Income Tax Questions and Answers





1. Dividend from an Indian Company is …………………
a) Fully Taxable
b) Partly Taxable
c) Fully Exempted
d) None of these

Answer: c

2. Expenditure incurred on exempted income is ………… as deduction
a) Fully Allowed
b) Partly Allowed
c) Not Allowed
d) None of these

Answer: c

3. Income exempted from tax are stated in the section …… Of Income Tax Act.
a) 5
b) 10
c) 12
d) 8

Answer: b

4. Income from Salary is explained in the section ……………………
a) 12 to 14
b) 15 to 17
c) 18 to 22
d) 24 to 26

Answer: b

5. Salary is defied as per section ……….
a) 15(2)
b) 16(1)
c) 17(2)
d) 17(1)

Answer: d

6. When an URPF is recognized, the balance so transferred is called ………….
a) Recognized PF
b) Transferred PF
c) Recognized Balance
d) Transferred Balance

Answer: c

7. Bonus paid by the employer to the employee is …………
a) Fully Taxable
b) Partly Taxable
c) Fully Exempted
d) None of these

Answer: a

8. Gratuity is defined as per section ……….
a) 10(10A)
b) 10(10AA)
c) 10(10)
d) 10A

Answer: c

9. The highest Administrative Authority for Income Tax in India is............
a) Finance Minister
b) CBDT
c) President of India
d) Director of Income Tax

Answer: b

10. Payment made by an employer to employee monthly, other than salary is called ………….
a) Bonus
b) Allowances
c) Benefits
d) None of these

Answer: b

11. Income Tax Act was passed in the year ……….
a) 1934
b) 1956
c) 1961
d) 1972

Answer: c

12. Income Tax Act came into force on …………
a) 1st April 1935
b) 1st April 1961
c) 1st April 1962
d) 1st April 1956

Answer: c

13. Income tax is a ………………….
a) Professional tax
b) Direct tax
c) Indirect tax
d) Service tax

Answer: b

14. Income tax rates are fixed in …………….
a) Income tax Act
b) Finance Act
c) Income tax rules
d) Finance rules

Answer: b

15. There are …………… heads of income
a) 3
b) 4
c) 5
d) 2

Answer: c

16. A person with the age of ………… or more is considered as a super senior citizen as per Income tax Act.
a) 56
b) 60
c) 80
d) 85

Answer: c

17. The minimum exceptional limit of income is ……………….
a) 250,000
b) 200,000
c) 300,000
d) 500,000

Answer: c

18. Rebate of Income tax is defined as per section …………….
a) 81A
b) 87A
c) 81C
d) 87C

Answer: b

19. Section 2(9) of Income tax deals with ………….
a) Person
b) Assessee
c) Previous Year
d) Assessment Year

Answer: d

20. Assessment year is the period of 12 months commencing from …………… Every year.
a) 1st March
b) 31st March
c) 1st April
d) 30th April

Answer: c

21. When the income earned in an year is taxed in the same year, it is called ………………….
a) Advanced Assessment
b) Super Assessment
c) Accelerated Assessment
d) None of the above

Answer: c

22. Surcharge is levied when the total income exceeds ………………….
a) 5 Crore
b) 10 Crore
c) 1 Crore
d) 2 Crore

Answer: c

23. Educational cess is charges at the rate of …….
a) 2%
b) 1%
c) 3%
d) 5%

Answer: c

24. As per Income tax Act, Person includes ……………
a) Individual
b) HUF
c) Local Authority
d) All of the above

Answer: d

25. CBDT stands for ………………………….
a) Central Bureau of Direct Taxes
b) Central Board of Direct Taxes
c) Citizen’s Board of Direct Taxes
d) Citizen’s Bureau of Direct Taxes

Answer: b

26. CBDT is control by ………………………………….
a) Central Government
b) State Government
c) Both (A) and (B)
d) None of this above

Answer: a

27. To be an Ordinarily resident in India, an individual must satisfy ……………………….
a) Both Basic Conditions and One Additional Condition
b) One Basic Condition and Both Additional Conditions
c) One Basic Condition and One Additional Condition
d) Both Basic Conditions and Both Additional Conditions

Answer: b

28. A Company has ………… types of residential status.
a) 2
b) 3
c) 1
d) 4

Answer: a

29. A citizen of India who goes abroad for the purpose of employment, he must stay in India in the previous year for at least .............. days to become a resident
a) 90 days
b) 162 days
c) 180 days
d) 182 days

Answer: d

30. Who is assessee in case of a HUF?
a) Karta
b) Coparceners
c) Deemed Karta
d) None of these

Answer: a

31. HRA is ……………….
a) Fully Taxable
b) Partly Taxable
c) Fully Exempted
d) None of these

Answer: b

32. Rule ………… explain the taxation of HRA
a) 2
b) 2A
c) 2AA
d) 2AB

Answer: b

33. Agricultural income in Pakistan is assessable for ....................
a) Resident
b) Not Ordinarily Resident
c) Non-resident
d) Not taxable

Answer: a

34. If the assessee is living in own house HRA is ………….
a) Fully Taxable
b) Partly Taxable
c) Fully Exempted
d) None of these

Answer: a

35. Entertainment allowance is allowed as a deduction as per section ……………
a) 16
b) 16(i)
c) 16(ii)
d) 16(iii)

Answer: c

36. Any allowance granted for encouraging research, academic and other professional pursuit is called ………………………
a) Research Allowance
b) Academic Allowance
c) Higher Educational Allowance
d) Educational Allowance

Answer: b

37. Children education allowance is exempt up to per month per child for two children
a) Rs.100
b) Rs.150
c) Rs.200
d) Rs.250

Answer: a

38. Children hostel allowance is exempt up to per month per child for two children
a) Rs.100
b) Rs.200
c) Rs.250
d) Rs.300

Answer: d

39. Transport allowance given by the employer to the employee is exempt up to ……….
a) Rs.1000 p.m
b) Rs.1600 p.m
c) Rs.1000 p.a
d) Rs.1600 p.a

Answer: b

40. Foreign allowance is a …………….
a) Fully Exempted Allowance
b) Fully Taxable Allowance
c) Partly Exempted Allowance
d) None of these

Answer: a

41. State which of the following income are exempted?
a) Dearness Allowance
b) City Compensatory Allowance
c) Foreign Allowance
d) Medical Allowance

Answer: c

42. Education allowance is exempted for …….
a) One person
b) Four persons
c) Two persons
d) None of these

Answer: c

43. A government employee received salary Rs.120,000 and entertainment allowance Rs.10,000 during the previous year. He spent Rs.6000 on entertainment. He is entitled to deduction u/s 16(ii) :
a) 10,000
b) 6000
c) 5000
d) Nil

Answer: c

44. A citizen of India who goes abroad for the purpose of employment, he must stay in India at least for ................... days to become a resident
a) 90 days
b) 162 days
c) 180 days
d) 182 days

Answer: d

45. Who among the following may be “not ordinarily resident”?
a) Hindu Undivided Family
b) Company
c) Association of persons
d) None of these

Answer: a

46. The following is not taxable as income under the head "Salaries".
a) Commission received by a full time director
b) Remuneration received by a partner
c) Allowances received by an employee
d) Free accommodation given to an employee

Answer: b

47. Previous year means the financial year immediately preceding the …………………
a) Accounting Year
b) Assessment Year
c) All of the above
d) None of the above

Answer: b

48. Gratuity received by a government employee is ..................
a) Fully exempted
b) Partly exempted
c) Fully taxable
d) Exempted up to Rs:1,00,000

Answer: a

49. The periodic payment of money for the past service is known as ........................
a) Gratuity
b) Pension
c) Commuted pension
d) Leave salary

Answer: b

50. Income received in India whether occurred in India or outside India, the tax incidence in case of resident is ………………………….
a) Taxable as per slabs
b) Exempted from tax
c) Partly exempted
d) None of the above

Answer: a

51. The income received and accrued outside India from a business controlled or profession set up in India, the tax incidence in case of resident is ……………….
a) Taxable
b) Non-taxable
c) Partly taxable
d) None of the above

Answer: a

52. Pension is taxable under .................. head
a) Salary
b) House property
c) Capital gains
d) other sources

Answer: a

53. Salary received by a Member of Parliament is taxable under the head...................
a) Income from salary
b) Capital gains
c) Profits and gains of business or profession
d) Income from other sources

Answer: d

54. A person is Non-resident if he fails to fulfil .....................
a) The additional conditions
b) At least one of the basic conditions
c) Both basic conditions
d) None of these

Answer: b

55. Income received in India is taxable in the hands of ......................
a) Resident only
b) Resident and ordinarily resident only
c) Non-resident only
d) All assessees

Answer: d

56. ……………………………… is exempted from income tax.
a) Interest from Indian company
b) Dividend from foreign company
c) Cooperative dividend
d) Dividend from Indian company

Answer: d

57. The Income Tax Act,1961 broadly covers ……………………….
a) Basic charging income
b) Rebates and reliefs
c) Incomes exempted from income tax
d) All of the above

Answer: d

58. Any rent or revenue derived from land which is situated in India and is used for agricultural purpose is …………………….
a) Partially taxable
b) Fully taxable
c) Exempted from tax
d) None of the above

Answer: c

59. Residential Status of an assesses can be ………………………….
a) Different for different previous year in the same assessment year
b) Different for different assessment year
c) None of the above
d) All of the above

Answer: b

60. Which of the following is not included in salary income.
a) Commuted pension
b) Un commuted pension
c) Family pension
d) Leave salary

Answer: c

61. In case of Tax free salary, ..............................
a) Tax is to be paid by employer
b) No tax is payable on such salary
c) Tax is to be paid by the employee
d) Govt, itself pays the tax at a future date

Answer: a

62. Dearness allowance is taxable in the hands of .................
a) Govt employees
b) Non Govt employees
c) All employees
d) None of these

Answer: c

63. A Perk is .........................
a) Cash paid by employer to employee
b) Facility provided by employer to employee
c) Amount credited to employees
d) None of these accounts

Answer: b

64. Perquisites to employees are covered in the I.T. Act 1961 under...................
a) Sec 2a.
b) Sec. 17b.
c) Sec 28a.
d) Sec. 36c.

Answer: b

65. The value of Interest free concessional loans to employees is determined on the basis of lending rates of ..................... for the same purpose
a) S.B.I.
b) R.B.I
c) Central govt
d) State govt.

Answer: a

66. An employee is deemed as specified employee if he is a director in the company or has substantial in the company or his chargeable salary per annum exceeds.
a) Rs. 5,00,000.
b) Rs. 2,00,000.
c) Rs. 1,00,000.
d) Rs. 50,000

Answer: d

67. Value of rent free accommodation in case of Govt. employee shall be taxable up to .......................
a) 15% of employees salary.
b) 7.5% of employees salary
c) License fee fixed by Govt.
d) 10% of employees salary

Answer: c

68. Value of rent free accommodation a house owned by employer in case of non- Govt. employees with above 25 lakhs population is ......................
a) 10% of employees salary
b) 15% of employees salary
c) 7.5% of employee salary
d) 20% of employees salary

Answer: b

69. Interest on RPF balance is exempted up to .......................
a) 9.75%
b) 9.5%.
c) 10%.
d) 12%.

Answer: b

70. Employers contribution to RPF is exempted up to ...................
a) 10% of salary
b) 13% of salary
c) 12% of salary
d) 11% of salary

Answer: c

71. The income of previous year is chargeable to tax in the …………………….
a) Immediately succeeding assessment year
b) Same previous year
c) Immediately preceding academic year
d) None of the above

Answer: a

72. The interest on loan paid by the Government of India to a non-resident outside India is ………………. in India.
a) Not taxable
b) Partially taxable
c) Taxable
d) Can’t say

Answer: a

73. The salary, remuneration or compensation received by the partners is taxable under the head ………………………….
a) Income from Other Sources
b) Income from Business
c) Salary
d) None of the above

Answer: b

74. The death-cum-retirement gratuity received by the Government Employee or employee of local authority is ………………………….
a) Partially exempted
b) Fully exempted
c) Half taxable
d) None of the above

Answer: b

75. Under Section 15 of Income Tax Act, the salary due in previous years and even if it is not received is ……………………….
a) Taxable
b) Not taxable
c) Partially taxable
d) None of the above

Answer: a

76. The assesses can claim relief under ………………………… for arrears or advance salary.
a) Section 89(1)
b) Section 89(2)
c) Section 89(3)
d) Section 89(4)

Answer: a

77. The Payment of Gratuity Act came into force in …………………….
a) 1973
b) 1980
c) 1991
d) 1972

Answer: d

78. Deduction from gross Total income is allowed under Sec. 80C up to lower of the Qualifying amount or a maximum of
a) Rs. 50,000
b) Rs. 80,000
c) Rs. 1,00,000
d) Rs. 2,00,000

Answer: c

79. Profits earned from an illegal business are .....................
a) Taxable
b) Tax free
c) Ignored by Tax Authorities
d) treated as other income

Answer: a

80. Medical reimbursement is exempt upto .................. if treatment is done in a private hospital.
a) Rs: 5,000
b) Rs: 10,000
c) Rs: 15,000
d) Rs: 50,000

Answer: c

81. Which of the following is exempted.
a) C.C.A
b) D.A
c) Foreign Allowance
d) Medical Allowance

Answer: c

82. Free food provided to employees is exempted upto .................. per meal.
a) Rs: 40
b) Rs: 50
c) Rs: 60
d) Rs: 15

Answer: b

83. Which of the following is not taxable under the head Salary?
a) Remuneration paid to the lecturer of a college for setting a question paper
b) Salary received by a member of parliament
c) Commission received by an employee director of a company
d) Both (a) and (b)

Answer: d

84. In accordance with the provisions of Section 17(1) of Income Tax Act, 1961, the term salary includes …………………….
a) Any annuity or pension
b) Any gratuity
c) Any fees, commission, perquisite or profits in lieu of or in addition to any salary or wages
d) All of the above

Answer: d

85. If the employee receives retirement gratuity from more than one employer, he can claim exemption in respect of ……………………….
a) Current employer
b) Previous employer
c) Both employer
d) Not from single employer

Answer: c

86. The family pension received by the family members of armed forces after death of employee is ……………………………….
a) Exempt fully
b) Exempted after fulfilling of certain conditions
c) Not exempted
d) None of the above

Answer: b

87. The entertainment allowance is applicable to …………………….
a) Private sector employees
b) Public sector employees
c) Government employees
d) All of the above

Answer: c

88. The entertainment tax allowed as a deduction under Section 16 of Income Tax Act is the least of ………………………….
a) Actual amount of entertainment allowance received
b) 20% of basic salary of the individual
c) 50,00
d) All of the above

Answer: d

89. Income accrued outside India and received outside India is taxable in case of ………………………….
a) Resident and ordinary resident (ROR)only
b) Resident but not ordinary resident (RNOR)only
c) Non-resident only
d) ROR, RNOR and Non-resident

Answer: a

90. Gross Total Income is arrived after ……………………….
a) only adding Income under five heads of Income
b) adding Income under five heads of Income excluding losses
c) adding Income under five heads of Income, after applying clubbing provisions and making adjustment of set off and carry forward of losses
d) adding Income under five heads of Income, after applying clubbing provisions and making adjustment of set off and carry forward of losses and after allowing deduction undersection 80Cto80U

Answer: d

91. Employer provides a car (below 1.6 ltr capacity) along with a driver to X partly for official and partly for personal purpose. The expenses incurred by the company are: running and maintenance expenses – ` 32,000 and driver’s salary – ` 36,000 . Taxable value of perquisite is ……………………….
a) 21,600
b) 10,800
c) 32,400
d) 39,600

Answer: c

92. Encashment of earned leave is given by ……………………… of Income Tax Act, 1961.
a) Section 10(10AA)
b) Section 12(10A)
c) Section 15(10B)
d) None of the above

Answer: a

93. Compensation received on voluntary retirement is given by ……………………. of Income Tax Act,1961
a) Section 10(10D)
b) Section 10(10C)
c) Section 10(10E)
d) Section 11(10D)

Answer: b

94. If an employer transfers second hand motor car to the employee, the perquisite is valued at …………………………………….
a) Actual cost less depreciation @30% for every completed year under straight line method
b) Actual costless depreciation @20% for every completed year under WDV method
c) Actual costless depreciation @30% for every completed year under WDV method
d) Actual costless depreciation @20% for every completed year under SLM method

Answer: d

95. The following is not taxable as income under the head “Salaries”:
a) Commission received by a full-time director
b) Remuneration received by a partner
c) Allowances received by an employee
d) Free accommodation given to an employee

Answer: b

96. The following is exempt income from Income Tax:
a) Travel concession to employee
b) Remuneration received for valuation of answer scripts
c) Encashment of leave salary whilst in service
d) Perquisites in India

Answer: d

97. Gift to employee up to ……………………… p.a. will not be treated as perquisite taxable in the hands of employee.
a) 4,000
b) 5,000
c) 10,000
d) 2,500

Answer: b

98. Salary received by the manager of an agricultural farm is .........................
a) An agricultural income
b) A salary income
c) A business income
d) A capital income

Answer: b

99. Any benefits attached to an office or position in addition to salary or wages is called …………….
a) Allowances
b) Perquisites
c) Benefits
d) None of these

Answer: b

100. Leave travel concession is explained as per section ……………
a) 10(1)
b) 10(5)
c) 10(10)
d) 10(5A)

Answer: b