TAXATION
I. Multiple choice questions
1. Which one of the following describes e-commerce?
A - Doing Business Electronically
B - Doing Business
C - Sale of Goods
D - All of the above.
Answer: D - All of the above. (E-commerce encompasses doing business electronically,
which includes the sale of goods.)
2. Verification of electronic records possible through:
A - Public Key
B - Digital Signatures
C - Private Key
D - E-Governance
Answer: B - Digital Signatures. (Digital signatures are used to verify the authenticity and
integrity of electronic records.)
3. Digital signature certificates are issued by:
A - Central Government
B - Certifying Authorities
C - State Governments
D - None of these
Answer: B - Certifying Authorities. (Certifying Authorities are trusted entities that issue
digital signature certificates.)
4. Information Technology Act 2000 is based on which model law of e-commerce?
A - UNCITRAL
B - UNCITRAL (This appears to be a typo in the image, as both options B and C are the
same)
C - UNCITRAL
D - UNICITRIAL
Answer: B - UNCITRAL. (The Information Technology Act 2000 in India is based on the
UNCITRAL Model Law on Electronic Commerce.)
5. E-Business requires:
A - Accessibility to Net Works
B - Access to Markets
C - Accessibility to Computers
D - All of the above
Answer: D - All of the above. (E-business requires access to networks, markets, and
computers.)
6. IT Act 2000 to the state of J&K:
A - Applies
B - Does not apply
C - Applies on General Notification
D - Exempted
Answer: A - Applies. (The Information Technology Act 2000 applies to the entire territory
of India, including Jammu & Kashmir.)
7. Under the Income Tax Act, the basis of taxation depends on:
A - The citizenship of the tax payer.
B - The age of the tax payer.
C - The residential status of the tax payer.
D - The gender of the tax payer.
Answer: C - The residential status of the tax payer. (Income tax liability in India is
determined by the residential status of the individual.)
8. ______ is empowered to levy and collect income tax:
A - State Governments.
B - RBI.
C - Central Government.
D - Local Self-Governments dependent.
Answer: C - Central Government. (The Central Government of India is responsible for
levying and collecting income tax.)
9. Income Tax Act extends to ______ of India:
A - States.
B - Union Territories.
C - Citizens.
D - Whole of India.
Answer: D - Whole of India. (The Income Tax Act applies to the entire territory of India.)
10. Resident of India includes:
A - Ordinarily Resident.
B - Not Ordinarily Resident.
C - Both of them.
D - None of them.
Answer: A - Ordinarily Resident. (A person can be classified as a Resident in India if they
meet certain criteria, and within the category of Residents, they can be further classified as
Ordinarily Resident or Not Ordinarily Resident.)
II. Fill in the Blanks/True or False
1. Article ______ of the Constitution of India is related to tax.
Answer: 265. (Article 265 of the Indian Constitution states that "No tax shall be levied or
collected except by authority of law.")
2.There are ______ heads of income to compute gross total income.
Answer: 5. (The five heads of income under the Income Tax Act are: Income from
Salary, Income from House Property, Profits and Gains of Business or Profession,
Capital Gains, and Income from Other Sources.)
3. Income Tax is payable on ______ income.
Answer: Total. (Income tax is payable on the total income of an individual or entity.)
4. Income Tax Act was passed in the year _______.
Answer: 1961. (The Income Tax Act, 1961 is the governing legislation for income tax in
India.)
5. IT Form used for Tax Payer is _______.
Answer: ITR (Income Tax Return). (ITR is the form used to file income tax returns.)
6. Section ______ of Income Tax Act is related to residential status.
Answer: 6. (Section 6 of the Income Tax Act deals with the determination of residential
status.)
7. The sum of various heads of income is called as _______.
Answer: Gross Total Income. (The sum of income under the five heads is referred to as
Gross Total Income.)
8. Salary is chargeable under section ______ of Income Tax Act.
Answer: 15. (Salary income is chargeable under Section 15 of the Income Tax Act.)
9. The Tax will be economical if cost of collection is less. True/False.
Answer: True. (This statement is generally true. If the cost of collecting tax is lower, it
makes the tax system more efficient and economical.)
10. Taxation helps in the growth and development of the country. This statement is True/False.
Answer: True. (Taxation funds government spending on infrastructure and services,
contributing to national development.)
III. Two-Mark Answers
1. Assessment Year.
Answer: The assessment year is the 12-month period following the financial year, during which
income earned in the financial year is assessed and taxed.
2. Heads of Income.
Answer: Heads of income are the five categories under which income is classified for taxation:
Salary, House Property, Business/Profession, Capital Gains, and Other Sources.
3. Residential Status of Individual in respect of Income Tax Act.
Answer: Residential status determines tax liability based on the individual's stay in India during
the financial year, classifying them as Resident, Non-Resident, or Not Ordinarily Resident.
4. Agricultural Income.
Answer: Agricultural income is income derived from agricultural land in India, and it is
generally exempt from income tax, subject to certain conditions.
5. Explain the meaning of Article 265 of the Constitution of India.
Answer: Article 265 states that "No tax shall be levied or collected except by authority of law,"
meaning taxes can only be imposed if explicitly authorized by a valid law.
