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Chapter 1 – Basic Concept of Tax Laws | CS Executive | Tax Law Scanner 2021

Chapter 1st

Basic Concept of Tax Laws




1. Health & Education cess is payable on

a) Income-tax only 

b) Income-tax plus surcharge

b) Income Tax minus rebate 

d) any of the above, depends on

question

Answer – D


2. The General rates of income tax are mentioned in –

a) Income-tax Act, 1961 

b) Annual Finance Acts

c) both Income-tax Act, 1961 and Annual Finance Acts 

d) None of the above

Answer – B


3. Which statement is Ture in case of surcharge applicable in the case of an individual is –

a) 2% of tax payable if total income exceeds 100 lakh

b) 10% of tax payable if total income exceeds 100 lakh

c) 25% of tax payable if total income exceeds ` 200 lakh

d) Surcharge not levied on individual

Answer – C


4. As per section 115BAC newly inserted, In respect of a Resident Individual, who is of the age of 60 years or more at any time during the previous year 2020-21

a) Higher basic exemption of ` 2,00,000 is available

b) Higher basic exemption of ` 2,50,000 is available

c) Higher basic exemption of ` 3,00,000 is available.

d) Higher basic exemption of ` 5,00,000 is available.

Answer – B

5. The surcharge applicable to a domestic company for A.Y. 2021-22 is –

a) 2% always irrespective of level of income

b) 10% if total income exceeds ` 1 crore.

c) 5% if total income exceeds ` 1 crore

d) 7% if the total income exceeds ` 1 crore but upto` 10 crore.

Answer – D

6. The surcharge applicable to a foreign company for A.Y. 2021-22 is –

a) Nil

b) 2% if the total income exceeds ` 1crore upto` 10 crore

c) 2.5% if the total income exceeds ` 1 crore upto` 10 crore

d) 5% in all cases

Answer – B

7. A non-resident individual having taxable income in India of ` 5,00,000 shall be allowed rebate of how much under section 87A

a) 2,000 

b) 3,000 

c) 5,000 

d) Nil

Answer – D

8. ABC Inc, a foreign company has a total income of 1 crore. What would be the amount of surcharge applicable?

a) 10% 

b) 2% 

c) 5% 

d) Nil

Answer – D

9. Direct tax is a kind of tax where burden of tax is ………………. on payer.

a) directly 

b) indirectly

Answer – A


10. The provision of income tax is governed under which act`

a) Income tax Act, 1961 

b) Income tax Act, 1922

c) Direct tax code 

d) All of the above

Answer – A

11. Decisions pronounced by …… becomes law.

a) Supreme Court 

b) High Court

c) Income tax Appellate Tribunal 

d) None of the above


Answer – A


12. …………. capital is that capital which is turned over in business and results in profit or loss

a) fixed 

b) circulating 

c) any 

d) none

Answer – B 


13. …… capital is not directly involved in business

a) fixed 

b) circulating 

c) any 

d) none

Answer – A

14. A newly set up business coming into existence, the first previous year will commence from

a) Date of set up of business 

b) 1st April of previous year

c) Any date after set up of business 

d) one day before date of set up of business


Answer – A

15. Exemption limit of ` 3,00,000 or ` 5,00,000 is applicable for

a) Resident Individual 

b) Non-resident Individual

c) Both resident and non-resident Individual 

d) none of them

Answer – A

16. A resident individual aged 70 year shall be allowed exemption of

a) ` 2,50,000 

b) ` 3,00,000 

c) ` 5,00,000 

d) Nil

Answer – B

17. A non-resident individual who is 85 years of age shall be allowed exemption of …….. from taxable income

a) ` 5,00,000 

b) ` 2,00,000 

c) ` 2,50,000 

d) Nil

Answer – C

18. Which of the following is not an example of capital receipt?

a) money received on issue of shares 

b) money received on sale of land

c) money received on sale of goods 

d) none of the above


Answer – C

19. Income tax is charged on the basis of rate prescribed by

a) Income tax Act 

b) Finance Act

c) Central Board of Direct Taxes 

d) Ministry of Law

Answer – B

20. Income includes

a) only legal income 

b) Illegal income

c) both legal and illegal 

d) None of them

Answer – C

21. Charging section of income tax is

a) Section 4 

b) Section 9 

c) Section 15 

d) Section 28

Answer – A

22. Rebate under section 87A is allowed to

a) Resident individual 

b) any individual (resident or non-resident)

c) Resident individual and HUF 

d) all assessee

Answer – A

23. Rebate under section 87A shall be allowed to the maximum extent of

a) ` 2,500 

b) ` 12,500 

c) ` 5,000 

d) tax payable

Answer – B


24. Any rent or revenue derived from land may be treated as agricultural income if

a) It is derived from land 

b) the land is used for agricultural purposes

c) the land is situated in India 

d) All of the above condition shall be satisfied

Answer – D

25. Which of the following income is an agricultural income

a) Income from brick making

b) Income from agricultural land situated in Pakistan

c) Prize from Government on account of higher crop yield

d) Compensation received from insurance company on account of loss of crop

Answer – D

26. Which of the following income is not included in term income under the Income tax Act, 1961

a) Profit and gains 

b) Dividend from foreign company

c) Profit in lieu of Salary 

d) Reimbursement of travelling expenses

Answer – D

27. A person includes:

a) Only Individual

b) Only Individual and HUF

c) Individuals, HUF, Firm, Company only

d) Individuals, HUF, Company, Firm, AOP/ BOI, Local Authority, Every Artificial Juridical Person

Answer – D


28. Every assesse 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

Answer – C

29. Describe the status of the following person, X and Y are legal heirs of Z. Z died in 2019 and X and Y carryon his business without entering into a partnership.

a) Firm 

b) Limited Liability Partnership

c) Company 

d) Body of Individual

Answer – B

30. Assessment year is a period of

a) more than 12 months 

b)12 months and less than 12 months

c) 12 months only 

d)12 months and more than 12 months

Answer – C

31. All assessee 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 of12 months

d) Period starting from 1st July to 30th June only

Answer – B

32. 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 31st March, 2021 and will end on 31st March, 2021

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

d) Start from1st January, 2021 and will end on 31st March, 2021

Answer – B

33. 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 have to follow extended year from 1 January to next 31 March (period of15 months)

Answer – A

34. In which of the following cases, income of previous year is assessable in previous year itself:

a) Assessment of 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

Answer – A

35. As per section 115BAC, In case of female individual, who is of 65 years of age, what is the maximum exemption limit for AY 2021-22

a) ` 2,50,000 

b) ` 3,00,000 

c) ` 5,00,000 

d) Nil

Answer – B


36. Calculate Income-tax payable by an Individual (aged 30 years) for AY 2021-22 if his total income is

1,01,00,000 (not opt out 115BAC):

a) ` 33,21,500

b) ` 28,42,500

c) 30,93750

d) ` None

Answer – A

Solution

PARTICULARS

DIFFERNCE

RATE

1CR

1,01,00,000

UP TO 250K

250K

NIL

250K TO 500K

250K

5%

12500

12500

500K TO 1000K

5,00K

20%

100000

100000

ABOVE 10,00K

90,00K

30%

2700000

91,00K

30%

2730000

TOTAL TAX

2812500

2842500

ADD- SC@10%/15% ON TAX

[10%]

281250

[15%]

426375

= TAX + SC

3093750

3268875

MARGINAL RELIEF

INCOME TAX + SC ON ACTUAL INCOME – INCOME TAX ON 1CR AS THE CASE MAY BE – ACTUAL INCOME – 1CR

[3268875-3093750] – [1.01CR – 1CR]

175125 – 100000

75125

CALCULATION OF TAX LAIBILITY AFTER MARGINAL RELIEF

PARTICULARS

AMOUNT

= TAX PLUS SC ON ACTUAL INCOME

3268875

LESS- MR COMPUTED ABOVE

75125

=TAX

3193750

ADD- H&E CESS @4%

127750

=TAX LIABILITY

3321500

37. Out of the following, which capital receipt is not taxable?

a) Capital gains of ` 10,00,000

b) Amount of` 5,00,000 won by way of lottery, games, puzzles

c) Amount of` 2,00,000 received by way of gift from relatives

d) Amount of` 1,00,000 received by way of gift from a friend on marriage anniversary


ANSWER – D

38. Total income is to be rounded off to nearest multiple of……. and taxis to be rounded off to nearest

multiple of………

a) Ten, Rupee

b) Hundred, Ten

c) Ten,Ten

d)Rupee, Rupee


ANSWER – C

39. Assessee is always a person but a person may or may not be an assessee.

a) True

b) False

c) Partly true

d) None of the above

ANSWER – A

40. A person may not have assessable income but may still be assesse

a) True

b) False

c) Partly true

d) None of the above

ANSWER – B

41. A new business was set up on 15-11-2020 and commenced business from 1-12-2020. The first previous year in this case shall be:

a) 15-11-2020 to 31-3-2021

b) 1-12-2020 to 31-3-2021

c) 2021-2022

d) 2020-21

ANSWER – A

42. Surcharge in case of an individual or HUF for assessment year 2021-22 is payable at rate of:

a) 12% of the income-tax payable provided the total income exceed ` 6,00,000.

b) 10% of the income-tax payable provided the total income exceeds ` 50,00,000

c) 5% of the income-tax payable if the total income exceeds ` 1,80,50,000

d) 15% of the income-tax payable provided the total income exceeds ` 90,00,000

ANSWER – B

43. The maximum amount on which income-tax is not chargeable in case of firm is:

a) ` 2,00,000

b) ` 2,50,000

c) ` 5,00,000

d) Nil

ANSWER – C

44. A co-operative society is taxable at flat rate of 30% on Total Income

a) True

b) False

c) Partly true

d) None of the above

ANSWER – B

45. Health & Education cess is leviable in case of

a) An individual and HUF

b) A company assessee only

c) All assesses

d) Only Individual

ANSWER – C

46. In case of an individual and HUF, H & EC is leviable only when total income of such assessee

a) exceeds ` 10,00,000

b) always levied, irrespective of level of income

c) exceeds ` 7,00,000

d) exceeds ` 1,00,00,000

ANSWER – B

47. The total Income of the assessee has been computed as ` 2,53,494.90. After rounding off, total

Income will be taken as ……….

a) ` 2,53,500

b) ` 2,53,490

c) ` 2,53,495

d) `2,54,000

ANSWER – B

48. A circular of the CBDT u/s 119 of the Income tax Act 1961

a) can override or detract from the Act

b) cannot override or detract from the Act

c) may override the entire act

d) None of the above

ANS – B

49. The circulars issued by CBDT are binding on:

a) Assessee

b) Income-tax Authorities i.e. Assessing Officers

c) Both the above

d) None of the above

ANS – B

50. Decision passed by Supreme Court is binding on

a) All courts and tribunal

b) Income tax authorities

c) Assessee

d) All of the above

ANS – D

51. The amount of Health & Education cess to be collected along with income tax for the assessment

year 2021-22 is

a) 2%

b) 1%

c) 4%

d) Nil

ANS – C

52. Calculate rebate available u/s 87A to resident HUF having total income of` 3,00,000.

a) ` 3,000

b) ` 1,500

c) ` 2,000

d) Nil

ANS – D

53. Calculate rebate available u/s 87A to a resident individual having total income of` 6,00,000.

a) ` 3,000

b) ` 1,500

c) ` 12,500

d) Nil

ANS – D

54. Rebate under section 87A is allowed only on fulfillment of which condition

i) Assessee should be resident individual

ii) the Total Income of assessee is upto` 5,00,000

iii) All assessee

a) (i) and (ii)

b) only (ii)

 c) (ii) and (iii)

d) (iii)

ANS – A

55. Income of a business commenced & Set-up on 1stMarch, 2021 will be assessed during the

assessment year…………………….?

a) 2021-2022

b) 2020-2021

c) 2019-2020

d) 2018-2019

ANS – A

56. The maximum exemption limit under the income Tax Act ,1961 in case of a women who is 65 year of age and who is non-resident in India is ` …………………………?

a) 2,00,000

b) 2,50,000

c) 3,00,000

d) 5,00,000

ANS – B

57. The tax payable or refund due to an assessee is to be rounded off to the nearest…………?

a) 10

b) 1

c) 100

d) None of the above

ANS – A

58. Accounting standard notified under section 145 is applicable for ………… system of accounting?

a) Cash

b) mercantile

c) Hybrid

d) None of the above

ANS – B

59. AOP should consist of :

a) Individual only

b) Persons other than individual only

c) Both the above

d) None of the above

ANS – C

60. Body of individual should consist of:

a) Individual only

b) Persons other than individual only

c) Both the above

d) None of the above

ANS – A

61. From which entry does Central Government get power to levy Income tax

a) Entry 97 of Union List

b) Entry 92C of Concurrent List

c) Entry 82 of Union List

d) Entry 92C of State List

ANS – C

62. In case of partnership firm Surcharge is applicable when:

a) if its total income exceeds ` 1 crore

b) if total income exceeds ` 2 crore

c) Surcharge is not applicable on firm

d) its total income exceeds ` 50 lakhs

ANS – A

63. Finance Act is ……………

a) white paper presented for introduction of Income tax act

b) an act containing notifications, circulars issued by CBDT

c) an annual act in which amendment of Income tax, service tax etc. is contained

d) none of the above

ANS – C

64. Aggregate of incomes computed under five heads of income after applying clubbing provisions and making adjustments of set off, carry forward and set off the losses is known as ………

a) Taxable income

b) Gross Total income

c) Total Income

d) Net Income

ANS – B

65. Hindu undivided family (HUF) includes:

a) Family of Muslims, Christians

b) family of Jains, Sikhs, Buddhist

c) Both of the above

d) None of the above

ANS – B

66. Surcharge is calculated as a % of ……….

a) Gross Total income

b) Basic Tax

c) Total Income

d) Tax + Total income

ANS – B

67. A joint family of Mr. Ravi, Mrs. Ravi and their son Raj and daughter Simmy is a

a) HUF

b) Firm

c) BOI

d) Artificial judicial person

ANS – A

68. Rates of tax on ‘Special income’ is:

a) remains same for all type of person

b) vary from person to person

c) Any of the above

d) None of the above

ANS – A

69. A person leaves India permanently on 15-11-2020. The assessment year for income earned till 15-11-2020 in this case shall be:

a) 2019-20

b) 2020-21

c) 2021-22

d) None of the above

ANS – B

70. A local authority is taxable at flat rate of income-tax

a) True

b) False

c) Partly true

d) None of the above

ANS – A

71. Income tax is a form of

a) Direct tax

b) Indirect tax

c) Either a) or b)

d) none of them

ANS – A

72. Which of the following are deducted to compute tax payable

a) Tax deducted and collected at source

b) Advance tax

c) Double Taxation relief

d) All of the above

ANS – D

73. Light Ltd., a domestic company has income of 10 crore, what rate of surcharge is applicable on

same

a) 10%

b) 2%

c) 7%

d) Nil

ANS – C

74. The rate of tax applicable to a firm for A.Y. 2021-22 is –

a) 30%

b) 35%

c) 40%

d) 20%

ANS – A

75. The rate of tax applicable to a domestic company for A.Y. 2021 -22 if company T.O in P.Y 2018-19 was 343 crore is –

a) 30%

b) 25%

c) 40%

d) 45%

ANS – B

76. If a domestic company has income of ` 11 crore, surcharge at the rate of …… is applicable

a) 12%

b) 7%

c) 5%

d) Nil

ANS – A

77. Income of ………… year of an assessee is taxed during ………… year.

a) financial year, previous year

b) assessment year, previous year

c) previous year, assessment year

d) previous year, financial year

ANS – C

78. Corporate society is taxable at the flat rate of 22% under section 115BAD. Is the statement valid

a) valid

b) invalid

c) Partially valid

d) none of them

ANS – A

79. Surcharge @….. shall be levied if total income of Individual exceeds ` 5 crore.

a) 25%

b) 37%

c) 15%

d) Nil

ANS – B

80. Assessment of person leaving India under section 174 is done in relevant …………………..

a) Assessment Year

b) Previous Year

c) Financial Year

d) Exempt

ANS – B

81. Salary received from member of parliament is taxable under the head

a) PGBP

b) Salary

c) Other Sources

d) None of the above

ANS – C

82. Year in which income is taxable is known as …… & year in which it is earned is known as ……

a) Previous year, Assessment year

b) Assessment year, Previous year

c) Assessment year, financial year

d) financial year, Previous year

ANS – B

83. Mrs. V (Age 82 year) is resident in India for the assessment year 2021-22. For the previous year 2020-21, her income chargeable to tax in India is ` 8,30,000. Find out Tax liability as per section 115BAC.

a) 81,640

b)49,500

c) 51,480

d) 78,500

ANS – C

SOLUTON

UP TO 250K = NIL

250K TO 500K = 12500 [5%]

500K TO 750K = 25000 [10%]

750K TO 830K = 12000 [15%]

TOTAL = 12500+25K+12K = 49500 ADD CESS 4% = 51480

84. Mr. V, resident in India for the assessment year 2021-22. For the previous year 2020-21, his income chargeable to tax in India is ` 15,00,000. Find out Tax liability as per section 115BAC if born on (i) 15th Jan, 1941 (ii) 15th Jan, 1961 (without cess)

a) 187500 both case

b) 195000 both case

c) 2,70,400 / 2,60,000

d) None of the above

ANS – B

85. Income-Tax Act Extends to:

a) Whole of India

b) Whole of India except J&K

c) Whole of India except Sikkim

d) Whole of India except J&K and Sikkim

ANS – A

86. Surcharge on Income-Tax is payable by:

a) All Assessee subject to total income

b) Indian Company

c) Foreign company

d) Firm & Company Only

ANS – A

87. The maximum amount on which income tax is not chargeable in case of HUF for assessment year 2021-22.

a) 2,00,000

b) 2,20,000

c) 2,50,000

d) 1,80,000

ANS – C

88. The maximum amount on which income tax is not chargeable in case of AOP/BOI for assessment year 2021-22.

a) 1,00,000

b) 2,50,000

 c) 2,00,000

d) Nil

ANS – B

89. The Total Income of the assessee has been computed as ` 2,53,435.80. For rounding off, the total income will be taken as:

a) 2,53,430

b) 2,53,433

c) 2,53,432

d) 2,53,440

ANS – D

90. Rebate u/s 87 is not available to:

a) All Individual & HUF

b) Firm

c) Resident Individual

d) A & B

ANS – D

91. Tax computed is 8,256.12. After rounding off tax payable is:

a) 8,250

b) 8,256

c) 8,257

d) 8,260

ANS – D

92. Marginal relief is allowed in case of individual if Total Income exceeds:

a) 10 Lakhs

b) 50 Lakh

c) 10 Crore

d) 100 Crore

ANS – B

93. Special rate (Flat rate) of Income Tax prescribed by –

a) Finance Act

b) Income Tax Act

d) Both of the above

d) None

ANS – B

94. Newly inserted Special Rate / Specific Rate of Income Tax prescribed ubder –

a) Section 115BAA

b) Section 115BAC

d) Section 115BAB

d) None

ANS – B

95. The tax liability of Mr. Saral, who attained the age of 60 years on 01.04.2021 and does not opt for the provisions of section 115BAC for the P.Y. 2020-21, on the total income of ` 5,60,000,

comprising of salary income and interest on fixed deposits, would be –

(a) 9,880

(b) ` 22,880

(c) ` 25,480

(d) Nil

ANS – B

96. The tax liability of Nirlep Co-operative Society (does not opt to pay tax under section 115BAD) on the total income of ` 90,000 for P.Y. 2020- 21, is –

(a) ` 24,000

(b) ` 28,080

(c) Nil

(d) ` 24,960

ANS – D

97. What is the amount of marginal relief available to Sadvichar Ltd., a domestic company on the total income of ` 10,03,50,000 for P.Y. 2020- 21 (comprising only of business income) whose turnover in P.Y. 2018- 19 is ` 450 crore, paying tax as per regular provisions of Income-tax Act? Assume that the company does not exercise option under section 115BAA.

(a) ` 9,98,000

(b) ` 12,67,600

(c) ` 3,50,000

(d) `13,32,304

ANS – B

98. The tax payable by Dharma LLP on total income of ` 1,01,00,000 for P.Y. 2020-21, is –

(a) ` 35,29,340

(b) ` 32,24,000

(c) ` 33,21,500

(d) ` 31,51,200

ANS – B

99. whether Health & education cess are applicable when tax calculate as per section 115BAC ?

 a) Yes @ 4%

b) Not applicable

c)Yes @ 3%

d) None of the above

ANS – A

100. The tax liability of Nirlep Co-operative Society (opt to pay tax under section 115BAD) on the total income of ` 80,000 for P.Y. 2020- 21, is –

a) 20,130

b) 18,300

c) 17,600

d) 20,134

ANS – A

THE END

TEAM – CS ASPIRANT

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