MCQs on THE INCOME TAX ACT 1961 Part - 1

Q.1:- Salary paid by an Indian company to its employees working in one of its branches outside India is:

• Salary deemed to accrue in India
• Salary accruing outside India
• Salary accruing in India
• None of the above

Q.2:- Income from subletting of house property is taxable under the head :

• Capital Gain
• Income from Other Sources
• Income from House Property
• Profits & Gains of Business or Profession

Q.3:- Mohan Received a gift of Rs.35,000/- each from his 3 friends on 30th March 2019:.

• 105,000 is taxable
• 50000 is taxable
• Not taxable
• Rs. 55000 is taxable

Q.4:- The benefit of exemption under Section 54F is available when following capital asset transferred

• Short term capital asset other than residential house property
• Short term residential house property
• Long term residential house property:
• Any long term capital asset other than residential house property

Q.5:- Income of minor is clubbed however the clubbing provision is not applicable if:

• Parents are separated
• Minor is a married daughter
• Minor is handicapped as specified u/s 80U
• None of the above

Q.6:- In case of revocable transfer of asset, all income arising from such asset to transferee shall be included

• income of transferee
• income of transferor
• Both transferor and transferee
• Either transferor or transferee

Q.7:- When parent's income is clubbed with minor child income, parent is eligible for exemption

• Actual income of minor or Rs. 10,000 whichever
• Actual income of minor or Rs. 1,500 whichever is less
• Actual income of minor or Rs. 20,000 whichever is less
• Actual income of minor or Rs. 5,000 is less whichever is less

Q.8:- Unabsorbed depreciation can be carried forward for set off:

• For an unlimited number of years
• For a period of four years only
• For a period of eighteen years only
• For a period of eight years only

Q.9:- Which of the following loss can't be carry forward if assessed has not filed his return of income within time under section 139(1) of the Income-tax Act?

• Losses under Head Capital gain
• Losses of owning & maintaining race horses
• Losses under Head Business/Profession
• All of the above

Q.10:- If Mr. A & Mrs. A both have substantial interest in a concern and both are in receipt of remuneration from that concern, then what will be the tax consequences?

• Remuneration shall be clubbed in the total income of Mrs. A
• Remuneration shall be clubbed in the total of that individual whose total income (before this clubbing) is higher
• Clubbing shall not apply
• Remuneration shall be clubbed in the total income of Mr. A

Q.11:- Double taxation relief could be:

• Unilateral Relief & Bilateral Relief
• Unilateral Relief
• Unilateral Relief or Bilateral Relief
• Bilateral Relief

Q.12:- Double taxation relief for incomes taxed in the countries with which no agreement exists is governed by:

• Section 93
• Section 91
• Section 89
• None of the above. .

Q.13:- Samraat, resident in India, has earned an income of Rs.4 lakh by way of lump sum consideration for copyright of book from a publisher in Country E, with which India does not have a DTAA. The same has been taxed at a flat rate of 5% in Country E. In India, his gross total income is Rs.7 lakhs. The double taxation relief availableis

• Rs.7,725
• Rs.1,950
• Rs.20,000
• Rs.1,931

Q.14:- Mr. Harry and Mr. Sujoy, resident and Indian citizens, have been appointed as senior officials of County A embassy and County B embassy, respectively, in India in October, 2018. Mr. Harry and Mr. Sujoy are subjects of Country A and County B, respectively, and are not engaged in any other business or profession in India. The remuneration received by Indian officials working in Indian embassy in County A is exempt but in County B is taxable. The tax treatment of remuneration received by Mr. Harry and Mr. Sujoy from embassies of Country A and Country B, respectively, in India for the P.Y. 2018-19is:

• Remuneration received by Mr. Harry is exempt but remuneration received by Mr. Sujoy istaxable
• Remuneration received by Mr. Sujoy is exempt but remuneration received by Mr. Harry istaxable
• Taxable under the Income-tax Act,1961
• Exempt from income-tax under section 10

Q.15:- Any profits or gains arising from the slump sale effected in the previous year shall be chargeable to income-taxas:

• No capital gain but the same will be taxable as business profits.
• Long term capital gain only
• Short term capital gains or Long term capital gains depending upon the period of holding of the undertaking.
• Short term capital gain only

Q.16:- Which of the following transactions shall not be regarded as transfer as per the provisions of Section 47:

• compulsory acquisition thereof under any law
• Any transfer of a capital asset, being share of a special purpose vehicle to a business trust in exchange of units allotted by that trust to the transferor
• Conversion of capital asset into stock in trade asset
• Extinguishment of rights in respect of capital

Q.17:- Any profits or gains arising from the slump sale of one or more undertakings held for more than months, shall be chargeable to income-tax as capital gains arising from the transfer of long-term capital assets and shall be deemed to be the income of the previous year in which the transfer took place

• 24
• 48
• 12
• 36

Q.18:- The Finance Act, 2001 introduced law of transfer pricing in India through Sections of the Income Tax Act, 1961 which guides computation of the transfer price and suggests detailed 1 documentation procedures:

• 90 to 92
• 90
• 92 to 92F :
• 91

Q.19:- GAAR stands for

• General agreement-avoidance rules
• Government anti-avoidance rules
• Government anti-agreement rules.
• General anti-avoidance rules

Q.20:- For accounting purposes, employee share-based payment plans are classified as :

• Fair value of goods/ services received unless it is not reliably measurable then fair value of share prices would be used
• Equity settled, cash settled and employees share based payment plans with cash alternatives.
• Equity settled and cash settled.
• Liability settled and cash settled.

Q.21:- _____ occurs when shares are allotted to the employee after he has exercised his option on completion of the vesting period:

• Second levy
• Third levy
• First Levy
• None of the above

Q.22:- When employee opt to sale share previously allotted under the ESOP, profit made by him the tax as capital gain are calculated by subtracting the _____ as on the exercise date from the consideration of such shares?

• Agreed value
• Face value
• Fair market value.
• Fair value

Q.23:- Capital Gain on ESOP = Sale proceeds

• FMV at the time of allotment of shares
• Face value of share
• Indexed cost of acquisition
• Cost of acquisition

Q.24:- In case the letting out of property is incidental to the main business, then income from such property shall be taxable as:

• Income from Other Sources
• Capital Gain
• Profits & Gains of Business or Profession
• Income from House Property

Q.25:- Dividends declared by Indian company are assessable under the head:

• Fully taxable under the head other source
• Casual income
• Income from other source
• Capital gain

Q.26:- Which of the following income is agricultural income-

• Income from poultry farm
• Rent received from agricultural land
• Dividend from a company engaged in agriculture.
• Income from dairy farm

Q.27:- Advance tax is not payable if tax payable after considering TDS and tax relief is:

• Less than Rs. 25000
• Less than Rs. 20000
• Less than Rs. 15000
• Less than Rs. 10000

Q.28:- An individual, being foreign national, came to India first time during the previous year on 01-01-2019 for 200 days, his residential status for the previous year 2018-19 is:

• Resident but not ordinarily resident in India
• Resident in India
• Non-resident
• Resident and ordinarily resident in India

Q.29:- The basic exemption limit (for the assessment year 2020-21 in case of a HUF is Rs .....................:

• Rs. 3,00,000
• Rs. 5,00,000
• Rs. 2,50,000
• Rs. 2,00,000

Q.30:- As per the first basic condition to determine residential status, a person should have been in India during the previous year concerned for:

• 240 days or more
• 182 days or more
• 60 days or more
• 120 days or more

Q.31:- Receipt is determined as Capital Receipt or Revenue receipt:

• While preparing final accounts
• At the time it is received
• When received amount is used
• None of the above

Q.32:- Which of the following is not a capital receipt?

• Lump-sum received on sale of shares
• 'Salami' for settlement of Tenancy
• Goods sold for cash under "Patent rights'
• Insurance claim received on machinery lost by fire

Q.33:- Receipt of amount on maturity of LIC Policy is:

• A casual receipt
• A revenue receipt
• A capital receipt
• None of these.

Q.34:- As per section 2(31), the following is included in the definition of 'person'

• A minor
• A company
• A Hindu undivided family
• An individual

Q.35:- Salary under section 17(1) of the Income Tax Act, 1961 does not include:

• Gratuity
• Interest
• Wages
• Pension

Q.36:- If control and management of its affairs was fully in India a foreign company becomes:

• Ordinarily resident in India
• Non resident
• Resident in India
• None of the above

Q.37:- …………………………….of an undertaking will entail transfer of the undertaking as a going concern for a lump-sum consideration, by the seller company to the purchaser company without considering the individual values of the assets or liabilities contained within the undertaking:

• Itemized sale
• slump Sale
• Wholesale
• Normal Sale

Q.38:- Mr. Dhanush holds shares in both L Ltd., and M Ltd. In the context of transfer pricingprovisions,

• L Ltd. and M Ltd. are deemed associated enterprises if Mr. Dhanush holds totally 52% or more combined voting power in both thesecompanies.
• L Ltd. and M Ltd. are deemed associated enterprises if Mr. Dhanush holds 26% or more of voting power in L Ltd., which in turn holds 26% or more of voting power in MLtd.
• L Ltd. and M Ltd. are associated enterprises if Mr. Dhanush holds 26% or more of voting power in each of thesecompanies.
• L Ltd. and M Ltd. can never be associatedenterprises.

Q.39:- As per sec.60, income is clubbed if:

• Asset yielding income is transferred as irrevocable transfer
• Asset yielding income is transferred as revocable transfer
• Income is transferred without transferring asset yielding income
• None of the above

Q.40:- Tax haven is a place where?

• There is no tax on income
• Tax rates are very high
• There is no tax on income or tax rates are very low
• Tax rates are very low

Q.41:- Second additional condition for resident to be an ordinarily resident is that he must have stayed in India during the seven previous years preceding the relevant previous year at least:

• 730 days
• 60 days
• 365 days
• 182 days

Q.42:- Which of the following is not a capital expense?

• Expenses of promoting a company
• Commission to employees to achieve sales targets
• Installation expenditure of plant of a company
• Legal expenses for reduction of capital

Q.43:- Every assessed is a person, and:

• An individual is always an assessed
• A HUF is always an assessed
• Every person need not be an assessed
• Every person is also an assessed

Q.44:- Income Tax Act came into force on:

• 01.04.1956
• 01.04.1965
• 01.04.1961
• 01.04.1962

Q.45:- In which of the following cases, income of previous year is assessable in the previous c itself?

• A person who is into illegal business
• A person who is running a charitable institution
• Assessment of persons leaving India
• A person in employment in India

Q.46:- Agriculture Income from outside India will be:

• Exempt from tax
• Taxable under the head Profit and Gains of Business or profession
• Taxable under the head income from Other Source.
• None of these.

Q.47:- Embezzlement of cash by a cashier is:

• A casual loss
• A revenue loss
• A capital loss
• None of the above

Q.48:- Which of the following gifts is taxable?

• Gift from wife
• Gift from office college
• Gift in kind from relatives
• Gift from son

Q.49:- Which sections of the income tax act 1961 deals with income under the head " Income from House Property"?

• Sections 22 to 27
• Sections 61 to 68
• Sections 6 to 9
• Sections 38 to 44

Q.50:- Indexation is applicable to:

• Sale of depreciable capital assets
• Sale of long term capital assets which are not depreciable assets
• Sale of short term capital assets
• Sale of long term debentures