Basic Concepts
1. Income tax in India is charged under which Act?
a) Companies Act, 2013
b) Income-tax Act, 1961
c) Finance Act, 2024
d) Wealth-tax Act, 1957
Answer: Income-tax Act, 1961
2. Income tax is a:
a) Indirect Tax
b) Direct Tax
c) Service Tax
d) Customs Duty
Answer: Direct Tax
3. The previous year for income tax purposes means:
a) Calendar year
b) Assessment year
c) Financial year immediately preceding assessment year
d) Any 12 months chosen by the assessee
Answer: Financial year immediately preceding assessment year
4. Assessment year for FY 2024–25 is:
a) 2023–24
b) 2024–25
c) 2025–26
d) 2026–27
Answer: 2025–26
5. Income tax is levied by:
a) State Government
b) Central Government
c) Both Central and State Governments
d) Local Authority
Answer: Central Government
6. The maximum marginal rate of income tax means:
a) Highest slab rate including surcharge and cess
b) Highest slab rate excluding surcharge
c) Flat rate of 30%
d) Corporate tax rate
Answer: Highest slab rate including surcharge and cess
7. The person responsible for paying income tax is called:
a) Assessee
b) Taxpayer
c) Deductor
d) Person in charge
Answer: Assessee
8. Agricultural income is:
a) Taxable under Income-tax Act
b) Exempt under Section 10(1)
c) Taxable at flat 10%
d) Taxable partly
Answer: Exempt under Section 10(1)
9. Which of the following is not included in the definition of “income”?
a) Salary
b) Winnings from lottery
c) Capital receipts
d) Business profits
Answer: Capital receipts
10. Finance Act is passed by:
a) State Legislature
b) President
c) Parliament
d) CBDT
Answer: Parliament
Basis of Charge
11. Section 4 of the Income-tax Act deals with:
a) Residential status
b) Charge of income-tax
c) Exempt incomes
d) Filing of return
Answer: Charge of income-tax
12. Total income of a person is computed for:
a) Previous year
b) Assessment year
c) Any year
d) Calendar year
Answer: Previous year
13. Income tax is charged at the rates prescribed by:
a) CBDT circular
b) Finance Act
c) Income-tax Rules
d) Notification
Answer: Finance Act
14. Who is liable to pay advance tax?
a) Every assessee with tax liability of ₹10,000 or more
b) Only companies
c) Only salaried employees
d) Only non-residents
Answer: Every assessee with tax liability of ₹10,000 or more
15. Tax on casual income (lottery, horse race) is levied at:
a) Normal slab rate
b) 20%
c) 30% flat rate
d) Exempt
Answer: 30% flat rate
Residential Status
16. Residential status of an individual is determined for:
a) Assessment year
b) Previous year
c) Calendar year
d) Any year
Answer: Previous year
17. A person is said to be resident in India if he stays in India for at least:
a) 30 days in PY
b) 60 days in PY and 365 days in 4 preceding years
c) 182 days in PY
d) Either (b) or (c)
Answer: Either (b) or (c)
18. For an Indian citizen leaving India for employment, the condition of 60 days is
substituted with:
a) 90 days
b) 120 days
c) 182 days
d) 240 days
Answer: 182 days
19. A Hindu Undivided Family’s residential status is based on:
a) Residence of Karta
b) Place of control and management
c) Income earned in India
d) PAN location
Answer: Place of control and management
20. A non-resident’s income taxable in India is:
a) Income received in India only
b) Income accruing or arising in India
c) Both (a) and (b)
d) Global income
Answer: Both (a) and (b)
21. Not Ordinarily Resident (NOR) condition applies when:
a) Resident in at least 2 out of 10 PY and 730 days in 7 PY
b) Resident in 9 out of 10 PY
c) Non-resident always
d) HUF only
Answer: Resident in at least 2 out of 10 PY and 730 days in 7 PY
22. Foreign income of a resident and ordinarily resident is:
a) Not taxable
b) Fully taxable
c) Taxable if received in India
d) Partly taxable
Answer: Fully taxable
23. A non-resident’s foreign income is:
a) Fully taxable
b) Exempt
c) Taxable only if received in India
d) Taxable partly
Answer: Taxable only if received in India
24. Residential status of a company depends on:
a) Its turnover
b) Its POEM (Place of Effective Management)
c) Its shareholders
d) Its registered office
Answer: Its POEM (Place of Effective Management)
25. The scope of total income depends on:
a) Type of assessee
b) Residential status
c) Age of assessee
d) Rate of tax
Answer: Residential status
Scope of Total Income
26. Global income is taxable in India only if assessee is:
a) Resident but not ordinarily resident
b) Resident and ordinarily resident
c) Non-resident
d) Not resident
Answer: Resident and ordinarily resident
27. Dividend received from an Indian company is:
a) Fully taxable in the hands of shareholders
b) Exempt
c) Taxable at 10%
d) Taxable in the hands of company
Answer: Fully taxable in the hands of shareholders
28. Salary earned abroad for services rendered in India is:
a) Not taxable
b) Taxable in India
c) Taxable abroad only
d) Partly taxable
Answer: Taxable in India
29. Interest received from Government of India bonds abroad is:
a) Not taxable
b) Taxable in India
c) Taxable only outside India
d) Taxable partly
Answer: Taxable in India
30. Agricultural income from land situated in India is:
a) Taxable
b) Exempt
c) Taxable partly
d) Taxable at 10%
Answer: Exempt
31. Past untaxed foreign income brought into India is:
a) Taxable
b) Exempt
c) Taxable at flat rate
d) Treated as salary
Answer: Exempt
32. Income deemed to accrue or arise in India includes:
a) Interest, royalty, technical fees payable by Indian resident
b) Agricultural income outside India
c) Capital gain from shares of foreign company without Indian assets
d) Salary earned abroad
Answer: Interest, royalty, technical fees payable by Indian resident
33. Gift received from a relative is:
a) Exempt
b) Taxable
c) Taxable at 20%
d) Taxable at 30%
Answer: Exempt
34. Gift received from non-relative above ₹50,000 is:
a) Fully exempt
b) Fully taxable
c) Taxable partly
d) Taxable at 10%
Answer: Fully taxable
35. Winnings from lottery are taxable:
a) At slab rate
b) Exempt
c) At 30% flat rate
d) At 20% flat rate
Answer: At 30% flat rate
Income from Salary
36. Salary is taxable on:
a) Due basis only
b) Receipt basis only
c) Due or receipt whichever is earlier
d) Whichever is later
Answer: Due or receipt whichever is earlier
37. Pension received from employer is:
a) Salary income
b) Income from other sources
c) Business income
d) Exempt
Answer: Salary income
38. Commuted pension received by a government employee is:
a) Fully exempt
b) Fully taxable
c) Partly taxable
d) Taxable at 10%
Answer: Fully exempt
39. Gratuity received by a non-government employee covered under Payment of
Gratuity Act is exempt up to:
a) ₹10 lakhs
b) ₹20 lakhs
c) ₹25 lakhs
d) ₹15 lakhs
Answer: ₹20 lakhs
40. House rent allowance is exempt under section:
a) 10(10A)
b) 10(10B)
c) 10(13A)
d) 10(14)
Answer: 10(13A)
41. Employer’s contribution to RPF is exempt up to:
a) 10% of salary
b) 12% of salary
c) 14% of salary
d) 15% of salary
Answer: 12% of salary
42. Transport allowance to a disabled employee is exempt up to:
a) ₹1,600 per month
b) ₹3,200 per month
c) ₹5,000 per month
d) Fully exempt
Answer: ₹3,200 per month
43. Perquisite is taxable in the hands of:
a) Employer
b) Employee
c) Both employer and employee
d) None
Answer: Employee
44. Medical allowance is:
a) Exempt up to ₹15,000
b) Fully taxable
c) Exempt fully
d) Taxable partly
Answer: Fully taxable
45. Leave encashment at the time of retirement of government employee is:
a) Fully exempt
b) Fully taxable
c) Exempt up to ₹3 lakhs
d) Exempt up to ₹5 lakhs
Answer: Fully exempt
46. Professional tax paid by employer on behalf of employee is:
a) Exempt
b) Fully taxable
c) Deduction from salary income
d) Perquisite
Answer: Deduction from salary income
47. Value of rent-free accommodation in metro cities is:
a) 5% of salary
b) 10% of salary
c) 15% of salary
d) 20% of salary
Answer: 15% of salary
48. Voluntary retirement compensation is exempt up to:
a) ₹3 lakhs
b) ₹5 lakhs
c) ₹10 lakhs
d) ₹20 lakhs
Answer: ₹5 lakhs
49. Tax-free perquisites include:
a) Medical facilities in government hospital
b) Rent-free accommodation
c) Car facility
d) Interest-free loan
Answer: Medical facilities in government hospital
50. Income under the head “Salaries” is taxable only if there exists:
a) Relationship of employer and employee
b) Contract for service
c) Business connection
d) Principal-agent relationship
Answer: Relationship of employer and employee
