) Business loss against salary income

Explanation: Business loss cannot be set off against salary income under Section 71.

The order of set off of losses is:

a) Inter-head, then intra-head

b) Intra-head, then inter-head

c) Carry forward, then set off

d) Inter-head only

Answer: b) Intra-head, then inter-head

Explanation: Losses are first set off within the same head (Section 70) and then against other heads (Section 71).

Which income is exempt from tax under Section 10?

a) Income from house property

b) Agricultural income

c) Business income

d) Capital gains

Answer: b) Agricultural income

Explanation: Agricultural income from land in India is exempt under Section 10(1).

Income from an illegal business is:

a) Exempt from tax

b) Taxable

c) Ignored by tax authorities

d) Deductible

Answer: b) Taxable

Explanation: Income from illegal activities is taxable under the head ‘Profits and Gains from Business or Profession’.

Loss from a smuggling business can be set off against:

a) Legal business income

b) Illegal business income only

c) Any head of income

d) Cannot be set off

Answer: b) Illegal business income only

Explanation: 

Loss from an illegal business cannot be set off against legal business income.Which section defines the term ‘block of assets’?

a) Section 2(11)

b) Section 2(47)

c) Section 32

d) Section 50

Answer: a) Section 2(11)

Explanation: Section 2(11) defines a block of assets as a group of assets within the same class for depreciation purposes.

Depreciation is allowed as a deduction under which section?

a) Section 30

b) Section 31

c) Section 32

d) Section 33

Answer: c) Section 32

Explanation: Section 32 governs the allowance of depreciation on tangible and intangible assets.

The Income Tax Act, 1961, extends to:

a) Whole of India

b) Whole of India except Jammu & Kashmir

c) Whole of India except Sikkim

d) Metro cities only

Answer: a) Whole of India

Explanation: The Income Tax Act, 1961, applies to the whole of India, including Jammu & Kashmir.

Casual income, such as lottery winnings, is taxable under:

a) Income from salary

b) Income from other sources

c) Capital gains

d) Business income

Answer: b) Income from other sources

Explanation: Casual income like lottery winnings is taxed under ‘Income from Other Sources’ under Section 56.

Which of the following is not a head of income under the Income Tax Act?

a) Salary

b) House property

c) Agricultural income

d) Capital gains

Answer: c) Agricultural income

Explanation: Agricultural income is exempt under Section 10 and is not a head of income.

The deduction under Section 80G is available for:

a) Medical expenses

b) Donations to charitable institutions

c) Interest on education loans

d) House rent allowance

Answer: b) Donations to charitable institutions

Explanation: Section 80G allows deductions for donations to specified charitable institutions or funds.

Income from a partnership firm to a working partner is taxable under:

a) Salary

b) Business or profession

c) Other sources

d) Capital gains

Answer: b) Business or profession

Explanation: Salary or remuneration to a working partner is taxed under ‘Profits and Gains from Business or Profession’.

Which of the following is a capital asset?

a) Stock-in-trade

b) Raw materials

c) Personal effects (excluding jewellery)

d) Agricultural land in a rural area

Answer: c) Personal effects (excluding jewellery)

Explanation: Personal effects (excluding jewellery, paintings, etc.) are considered capital assets under Section 2(14).

The Finance Minister presents the budget under the Income Tax Act for:

a) Setting tax rates

b) Amending the Act

c) Both a and b

d) None of the above

Answer: c) Both a and b

Explanation: The Finance Minister presents the budget to set tax rates and propose amendments to the Income Tax Act.

What is the full form of CBDT?

a) Central Board of Direct Taxes

b) Central Board of Duplicate Taxes

c) Central Board of Direct Tariffs

d) None of the above

Answer: a) Central Board of Direct Taxes

Explanation: CBDT is the authority responsible for administering direct taxes in India.

The term ‘assessee’ includes:

a) Individual only

b) Company only

c) HUF, AOP, and BOI

d) All of the above

Answer: d) All of the above

Explanation: Under Section 2(7), an assessee includes individuals, companies, HUFs, AOPs, BOIs, etc.

Which section deals with the computation of capital gains in case of a slump sale?

a) Section 50

b) Section 50B

c) Section 50C

d) Section 51

Answer: b) Section 50B

Explanation: Section 50B governs the computation of capital gains in the case of a slump sale of an undertaking.

The deduction under Section 80C is available for:

a) Donations

b) Life insurance premiums

c) Medical expenses

d) Interest on loans

Answer: b) Life insurance premiums

Explanation: Section 80C allows deductions for investments like life insurance premiums, PPF, etc., up to Rs. 1,50,000.

Income tax is a:

a) Direct tax

b) Indirect tax

c) Both direct and indirect

d) None of the above

Answer: a) Direct tax

Explanation: Income tax is a direct tax levied on the income of individuals, firms, etc.

The Income Tax Act, 1961, came into force on:

a) 1st April 1960

b) 1st April 1961

c) 1st April 1962

d) 31st March 1961

Answer: c) 1st April 1962

Explanation: The Income Tax Act, 1961, came into force on April 1, 1962.

50 MCQs on Deductions from Gross Total Income under Income Tax Act, 1961

1. Which section of the Income Tax Act, 1961, provides for deductions from Gross Total Income?

a) Section 70–74

b) Section 80C–80U

c) Section 60–64

d) Section 32–35

Answer: b) Section 80C–80U

Explanation: Deductions from Gross Total Income are allowed under Sections 80C to 80U to reduce taxable income.

2. What is the maximum deduction limit under Section 80C for an individual?

a) Rs. 1,00,000

b) Rs. 1,50,000

c) Rs. 2,00,000

d) Rs. 2,50,000

Answer: b) Rs. 1,50,000

Explanation: Section 80C allows a maximum deduction of Rs. 1,50,000 for investments like PPF, ELSS, life insurance premiums, etc.

3. Which of the following is eligible for deduction under Section 80C?

a) Donation to charity

b) Payment of tuition fees for children

c) Medical insurance premium

d) Interest on education loan

Answer: b) Payment of tuition fees for children

Explanation: Tuition fees for full-time education of up to two children are eligible under Section 80C.

4. Deduction under Section 80D is available for:

a) Life insurance premiums

b) Medical insurance premiums

c) Charitable donations

d) Interest on home loan

Answer: b) Medical insurance premiums

Explanation: Section 80D allows deductions for health insurance premiums and preventive health check-ups.

5. What is the maximum deduction under Section 80D for health insurance premiums for self, spouse, and dependent children (non-senior citizens)?

a) Rs. 15,000

b) Rs. 25,000

c) Rs. 50,000

d) Rs. 75,000

Answer: b) Rs. 25,000

Explanation: Section 80D allows up to Rs. 25,000 for non-senior citizens and Rs. 50,000 for senior citizens for health insurance premiums.

6. Deduction for preventive health check-ups under Section 80D is limited to:

a) Rs. 5,000

b) Rs. 10,000

c) Rs. 15,000

d) Rs. 20,000

Answer: a) Rs. 5,000

Explanation: The deduction for preventive health check-ups is capped at Rs. 5,000 within the overall Section 80D limit.

7. Section 80E provides a deduction for:

a) Interest on education loan

b) Interest on home loan

c) Interest on car loan

d) Interest on personal loan

Answer: a) Interest on education loan

Explanation: Section 80E allows a deduction for interest paid on loans taken for higher education of self, spouse, or children.

8. For how many years can the deduction under Section 80E be claimed?

a) 5 years

b) 7 years

c) 8 years

d) Indefinitely

Answer: c) 8 years

Explanation: The deduction is available for 8 years or until the loan interest is fully repaid, whichever is earlier.

9. Deduction under Section 80G is available for:

a) Donations to charitable institutions

b) Medical insurance premiums

c) Interest on education loan

d) House rent allowance

Answer: a) Donations to charitable institutions

Explanation: Section 80G provides deductions for donations to specified charitable organizations or funds.

10. What is the deduction percentage for donations to the National Defence Fund under Section 80G?

a) 50%

b) 100%

c) 75%

d) 125%

Answer: b) 100%

Explanation: Donations to certain funds like the National Defence Fund qualify for a 100% deduction without any limit.

11. Which section allows a deduction for house rent paid by an individual not receiving HRA?

a) Section 80C

b) Section 80GG

c) Section 80G

d) Section 80D

Answer: b) Section 80GG

Explanation: Section 80GG provides a deduction for rent paid by individuals not receiving House Rent Allowance (HRA).

12. The maximum deduction under Section 80GG is:

a) Rs. 5,000 per month

b) Rs. 2,000 per month

c) Rs. 7,000 per month

d) Rs. 10,000 per month

Answer: a) Rs. 5,000 per month

Explanation: The maximum deduction under Section 80GG is Rs. 5,000 per month or 25% of total income, whichever is lower.

13. Deduction under Section 80TTA is available for:

a) Interest on home loan

b) Interest on savings account

c) Interest on fixed deposits

d) Interest on bonds

Answer: b) Interest on savings account

Explanation: Section 80TTA allows a deduction of up to Rs. 10,000 on interest from savings accounts for individuals and HUFs.

14. What is the maximum deduction under Section 80TTA for non-senior citizens?

a) Rs. 5,000

b) Rs. 10,000

c) Rs. 15,000

d) Rs. 20,000

Answer: b) Rs. 10,000

Explanation: The maximum deduction for interest on savings accounts is Rs. 10,000 under Section 80TTA.

15. Section 80TTB is applicable to:

a) Non-senior citizens

b) Senior citizens

c) HUFs only

d) Companies

Answer: b) Senior citizens

Explanation: Section 80TTB provides a deduction for senior citizens on interest from deposits.

16. The maximum deduction under Section 80TTB for senior citizens is:

a) Rs. 10,000

b) Rs. 25,000

c) Rs. 50,000

d) Rs. 75,000

Answer: c) Rs. 50,000

Explanation: Section 80TTB allows senior citizens a deduction of up to Rs. 50,000 on interest from savings, fixed, or recurring deposits.

17. Deduction under Section 80U is available for:

a) Donations to charity

b) Persons with disabilities

c) Interest on education loan

d) Medical insurance premiums

Answer: b) Persons with disabilities

Explanation: Section 80U provides deductions for individuals with specified disabilities.

18. What is the maximum deduction under Section 80U for a person with 40%–80% disability?

a) Rs. 50,000

b) Rs. 75,000

c) Rs. 1,25,000

d) Rs. 1,50,000

Answer: b) Rs. 75,000

Explanation: Section 80U allows Rs. 75,000 for 40%–80% disability and Rs. 1,25,000 for severe disability (80% or more).

19. Deduction under Section 80DD is for:

a) Medical treatment of a dependent with a disability

b) Medical insurance premiums

c) Interest on education loan

d) Charitable donations

Answer: a) Medical treatment of a dependent with a disability

Explanation: Section 80DD allows deductions for expenses on medical treatment or maintenance of a dependent with a disability.

20. The maximum deduction under Section 80DD for a dependent with severe disability is:

a) Rs. 50,000

b) Rs. 75,000

c) Rs. 1,25,000

d) Rs. 1,50,000

Answer: c) Rs. 1,25,000

Explanation: Section 80DD allows Rs. 75,000 for general disability and Rs. 1,25,000 for severe disability.

21. Which section allows a deduction for contributions to the National Pension System (NPS)?

a) Section 80C

b) Section 80CCD

c) Section 80D

d) Section 80G

Answer: b) Section 80CCD

Explanation: Section 80CCD provides deductions for contributions to NPS.

22. The maximum deduction under Section 80CCD(1) for NPS contribution is:

a) Rs. 50,000

b) Rs. 1,50,000

c) Rs. 2,00,000

d) 10% of salary

Answer: d) 10% of salary

Explanation: Section 80CCD(1) allows a deduction of up to 10% of salary (for employees) or 20% of gross total income (for others), subject to the overall Section 80C limit of Rs. 1,50,000.

23. What is the additional deduction under Section 80CCD(1B) for NPS?

a) Rs. 50,000

b) Rs. 1,00,000

c) Rs. 1,50,000

d) Rs. 2,00,000

Answer: a) Rs. 50,000

Explanation: Section 80CCD(1B) allows an additional deduction of up to Rs. 50,000 for NPS contributions, over and above the Section 80C limit.

24. Deduction under Section 80CCD(2) is available for:

a) Employee’s contribution to NPS

b) Employer’s contribution to NPS

c) Donations to charity

d) Medical insurance premiums

Answer: b) Employer’s contribution to NPS

Explanation: Section 80CCD(2) allows a deduction for the employer’s contribution to NPS, up to 10% of salary (14% for central government employees).

25. Which section allows a deduction for interest on a home loan for a self-occupied property?

a) Section 24

b) Section 80C

c) Section 80EE

d) Section 80G

Answer: a) Section 24

Explanation: Section 24 allows a deduction of up to Rs. 2,00,000 for interest on a home loan for a self-occupied property.

26. Section 80EE provides an additional deduction for:

a) First-time home buyers

b) Senior citizens

c) Persons with disabilities

d) Charitable donations

Answer: a) First-time home buyers

Explanation: Section 80EE allows an additional deduction of up to Rs. 50,000 for interest on a home loan for first-time buyers, subject to conditions.

27. The maximum deduction under Section 80EE is:

a) Rs. 25,000

b) Rs. 50,000

c) Rs. 1,00,000

d) Rs. 1,50,000

Answer: b) Rs. 50,000

Explanation: Section 80EE provides an additional deduction of up to Rs. 50,000 for home loan interest.

28. Which section allows a deduction for donations to scientific research or rural development?

a) Section 80G

b) Section 80GGA

c) Section 80GGB

d) Section 80GGC

Answer: b) Section 80GGA

Explanation: Section 80GGA allows deductions for donations to scientific research or rural development programs.

29. Deduction under Section 80GGA is available to:

a) Individuals only

b) Companies only

c) Assessees without business income

d) HUFs only

Answer: c) Assessees without business income

Explanation: Section 80GGA is for assessees not having income from business or profession.

30. Section 80GGB provides a deduction for:

a) Donations by individuals to political parties

b) Donations by companies to political parties

c) Donations to charitable institutions

d) Interest on savings accounts

Answer: b) Donations by companies to political parties

Explanation: Section 80GGB allows companies to claim deductions for contributions to political parties.

31. Section 80GGC provides a deduction for:

a) Donations by companies to political parties

b) Donations by individuals to political parties

c) Donations to charitable institutions

d) Medical insurance premiums

Answer: b) Donations by individuals to political parties

Explanation: Section 80GGC allows individuals and HUFs to claim deductions for contributions to political parties.

32. Which section allows a deduction for medical expenses for specified diseases?

a) Section 80D

b) Section 80DD

c) Section 80DDB

d) Section 80U

Answer: c) Section 80DDB

Explanation: Section 80DDB allows deductions for medical treatment of specified diseases.

33. The maximum deduction under Section 80DDB for non-senior citizens is:

a) Rs. 40,000

b) Rs. 60,000

c) Rs. 80,000

d) Rs. 1,00,000

Answer: a) Rs. 40,000

Explanation: Section 80DDB allows up to Rs. 40,000 for non-senior citizens and Rs. 1,00,000 for senior citizens.

34. Deduction under Section 80C is available to:

a) Individuals and HUFs

b) Companies only

c) Partnerships only

d) Trusts only

Answer: a) Individuals and HUFs

Explanation: Section 80C deductions are available only to individuals and Hindu Undivided Families (HUFs).

35. Which of the following is not eligible for deduction under Section 80C?

a) Public Provident Fund (PPF)

b) Equity Linked Savings Scheme (ELSS)

c) Medical insurance premium

d) National Savings Certificate (NSC)

Answer: c) Medical insurance premium

Explanation: Medical insurance premiums are deductible under Section 80D, not Section 80C.

36. Deduction under Section 80CCC is for:

a) Contributions to pension funds

b) Donations to charity

c) Interest on home loan

d) Medical expenses

Answer: a) Contributions to pension funds

Explanation: Section 80CCC allows deductions for contributions to certain pension funds of insurance companies.

37. The maximum deduction under Section 80CCC is included within the limit of:

a) Section 80D

b) Section 80C

c) Section 80G

d) Section 80U

Answer: b) Section 80C

Explanation: Section 80CCC deductions are part of the overall Rs. 1,50,000 limit under Section 80C.

38. Which section allows a deduction for interest on electric vehicle loans?

a) Section 80EE

b) Section 80EEB

c) Section 80TTA

d) Section 80U

Answer: b) Section 80EEB

Explanation: Section 80EEB provides a deduction of up to Rs. 1,50,000 for interest on loans for electric vehicles.

39. The maximum deduction under Section 80EEB is:

a) Rs. 50,000

b) Rs. 1,00,000

c) Rs. 1,50,000

d) Rs. 2,00,000

Answer: c) Rs. 1,50,000

Explanation: Section 80EEB allows a deduction of up to Rs. 1,50,000 for interest on electric vehicle loans.

40. Deduction under Section 80IA is available for:

a) Individuals

b) Infrastructure development undertakings

c) Charitable donations

d) Medical insurance premiums

Answer: b) Infrastructure development undertakings

Explanation: Section 80IA provides deductions for profits from eligible infrastructure businesses.

41. Section 80IB is related to deductions for:

a) Profits from industrial undertakings

b) Donations to political parties

c) Interest on savings accounts

d) Medical treatment

Answer: a) Profits from industrial undertakings

Explanation: Section 80IB allows deductions for profits from specified industrial undertakings.

42. Deduction under Section 80JJA is for:

a) Profits from bio-degradable waste businesses

b) Interest on education loans

c) Donations to charity

d) Medical insurance premiums

Answer: a) Profits from bio-degradable waste businesses

Explanation: Section 80JJA allows deductions for profits from businesses dealing with bio-degradable waste.

43. Which section provides a deduction for royalty income of authors?

a) Section 80QQB

b) Section 80RRB

c) Section 80G

d) Section 80C

Answer: a) Section 80QQB

Explanation: Section 80QQB allows a deduction of up to Rs. 3,00,000 for royalty income of authors of certain books.

44. The maximum deduction under Section 80QQB is:

a) Rs. 1,00,000

b) Rs. 2,00,000

c) Rs. 3,00,000

d) Rs. 5,00,000

Answer: c) Rs. 3,00,000

Explanation: Section 80QQB allows a deduction of up to Rs. 3,00,000 for royalty income of authors.

45. Section 80RRB provides a deduction for:

a) Royalty on patents

b) Royalty on books

c) Interest on savings accounts

d) Donations to charity

Answer: a) Royalty on patents

Explanation: Section 80RRB allows a deduction of up to Rs. 3,00,000 for royalty income from patents.

46. Deduction under Section 80IAC is for:

a) Startups

b) Charitable institutions

c) Medical treatment

d) Interest on loans

Answer: a) Startups

Explanation: Section 80IAC provides deductions for eligible startups for profits from business.

47. Which section allows deductions for donations to the Swachh Bharat Kosh?

a) Section 80G

b) Section 80GGA

c) Section 80GGB

d) Section 80GGC

Answer: a) Section 80G

Explanation: Donations to Swachh Bharat Kosh qualify for a 100% deduction under Section 80G.

48. Deduction under Section 80C includes:

a) Interest on savings accounts

b) Employee Provident Fund (EPF) contributions

c) Medical expenses for specified diseases

d) Donations to political parties

Answer: b) Employee Provident Fund (EPF) contributions

Explanation: EPF contributions are eligible for deduction under Section 80C.

49. Which section allows a deduction for contributions to the Clean Ganga Fund?

a) Section 80G

b) Section 80GGA

c) Section 80D

d) Section 80U

Answer: a) Section 80G

Explanation: Donations to the Clean Ganga Fund qualify for a 100% deduction under Section 80G.

50. The total deductions under Sections 80C, 80CCC, and 80CCD(1) cannot exceed:

a) Rs. 1,00,000

b) Rs. 1,50,000

c) Rs. 2,00,000

d) Rs. 2,50,000

Answer: b) Rs. 1,50,000

Explanation: The combined deduction under these sections is capped at Rs. 1,50,000.

50 MCQs on Computation of Total Income and Tax Liability under Income Tax Act, 1961

1. What is the first step in computing total income under the Income Tax Act, 1961?

a) Calculate Gross Total Income

b) Apply deductions under Section 80C to 80U

c) Compute tax liability

d) Determine tax slab rates

Answer: a) Calculate Gross Total Income

Explanation: Total income is computed by first aggregating income from all heads to arrive at Gross Total Income (GTI), followed by deductions.

2. Gross Total Income (GTI) is computed by:

a) Adding incomes from all heads after set-off of losses

b) Deducting expenses from taxable income

c) Applying tax rates to income

d) Adding deductions under Section 80C

Answer: a) Adding incomes from all heads after set-off of losses

Explanation: GTI is the sum of incomes under the five heads (Salary, House Property, Business/Profession, Capital Gains, Other Sources) after set-off of losses.

3. Total Income is calculated as:

a) Gross Total Income minus deductions under Section 80C to 80U

b) Gross Total Income plus deductions

c) Income from one head only

d) Gross Total Income minus exemptions

Answer: a) Gross Total Income minus deductions under Section 80C to 80U

Explanation: Total Income is GTI reduced by deductions under Sections 80C to 80U.

4. Which of the following is not a head of income?

a) Salary

b) House Property

c) Agricultural Income

d) Capital Gains

Answer: c) Agricultural Income

Explanation: Agricultural income is exempt under Section 10(1) and is not a head of income.

5. Which section allows a deduction for life insurance premiums?

a) Section 80D

b) Section 80C

c) Section 80G

d) Section 80U

Answer: b) Section 80C

Explanation: Section 80C allows deductions for life insurance premiums, PPF, etc., up to Rs. 1,50,000.

6. The maximum deduction under Section 80C for an individual is:

a) Rs. 1,00,000

b) Rs. 1,50,000

c) Rs. 2,00,000

d) Rs. 2,50,000

Answer: b) Rs. 1,50,000

Explanation: The limit for Section 80C deductions is Rs. 1,50,000 for individuals and HUFs.

7. Which section provides a deduction for health insurance premiums?

a) Section 80C

b) Section 80D

c) Section 80E

d) Section 80G

Answer: b) Section 80D

Explanation: Section 80D allows deductions for health insurance premiums and preventive health check-ups.

8. The maximum deduction under Section 80D for non-senior citizens is:

a) Rs. 15,000

b) Rs. 25,000

c) Rs. 50,000

d) Rs. 75,000

Answer: b) Rs. 25,000

Explanation: Section 80D allows up to Rs. 25,000 for non-senior citizens and Rs. 50,000 for senior citizens.

9. Tax liability is calculated on:

a) Gross Total Income

b) Total Income

c) Exempted Income

d) Income before set-off of losses

Answer: b) Total Income

Explanation: Tax liability is computed on Total Income after deductions under Sections 80C to 80U.

10. The basic exemption limit for an individual (non-senior citizen) under the old tax regime for FY 2024-25 is:

a) Rs. 2,50,000

b) Rs. 3,00,000

c) Rs. 5,00,000

d) Rs. 7,00,000

Answer: a) Rs. 2,50,000

Explanation: The basic exemption limit under the old regime for non-senior citizens is Rs. 2,50,000.

11. The basic exemption limit for a senior citizen (60–80 years) under the old tax regime is:

a) Rs. 2,50,000

b) Rs. 3,00,000

c) Rs. 5,00,000

d) Rs. 7,00,000

Answer: b) Rs. 3,00,000

Explanation: Senior citizens (60–80 years) have a higher exemption limit of Rs. 3,00,000 under the old regime.

12. The basic exemption limit for a super senior citizen (above 80 years) under the old tax regime is:

a) Rs. 3,00,000

b) Rs. 5,00,000

c) Rs. 7,00,000

d) Rs. 10,00,000

Answer: b) Rs. 5,00,000

Explanation: Super senior citizens (above 80 years) have an exemption limit of Rs. 5,00,000 under the old regime.

13. Under the new tax regime, the basic exemption limit for FY 2024-25 is:

a) Rs. 2,50,000

b) Rs. 3,00,000

c) Rs. 5,00,000

d) Rs. 7,00,000

Answer: b) Rs. 3,00,000

Explanation: The new tax regime offers a basic exemption limit of Rs. 3,00,000 for all individuals.

14. Which of the following deductions is not available under the new tax regime?

a) Section 80C

b) Section 80CCD(2)

c) Section 80D

d) Section 80G

Answer: a) Section 80C

Explanation: Most deductions, including Section 80C, are not available under the new tax regime, except for Section 80CCD(2) and a few others.

15. The tax rate for income between Rs. 2,50,001 and Rs. 5,00,000 under the old regime for non-senior citizens is:

a) 5%

b) 10%

c) 20%

d) 30%

Answer: a) 5%

Explanation: The tax rate for this slab under the old regime is 5%.

16. The tax rate for income between Rs. 3,00,001 and Rs. 6,00,000 under the new tax regime is:

a) 5%

b) 10%

c) 15%

d) 20%

Answer: a) 5%

Explanation: The new tax regime applies a 5% tax rate for income between Rs. 3,00,001 and Rs. 6,00,000.

17. Surcharge is applicable if Total Income exceeds:

a) Rs. 10,00,000

b) Rs. 50,00,000

c) Rs. 1,00,00,000

d) Rs. 2,00,00,000

Answer: b) Rs. 50,00,000

Explanation: Surcharge applies at different rates (10% to 37%) when Total Income exceeds Rs. 50,00,000.

18. Health and Education Cess is calculated at:

a) 2% of tax liability

b) 3% of tax liability

c) 4% of tax liability

d) 5% of tax liability

Answer: c) 4% of tax liability

Explanation: Health and Education Cess is levied at 4% on the tax liability (including surcharge, if applicable).

19. Rebate under Section 87A is available if Total Income does not exceed:

a) Rs. 3,00,000

b) Rs. 5,00,000

c) Rs. 7,00,000

d) Rs. 10,00,000

Answer: c) Rs. 7,00,000

Explanation: Under the new tax regime, a rebate under Section 87A is available for Total Income up to Rs. 7,00,000, reducing tax liability to zero.

20. The maximum rebate under Section 87A in the new tax regime is:

a) Rs. 12,500

b) Rs. 25,000

c) Rs. 50,000

d) Rs. 75,000

Answer: b) Rs. 25,000

Explanation: The rebate under Section 87A in the new regime is up to Rs. 25,000 for Total Income up to Rs. 7,00,000.

21. Which section governs the clubbing of income of a minor child?

a) Section 64

b) Section 70

c) Section 80C

d) Section 80D

Answer: a) Section 64

Explanation: Section 64(1A) mandates clubbing of a minor child’s income with the parent having higher income.

22. The exemption limit for a minor child’s clubbed income is:

a) Rs. 1,000

b) Rs. 1,500

c) Rs. 2,000

d) Rs. 2,500

Answer: b) Rs. 1,500

Explanation: Section 10(32) allows an exemption of up to Rs. 1,500 per minor child for clubbed income.

23. Income from a self-occupied house property is:

a) Always taxable

b) Exempt up to Rs. 2,00,000

c) Taken as nil

d) Taxed at 30%

Answer: c) Taken as nil

Explanation: The annual value of a self-occupied house property is taken as nil under Section 23.

24. The maximum deduction for interest on a home loan for a self-occupied property is:

a) Rs. 1,50,000

b) Rs. 2,00,000

c) Rs. 3,00,000

d) Rs. 5,00,000

Answer: b) Rs. 2,00,000

Explanation: Section 24 allows a deduction of up to Rs. 2,00,000 for interest on a home loan for a self-occupied property.

25. Which section allows a deduction for interest on an education loan?

a) Section 80C

b) Section 80D

c) Section 80E

d) Section 80G

Answer: c) Section 80E

Explanation: Section 80E allows a deduction for interest paid on education loans for higher education.

26. The deduction under Section 80E is available for:

a) 5 years

b) 7 years

c) 8 years

d) Indefinitely

Answer: c) 8 years

Explanation: The deduction is available for 8 years or until the interest is fully repaid, whichever is earlier.

27. Short-term capital gains are taxed at:

a) 15%

b) 20%

c) Slab rates

d) 30%

Answer: c) Slab rates

Explanation: Short-term capital gains (other than on listed securities) are taxed as per the assessee’s slab rates.

28. Long-term capital gains on listed securities are taxed at:

a) 10% (without indexation)

b) 20% (with indexation)

c) Slab rates

d) Exempt

Answer: a) 10% (without indexation)

Explanation: Long-term capital gains on listed securities exceeding Rs. 1,00,000 are taxed at 10% under Section 112A.

29. The exemption limit for long-term capital gains on listed securities is:

a) Rs. 50,000

b) Rs. 1,00,000

c) Rs. 2,00,000

d) Rs. 5,00,000

Answer: b) Rs. 1,00,000

Explanation: Section 112A provides an exemption for long-term capital gains on listed securities up to Rs. 1,00,000.

30. Income from lotteries is taxed at:

a) Slab rates

b) 20%

c) 30%

d) 15%

Answer: c) 30%

Explanation: Income from lotteries, card games, etc., is taxed at a flat rate of 30% under Section 115BB.

31. Which section allows a deduction for donations to charitable institutions?

a) Section 80C

b) Section 80D

c) Section 80G

d) Section 80U

Answer: c) Section 80G

Explanation: Section 80G provides deductions for donations to specified charitable funds or institutions.

32. The deduction for donations to the National Defence Fund under Section 80G is:

a) 50%

b) 75%

c) 100%

d) 125%

Answer: c) 100%

Explanation: Donations to certain funds like the National Defence Fund qualify for a 100% deduction.

33. The maximum deduction under Section 80TTA for interest on savings accounts is:

a) Rs. 5,000

b) Rs. 10,000

c) Rs. 15,000

d) Rs. 20,000

Answer: b) Rs. 10,000

Explanation: Section 80TTA allows a deduction of up to Rs. 10,000 for non-senior citizens.

34. Section 80TTB provides a deduction for senior citizens on:

a) Interest on deposits

b) Medical insurance premiums

c) Donations to charity

d) Interest on education loans

Answer: a) Interest on deposits

Explanation: Section 80TTB allows a deduction of up to Rs. 50,000 for interest on savings, fixed, or recurring deposits.

35. The maximum deduction under Section 80TTB for senior citizens is:

a) Rs. 10,000

b) Rs. 25,000

c) Rs. 50,000

d) Rs. 75,000

Answer: c) Rs. 50,000

Explanation: Section 80TTB provides a maximum deduction of Rs. 50,000 for senior citizens.

36. Loss from house property can be set off against other heads up to:

a) Rs. 1,00,000

b) Rs. 1,50,000

c) Rs. 2,00,000

d) Rs. 2,50,000

Answer: c) Rs. 2,00,000

Explanation: Section 71B allows house property loss to be set off against other heads up to Rs. 2,00,000 in a year.

37. Business loss can be carried forward for:

a) 4 years

b) 6 years

c) 8 years

d) Indefinitely

Answer: c) 8 years

Explanation: Section 72 allows business losses to be carried forward for 8 assessment years.

38. Which income is fully exempt from tax?

a) Salary income

b) Agricultural income

c) Business income

d) Capital gains

Answer: b) Agricultural income

Explanation: Agricultural income from land in India is exempt under Section 10(1).

39. The tax rate for income above Rs. 10,00,000 under the old regime for non-senior citizens is:

a) 20%

b) 30%

c) 25%

d) 15%

Answer: b) 30%

Explanation: Income above Rs. 10,00,000 is taxed at 30% under the old regime.

40. The standard deduction for salaried individuals under the new tax regime is:

a) Rs. 40,000

b) Rs. 50,000

c) Rs. 75,000

d) Rs. 1,00,000

Answer: b) Rs. 50,000

Explanation: The new tax regime allows a standard deduction of Rs. 50,000 for salaried individuals.

41. Which section provides a deduction for medical treatment of specified diseases?

a) Section 80D

b) Section 80DD

c) Section 80DDB

d) Section 80U

Answer: c) Section 80DDB

Explanation: Section 80DDB allows deductions for medical treatment of specified diseases.

42. The maximum deduction under Section 80DDB for non-senior citizens is:

a) Rs. 40,000

b) Rs. 60,000

c) Rs. 80,000

d) Rs. 1,00,000

Answer: a) Rs. 40,000

Explanation: Section 80DDB allows up to Rs. 40,000 for non-senior citizens and Rs. 1,00,000 for senior citizens.

43. The tax liability for a Total Income of Rs. 5,00,000 under the old regime for a non-senior citizen is:

a) Rs. 12,500

b) Rs. 25,000

c) Rs. 0

d) Rs. 50,000

Answer: c) Rs. 0

Explanation: With a rebate under Section 87A, tax liability is zero for Total Income up to Rs. 5,00,000 under the old regime.

44. Which section allows a deduction for contributions to the National Pension System (NPS)?

a) Section 80C

b) Section 80CCD

c) Section 80D

d) Section 80G

Answer: b) Section 80CCD

Explanation: Section 80CCD provides deductions for NPS contributions.

45. The maximum additional deduction under Section 80CCD(1B) for NPS is:

a) Rs. 25,000

b) Rs. 50,000

c) Rs. 1,00,000

d) Rs. 1,50,000

Answer: b) Rs. 50,000

Explanation: Section 80CCD(1B) allows an additional deduction of up to Rs. 50,000 for NPS contributions.

46. Advance tax is payable if tax liability exceeds:

a) Rs. 5,000

b) Rs. 10,000

c) Rs. 15,000

d) Rs. 20,000

Answer: b) Rs. 10,000

Explanation: Advance tax is payable if the tax liability for the year exceeds Rs. 10,000.

47. The due date for filing an income tax return for an individual (non-audit case) is:

a) June 30

b) July 31

c) September 30

d) December 31

Answer: b) July 31

Explanation: The due date for individuals (non-audit cases) is July 31 of the assessment year.

48. Which section allows a deduction for persons with disabilities?

a) Section 80D

b) Section 80DD

c) Section 80U

d) Section 80G

Answer: c) Section 80U

Explanation: Section 80U provides deductions for individuals with specified disabilities.

49. The maximum deduction under Section 80U for severe disability is:

a) Rs. 50,000

b) Rs. 75,000

c) Rs. 1,25,000

d) Rs. 1,50,000

Answer: c) Rs. 1,25,000

Explanation: Section 80U allows Rs. 75,000 for 40%–80% disability and Rs. 1,25,000 for severe disability.

50. The final tax liability is calculated as:

a) Tax on Total Income + Surcharge + Cess – Advance Tax – TDS

b) Tax on GTI + Surcharge – Cess

c) Tax on Total Income – Deductions

d) Tax on GTI + Advance Tax

Answer: a) Tax on Total Income + Surcharge + Cess – Advance Tax – TDS

Explanation: Final tax liability is computed by applying tax rates to Total Income, adding surcharge and cess, and deducting advance tax and TDS.