CHAPTER 1 INTRODUCTION AND BASIC CONCEPTSOF TAX MCQ TAX LAW

CHAPTER 1 INTRODUCTION AND BASIC CONCEPTSOF TAX

Q1: Income-tax Act, 1961 applies to:

(a) Whole of India

(b) Whole of India excluding Sikkim

(c) Whole of India excluding Jammu & Kashmir

(d) All of the above

Q2: Finance Bill becomes the Finance Act when it is passed by:

(a) The Lok Sabha

(b) Both Lok Sabha and Rajya Sabha

(c) Both House of Parliament and signed by the President of India

(d) Both House of Parliament and signed by Prime Minister of India.

Q3: The term assessee has been defined under section:

(a) Section 2(34)

(b) Section 2(9)

(c) Section 2(7)

(d) None of the above

Q4: Assesse is always a person but a person may or may not be an assessee.

(a) True

(b) False

Q5: A person may not have assessable income but may still be assessee.

(a) True

(b) False

Q6: Previous Year is defined

(a) under section 3

(b) under section 4

(c) under section 5

(d) None of the above

Q7: Assessment Year is the period of 12 month commencing on 1st day of:

(a) April every year

(b) December every year

(c) January every year

(d) July every year

Q8: In some cases assessment year and previous year can be same financial year.

(a) True

(b) False

Q9: Mr. RAM sets up a new business on 15/7/2020 and he commenced his business from

1/2/2021. The first previous year in this case shall be:

(a) 15/7/2020 to 31/3/2021

(b) 1/2/2020 to 31/3/2021

(c) PY 2020-2021

(d) PY 2020-2021

Q10: Cash gift received from a non-relative is regarded as income. However, exempt amount

is:

(a) Rs. 25,000 pa per person

(b) Rs. 50,000 pa per person

(c) Rs. 50,000 pa in aggregate

(d) Rs. 25,000 pa in aggregate

Q11 Association of persons can include:

(a) Only individuals

(b) All types of person

(c) Only companies

(d) All of the above

Q12: Mr. ADITYA. maintains his accounts of the basis of calendar year under the Companies

Act, 2013. For the PY 2020-2021 his AY under the Income Tax Act, 1961 shall be:

(a) 1/4/2019 to 31/3/2020

(b) 1/4/2020 to 31/3/2021

(c) 1/4/2021 to 31/3/2022

(d) 1/1/2020 to 31/12/2021

Q13: The total income of the assessee shall be rounded off in the multiples of:

(a) Rs. 1,000

(b) Rs. 100

(c) Rs. 10

(d) Not rounded off at all.

Q14: Pick-the correct one:

(a) Assessment year and previous year are same concepts.

(b) Assessment year is the year next to the previous year.

(c) Previous year is the year next to the assessment year.

(d) None of the above

Q15: MCQ. 15 Lalit, a resident individual of 81 years works as a consultant. If his taxable

income is Rs. 5,20,000, the tax payable by him would be_____

a) Rs. 22,880

b) Nil

c) Rs. 2,080

d) Rs. 4,160

Q16 If a resident Individual’s (35 years of age) wherein his total Income is Rs. 2,01,00,000, the

tax payable by him is _______

a) Rs. 67,84,375

b) Rs. 75,95,250

c) Rs. 70,55,750

d) Rs. 69,51,750

Q17: Under section 176 it is compulsory for the assessing officer to assess the income of the

assessee in the same year in which the business has been discontinued.

(a) True

(b) False

Q18: Mr. VIKAS has won a sporting event at the international event. His sponsors have

awarded him Rs. 10 Lakhs. This amount should not be taxable for him since this is not

the income which accrues on the day to day basis.

(a) True

(b) False

Q19: As per Income Tax Act, 1961 surcharge @ 12% is payable by a domestic company if the

total income exceeds:

a) Rs. 10 lakh

b) Rs. 1 crore

c) Rs. 10 crore

d) Rs. 100 crore

Q20: Mr. ROHAN has taken a loan of Rs. 5,00,000 from HDFC bank for purchasing a car.

His rental income is Rs. 50,000 pm out of which Rs. 5,000 pm directly goes to the bank

as an instalment of loan.

(a) Rs. 5,000 pm shall be regarded as diversion of Income.

(b) Rs. 5,000 pm shall be regarded as application of income.

(c) Rs. 5,000 pm shall not be regarded as his income.

Q21: A person includes:

(a) Only Individual

(b) Only Individual and HUF

(c) Individuals, HUF, Firm, Company only

(d) Individuals, HUF, Company, Firm, AOP or BOI, Local Authority, Every Artificial Juridical

Person

Q22: Every assessee is a person, and

(a) every person is also an assessee

(b) every person need not be an assessee

(c) an individual is always an assessee

(d) A HUF is always an assessee

Q23: Describe the status of the following person (i.e. individual, HUF, Firm, Company etc.)

Mr. S and Ms U are legal heirs of Mr. J. Mr. J died in 2020. After his death Mr. S and Ms

U carry on his business without entering into a partnership.

(a) Firm

(b) Limited Liability Partnership

(c) Company

(d) Association of firm

Q24: Assessment year can be a period of:

(a) more than 12 months or less than 12 months

(b) 12 months and less than 12 months

(c) only 12 months

(d) 12 months and more than 12 months

Q25: Year in which income is taxable is known as .................... and year in which income

is earned is known as ....................

(a) Previous year, Assessment year

(b) Assessment year, Previous year

(c) Assessment year, Assessment year

(d) Previous year, Previous year

Q26: All assessees are required to follow:

(a) Uniform previous year which must be calendar year only

(b) Uniform previous year which must be financial year only

(c) Any period of 12*months as previous year

(d) Period starting from 1st July to 30th June as previous year

Q27: First previous year in case of a business/

profession newly set up on 31/3/2021 would:

(a) Start from 1st April, 2020 and end on 31st March, 2021

(b) Start from 31/3/2021 and will end on 31/3/2021

(c) Start from 1st January, 2021 and end on 31st December, 2021

(d) Start from 1st January, 2020 and will end on 31 st March, 2020

Q28: A person follows Calendar year for

accounting. For taxation, he has to follow:

(a) Calendar year only - 1st January to 31st December

(b) Financial year only - 1st April to 31st March

(c) Any of the Calendar or Financial year as per his choice

(d) He will follow extended year from 1st January to next 31st March (a period of 15 months)

Q29: In which of the following cases, income of previous year is assessable in the previous

year itself:

(a) A persons leaving India

(b) A person in employment in India

(c) A person who is into illegal business

(d) A person who is running a charitable institution

Q30: In which of the following cases, Assessing Officer has the discretion to assess the

income of previous year in previous year itself or in the subsequent assessment year:

(a) Shipping business of non-residents

(b) Assessment of Association of Persons or Body of Individuals formed for a particular event or

purpose

(c) Assessment of persons likely to transfer property to avoid tax

(d) Discontinued business

Q31: Circulars issued by CBDT are binding on:

(a) The assessee

(b) Income Tax Authority

(c) Both of above

(d) None of the above

Q32: Association of persons consists of:

(a) Individuals (only)

(b) Any one Person other than individuals

(c) No kind of person

(d) Any kind of the person

Q33: Body of individuals consists of:

(a) Individuals only

(b) Persons other than individuals only.

(c) Any kind of persons

(d) None of the above.

Q34: An Individual leaves India permanently on 15/11/2020. The AY for incomes earned till

15/11/2020 shall be:

(a) AY 2019-2020

(b) AY 2020 -2021

(c) AY 2021-2022

(d) None of the above

Q35: The total of the assessee has been computed at Rs. 3,83,494.90. After rounding off,

Total Income will be taken as:

(a) Rs. 3,83,500

(b) Rs. 3,83,490

(c) Rs. 3,83,495

(d) None of the above

Q36: Income tax liability is rounded off to:

(a) Nearest of ten rupees

(b) Nearest of one rupee

(c) Nearest of hundred rupees

(d) No rounding off is done

Q37: Previous Year can be a period of:

(a) more than 12 months or less than 12 months

(b) 12 months and less than 12 months

(c) only 12 months

(d) 12 months and more than 12 months

Q38: The basic source of income-tax law is

(a) Income-tax Act, 1961

(b) Income-tax Rules, 1962

(c) Circulars/Notifications issued by CBDT

(d) Judgments of Courts

Q39: A domestic company means

(a) Only an Indian company

(b) Both Indian company and a foreign company having a branch in India

(c) Both Indian company and a foreign company having business connection in India

(d) Both Indian company and a foreign company which has made the prescribed arrangement for

declaration and payment of dividends in India out of the income chargeable to tax in India

Q40: Income Tax Act came into force on

(a) 1/4/1961

(b) 1/4/1962

(c) 1/4/1956

(d) 1/4/1965

Q41: How many heads of income are there to compute Gross total income?

(a) Six

(b) Five

(c) Four

(d) Three

Q42: The highest Administrative Authority for Income Tax in India is

(a) Finance Minister

(b) CBDT

(c) President of India

(d) Director of Income Tax

Q43: The amount of taxable income is to be rounded off to the nearest multiple of Rs. 1 for

income tax calculations

(a) True

(b) False

Q44: Income Tax is imposed on a person by

(a) State Govt.

(b) Central Govt.

(c) Both of the above

(d) None of the above

Q 45: In case of individual total income (excluding dividend income and income under sections

111A and 112A) exceeds Rs.2 crore but does not exceed Rs.5 crore

a. 15%

b. 15% and 25%

c. 10%

d. 15% and 37%

Q 46: In case individual maximum surcharge rate on Total income (including dividend income

and income under section 111A and 112A) exceeds Rs.50 lakh but does not exceed Rs.1 crore

is ___________

a. 10

b. 15

c. Nil

d. None of the above

Q 47: In alternative tax regime tax rate is …… if income exceeds 15 lakhs.

a) 10

b) 20

c) 25

d) 30

Q 48: Under Sec 115BAC maximum exemption limit is -------------- lakhs

a) 2.5

b) 3

c) 5

d) Depends upon age

Q49: Scheme of alternative tax regime is …………..

a) Compulsory

b) Optional

c) Optional provided opted before the date of filing return of income

Q 50: If the assesse has business / profession income, this option can be exercised for-----

previous year relevant to the assessment year 2021 – 2022

a) First year only

b) Every previous year

c) Any

d) Any PY and remains valid for subsequent years.

ANSWER SHEET 

1 A 2 C 3 C 4 A 5 A 6 A 7 A 8 A 9 A 10 C

11 D 12 C 13 C 14 B 15 D 16 C 17 B 18 B 19 C 20 B

21 D 22 B 23 D 24 C 25 B 26 B 27 B 28 B 29 A 30 D

31 B 32 D 33 A 34 B 35 B 36 A 37 B 38 A 39 D 40 B

41 B 42 B 43 B 44 B 45 B 46 A 47 D 48 A 49 B 50 D