Chapter 1: Basic Concepts of Income Tax and Tax Rates
Q1. What are the components of Income Tax Law in India?
Ans: Income Tax Act 1961, Income Tax Rules 1962, Finance Act, Circulars/Notifications, Court
Decisions
Q2. Which ministry handles Taxation?
Ans: Finance Ministry
Q3. State the heads of income under Income Tax Act 1961.
Ans: Salaries, HP, PGBP, CG, IFOS
Q4. Income means
A) Net Receipts B) Gross Receipts
C) Both A and B D) Neither A or B
Ans: A
Q4. Who is the assessing officer?
Ans: The assessing officer is the Income Tax Officer who calculates the tax liability of the
assessee.
Q5. State any 4 types of persons under Income Tax Act 1961.
Ans: Any 4 out of : Individual, HUF, Company, Firm, Association of Persons or Body of Individuals,
A local Authority, Every Artificial Juridical Person
Q6. Which of the following are the member of HUF?
A) Karta’s wife B) Daughter’s children
C) Karta’s wife’s father D) None of the above
Ans: A.
Q7. Meaning of Previous Year.
Ans: F.Y. immediately preceding the assessment year.
Q8. Meaning of Annual Year
Ans: Period of 12 months commencing on 1st April every year.
Q9. Which of the following is said to be a company in which the Public is substantially
interested in?
A) Govt/RBI owned B) Not for profit company
C) Both A and B D) None of the above
Q10. Which of the following wont be included in the definition of INDIA under Income Tax
Act 1961?
A) An oil rig, 217 Nautical miles from the Indian Coastline B) Continental Shelf of the
landmass
C) Mines dug for extraction of essential metals D) All of the above
Ans: A
Q11. What is Maximum Marginal Rate?
Ans: Rate of income tax (including surcharge, if any) applicable in relation to the highest slab of
income in case of an individual, AOP or BOI, as specified in the Finance Act.
Q12. State 2 cases where assessment of tax liability is made in the Previous year itself.
Ans: Discontinued Business, Persons Leaving India, Persons Likely To Transfer Property To Avoid
Tax, AOP/ BOI/ AJP Formed For A Particular Event, Shipping Business Of Non-Resident
Q13) Give an example each of Direct and Indirect Tax.
Ans. Income tax- Direct
GST, Custom Duty - Indirect Tax
Q14) State tax rate under New/Default regime for a gross income of Rs. 6,42,000.
Ans: 10%
Q15) Tax rate of 10% is applicable for which range of total income under Old Regime?
A) From 2,50,001 to 5,00,000 B) From 5,00,001 to 10,00,000
C) Above 10,00,000 D) None of the above
Ans: D
Q16) What does domestic company mean under Income Tax Act?
A) An Indian Company B) A company which pays dividend in India
C) Both A and B D) Neither A or B
Q17. What is the Surcharge rate applicable on a total income of Rs. 72.5 Lacs?
A) 10% of Income Tax B) 15% of Income Tax
C) N.A. D) None of the above
Ans: A
Q18. What is the total income limit and surcharge rate levied on Firms/LLP/Local
authorities?
Ans: T.I.> Rs. 1 crore and Surcharge rate is 12% of income tax
Q19. What is the rate of health and education cess applicable on total income?
Ans: 4% of income tax (plus surcharge if applicable)
Q20. State the tax rate applicable on Long Term Capital Gains (other than Section 112A).
Ans: 20%
Q21. Mr. Roy has won an amount of 1,00,000 from a monthly lottery. What is the tax rate
applicable on the amount won?
A) 30% with basic exemption B) 30% without basic exemption
C) 15% without basic exemption D) None of the above
Q22. Name 2 deductions available under the Default tax regime under the Income head
salaries.
Ans: Travelling Allowance, Daily Allowance, Conveyance Allowance, Transport Allowance to
Blind, deaf and dumb, orthopaedically handicapped.
Q23. State 2 deductions not available under the head of PGBP under Default Tax regime.
Ans:
1. Donations/contribution for research and development to:
• Approved Research Association, university, college or other institution(also for
social science and scientifical research)
• Approved Indian company,
• National Laboratory, University, IIT, or approved specified person,
2. Deduction of Capital expenditure for specified business not available
Q24. Meaning of assessee.
Ans: A person liable for payment of taxes or any other sum of money under the Income-tax Act.
