Income Tax Law and Accounts MCQ: Unit 1 Quiz and Flashcards

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Questions and Answers

Which of the following is not a characteristic of a regressive tax system?

It places a greater burden on lower-income individuals

Lower-income individuals pay a higher proportion of their income in taxes

Higher-income individuals pay a higher proportion of their income in taxes (correct)

The tax rate decreases as the amount subject to taxation increases

What is the main purpose of a consumption tax?

To encourage savings and investment (correct)

To generate revenue for the government

To distribute the tax burden equally among all income levels

To discourage spending and boost the economy

Which of the following is an example of a 'toll tax'?

Gasoline tax used to maintain roads and bridges (correct)

Sales tax on luxury goods

Corporate income tax on business profits

Property tax levied on homeowners

What is the impact of 'bracket creep' on taxpayers?

It pushes taxpayers into higher tax brackets as their income increases Signup and view all the answers

Who introduced the first modern Income Tax in India?

James Wilson Signup and view all the answers

When was the Income Tax Act enacted in India?

1961 Signup and view all the answers

What is the main focus of the Income Tax Act 1961?

Governing taxation in the country Signup and view all the answers

What are the different sources of income mentioned in the Income Tax Act 1961?

Income from house property, capital gains, and profit from business Signup and view all the answers

What is the main objective of taxation?

Raising revenue Signup and view all the answers

Which of the following is not an objective of taxation mentioned in the text?

Environmental conservation objectives Signup and view all the answers

What is the primary objective of taxation?

Raising revenue Signup and view all the answers

How can the state discourage consumption of harmful goods?

By levying prohibitive rates of tax Signup and view all the answers

What is a common way to regulate production through taxation?

By increasing tax on capital goods Signup and view all the answers

How is economic development measured?

By GNP (Gross National Product) Signup and view all the answers

What is the Indian household savings rate?

Around 26% Signup and view all the answers

What is the definition of 'Assessment' in the context of income tax?

Determination of income by the assessing officer Signup and view all the answers

Who is considered an 'Assessee' under the income tax act?

'Person' in respect of whom any proceedings are taken Signup and view all the answers

What is the definition of 'Income' according to the Sec.2 (24)?

'Income' includes all things declared by interpretation and its natural import Signup and view all the answers

When is the taxpayer's income assessed for tax purposes?

'Taxpayer income' year after it was earned, at rates prescribed in the financial act Signup and view all the answers

Who is considered a 'Person' according to Sec.2 (7)?

'Person' refers to a natural person or human being Signup and view all the answers

Study Notes

Taxation Characteristics

A regressive tax system is not characterized by a proportionate tax rate that increases with income.

Consumption Tax

The main purpose of a consumption tax is to tax goods and services at the point of sale.

Toll Tax

A toll tax is exemplified by a tax on the use of roads or bridges.

Bracket Creep

Bracket creep occurs when taxpayers are pushed into higher tax brackets due to inflation, increasing their tax liability.

Income Tax History

The first modern Income Tax in India was introduced by James Wilson in 1860.
The Income Tax Act was enacted in India in 1961.

Income Tax Act 1961

The main focus of the Income Tax Act 1961 is to consolidate and amend the laws related to income tax.
The Act mentions five heads of income: Salaries, Income from House Property, Profits and Gains of Business or Profession, Capital Gains, and Income from Other Sources.

Objectives of Taxation

The primary objective of taxation is to raise revenue for the government.
One objective of taxation is to discourage consumption of harmful goods by imposing higher taxes.
A common way to regulate production through taxation is by imposing higher taxes on undesirable goods.
Economic development can be measured through indicators such as GDP per capita.

Indian Economy

The Indian household savings rate is relatively high.

Income Tax Definitions

Assessment in the context of income tax refers to the process of determining the tax liability of a taxpayer.
An Assessee is any person or entity whose tax liability is being assessed.
Income, according to Sec.2 (24), includes dividends, capital gains, and profits from business or profession.
A taxpayer's income is assessed for tax purposes at the end of the financial year.
A Person, according to Sec.2 (7), includes an individual, Hindu Undivided Family, firm, local authority, company, or trust.

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Description

Test your knowledge of income tax law and accounts unit 1 with this multiple-choice quiz. Answer questions about regressive tax system, consumption tax, toll tax, and bracket creep.

MCQ on Income Tax Law and Accounts Unit 1

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