Tax Basics and Income-tax Law

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Questions and Answers

Which type of tax is levied directly on individuals or entities?

Excise tax

Sales tax

Property tax

Income tax (correct)

What is the main focus of the Income-tax Act, 1961?

Definition of indirect taxes

Computation of property tax

Tax rates for different income components

Tax computation procedures (correct)

What is the term used for the circumstances when income of the previous year would be assessed to tax in the previous year itself?

Advance assessment

Retroactive assessment (correct)

Current year assessment

Immediate assessment

Which tax is levied on the sale of goods within a country?

Sales tax Signup and view all the answers

In the context of income taxation, what does 'assessment year' refer to?

Year in which income is assessed for tax purposes Signup and view all the answers

What is the basic source of revenue to the Government?

Tax constitutes the basic source of revenue to the Government. Signup and view all the answers

Which type of tax is Incometax considered as?

Direct tax Signup and view all the answers

What does the Constitution of India lay down in Article 265?

No tax shall be levied or collected except by authority of law. Signup and view all the answers

What is the power given to the Parliament and State Legislatures in terms of making laws for the purpose of levy of taxes?

They are empowered to make laws on the matters enumerated in the Seventh Schedule. Signup and view all the answers

What does Union List contain in terms of powers to make laws?

Parliament has the exclusive power to make laws on matters contained in Union List. Signup and view all the answers

What does 'previous year' refer to in the context of computing income chargeable to tax under the Income-tax Act, 1961?

It refers to the financial year in which the income is earned and assessed for tax purposes. Signup and view all the answers

Which component of total income determines the tax liability of a person under the Income-tax Act, 1961?

Income from business or profession Signup and view all the answers

What is the difference between direct and indirect taxes?

Direct taxes are paid directly by individuals or entities to the government, while indirect taxes are paid by intermediaries and passed on to consumers. Signup and view all the answers

What does 'assessment year' refer to in the context of income taxation?

It refers to the financial year in which the tax liability is determined and paid. Signup and view all the answers

What is the primary purpose of taxes as mentioned in the text?

To meet the common welfare expenditure of the society Signup and view all the answers

What is the distinguishing characteristic of direct taxes?

The burden of tax cannot be shifted to another person Signup and view all the answers

Which article of the Indian Constitution lays down the principle that 'No tax shall be levied or collected except by authority of law'?

Article 265 Signup and view all the answers

Who has the exclusive power to make laws on the matters contained in the State List according to the Indian Constitution?

State Legislatures Signup and view all the answers

What power is given to the Parliament and State Legislatures for making laws for the purpose of levy of taxes?

Concurrent power Signup and view all the answers

Which list contains matters under which the Parliament has exclusive power to make laws in terms of levy of taxes?

(i) Union List Signup and view all the answers

In what way does indirect tax differ from direct tax?

Indirect tax can be shifted to another person Signup and view all the answers

What does the Seventh Schedule to Article 246 contain?

(i) Union List, (ii) State List, (iii) Concurrent List Signup and view all the answers

What is the key feature of indirect taxes?

'The person who pays the tax can recover it from somebody else' Signup and view all the answers

Study Notes

Taxation Basics

Direct tax is levied directly on individuals or entities.
Income-tax Act, 1961, focuses on taxing income of individuals and entities.

Income Tax

'Assessment year' refers to the year in which the income tax is levied on the income earned in the previous year.
'Previous year' refers to the year in which the income is earned, which is chargeable to tax under the Income-tax Act, 1961.
Taxable income is the component of total income that determines the tax liability of a person under the Income-tax Act, 1961.

Taxation Principles

The primary purpose of taxes is to generate revenue for the government.
The Constitution of India, in Article 265, lays down the principle that 'No tax shall be levied or collected except by authority of law'.
The distinguishing characteristic of direct taxes is that they are levied directly on individuals or entities.
Indirect taxes, on the other hand, are levied on goods and services.

Constitutional Provisions

The Parliament has exclusive power to make laws on the matters contained in the Union List.
The State Legislatures have exclusive power to make laws on the matters contained in the State List.
The Seventh Schedule to Article 246 contains the Union List, State List, and Concurrent List.

Types of Taxes

Direct tax is considered as income tax.
Indirect tax is levied on the sale of goods within a country.
Indirect tax differs from direct tax in that it is levied on goods and services rather than on individuals or entities.
Key feature of indirect taxes is that the burden of the tax can be shifted to another person.

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Description

This quiz covers the fundamental concepts of tax, including the types of taxes, direct and indirect taxes, and components of income-tax law. It also explores the computation of total income for income-tax purposes and the important terms in the Income-tax Act, 1961.