Income Tax And Corporate Tax — Part 1 MCQs with Explanations

The correct answer is Option B: 2, 4 and 5 . Let's break down why: Ethical principles in business are about doing what's morally right and fair. Statement 1: "To take the necessary action for the development of the concerned industry or business" - While contributing to industry growth is good, it's not always a direct ethical *obligation*. It's more of a strategic or beneficial action. Statement 2: "Pay taxes and discharge other obligations promptly" - This *is* a core ethical principle. Businesses have a legal and moral duty to pay their taxes fairly and on time. It ensures the government can provide essential services. Statement 3: "To ensure the best utilisation of the human resources" - This is important for efficiency and productivity, but not directly an *ethical* principle in the same way as fairness and honesty. It's more related to good management practices. Statement 4: "Refrain from secret kickbacks or pay-offs to customers, suppliers, administrators, etc." - This is a major ethical red flag! Kickbacks are a form of bribery and corruption and are completely unethical and often illegal. Statement 5: "Ensure payment of fair wages and fair treatment of employees" - This is essential for ethical business practice. Treating employees with respect and paying them fairly is a key ethical responsibility . Therefore, only statements 2, 4, and 5 are central ethical principles that a business *must* follow.

In tax laws, donation to approved and notified association for scientific research is allowed as 100% of the donation. Explanation: Section 80GGA allows deductions for donations made towards scientific research or rural development.

To determine the gross annual value (GAV) of a house property, we consider the following values: Municipal Value: Rs. 4,50,000 Fair Rental Value: Rs. 5,00,000 Standard Rent: Rs. 4,80,000 Actual Rent Received: Rs. 4,20,000 Step-by-Step Calculation: Step 1: Compare the Municipal Value and the Fair Rental Value and take the higher value. Higher Value (Municipal vs. Fair Rental): Rs. 5,00,000 Step 2: Compare the value obtained in Step 1 with the Standard Rent and take the lower value. Lower Value (Higher Value from Step 1 vs. Standard Rent): Rs. 4,80,000 Step 3: Compare the value obtained in Step 2 with the Actual Rent Received and take the higher value. Higher Value (Lower Value from Step 2 vs. Actual Rent): Rs. 4,80,000 Therefore, the gross annual value of the house property is Rs. 4,80,000 .

Option A: Fees paid to the lawyer for drafting partnership deed: This is allowed as a deduction because it's a necessary expense for setting up and running the business. It's a cost to formally establish the business structure. Option B: Loss due to embezzlement by an employee: This is also allowed as a deduction. It represents a real business loss incurred due to an unforeseen event related to employee actions. Businesses can deduct losses arising from such events. Option C: Legal expenses paid to protect the building of the business: This is a deductible expense. Maintaining and protecting business assets like buildings are ordinary and necessary for running a business. Option D: Cost of installing a new telephone: This is generally considered a capital expenditure, not a regular business expense. Capital expenditures are investments that provide long-term benefits to the business. Instead of being fully deducted in the year it is incurred, the cost of a new telephone (or telephone system) is usually capitalized and depreciated over its useful life. Depreciation means a portion of the cost is deducted each year. So, installing a new telephone isn't directly deducted from business income in the year it's purchased; rather it is depreciated. In simple terms: You can deduct expenses that keep your business running day-to-day. A new telephone is a longer-term investment, so it is depreciated, not fully deducted at once.

Income under the Income Tax Act, 1961 includes all receipts that add to the taxpayer’s wealth such as profits and gains of business or profession , dividends , and profit in lieu of salary . Reimbursement of travelling expenses does not represent an increase in the income of the employee, but only compensates the actual expenses incurred for official purposes. Hence , reimbursement of travelling expenses is not treated as income under the Income Tax Act, 1961.

Income from coffee grown and cured by the seller in India is treated as partly agricultural and partly non-agricultural income under the Income Tax Act, 1961. As per Rule 7B of the Income Tax Rules: When coffee is grown and cured (but not roasted or grounded), then 65% of the income is treated as agricultural income and exempt from tax 35% of the income is treated as non-agricultural income and taxable under the Income Tax Act This classification is based on the extent of agricultural vs. processing work involved in the production. Therefore, the tax liability is calculated on the 35% portion of the total income earned from coffee grown and cured.

Fully taxable is the correct answer to “Entertainment allowance for non-government employees are:”. This question is standard in competitive examination syllabi for Income Tax And Corporate Tax.

Statement (I) is correct, but (II) is incorrect is the correct answer to “Statement (I): If the tax liability has been reduced within the legal framework, it is tax planning. Statement (II): If tax liability has been reduced to get benefit of deduction available under the income tax, it is called tax evasion. In the context of the above two statements, which one of the following is correct”. This question is standard in competitive examination syllabi for Income Tax And Corporate Tax.

Tax paid on income which is doubly taxed, is allowed as deduction, at the Indian rate of tax or rate of tax of the foreign country, whichever is lower is the correct answer to “Where a person derives income from a nation with which India does not havea DTAA, such person is given credit in India in which of the following manner”. This question is standard in competitive examination syllabi for Income Tax And Corporate Tax.

Research is related to business only is the correct answer to “The revenue expenditure on research incurred by the assesses himself is allowed for deduction only if”. This question is standard in competitive examination syllabi for Income Tax And Corporate Tax.

60% agricultural and 40% non-agricultural is the correct answer to “If the agricultural land is used for tea plantation, then the tax liability is:”. This question is standard in competitive examination syllabi for Income Tax And Corporate Tax.

a-3, b-4, c-1, d-2 is the correct answer to “Match List-I with List-II and select the correct answer: List I List II a. Sec 6 (i) 1. Agriculture Income b. Sec 10AA 2. Leave Travel Concession c. Sec 10(1) 3. Resident d. Sec 10(5) 4. Leave Salary Choose the correct option from those given below:”. This question is standard in competitive examination syllabi for Income Tax And Corporate Tax.

Stock in trade is the correct answer to “Which of the following is not a capital asset under capital gains head of income”. This question is standard in competitive examination syllabi for Income Tax And Corporate Tax.

a-3, b-4, c-2, d-1 is the correct answer to “Match List-I with List-II and select the correct answer: List-I List-II a. Tax planning 1. Making suitable arrangement of TDS b. Tax avoidance 2. Understatement of income c. Tax evasion 3. Availing deduction under Section 10 (A) of IT Act d. Tax administration 4. Misinterpreting the provisions of the IT Act”. This question is standard in competitive examination syllabi for Income Tax And Corporate Tax.

100% of tax which is otherwise deductible under Section 194 C is the correct answer to “Under Section 271 C of the Income Tax Act, 1961 the amount of penalty for failure to deduct tax at source is”. This question is standard in competitive examination syllabi for Income Tax And Corporate Tax.

80TTA is the correct answer to “Which Section of the Income Tax Act relates to claim deduction for the amount of interest received from Bank Saving Account”. This question is standard in competitive examination syllabi for Income Tax And Corporate Tax.

3 and 4 is the correct answer to “Which two of the following are correct about TDS Certificates? 1. TDS on non-salary payment - Form 16 2. TDS on salary payment - Form 16 A 3. TDS on sale of property - Form 16 B 4. TDS on rent - Form 16 C Choose the correct option from those given below:”. This question is standard in competitive examination syllabi for Income Tax And Corporate Tax.

Inclusion of income of other person in assessee income is the correct answer to “Clubbing of income means:”. This question is standard in competitive examination syllabi for Income Tax And Corporate Tax.

Rs. 3,000 is the correct answer to “From the following details calculate the taxable income of 'A' assuming that he is a 'Not Ordinarily Resident' 1. Received Rs. 1000 in India, which accrued in England 2. Rs. 6000 was untaxed foreign income of some earlier years which was brought to India during previous year 3. Rs. 2,000 earned in India but received in England 4. Rs. 10,000 earned and received in Africa bur brought to India”. This question is standard in competitive examination syllabi for Income Tax And Corporate Tax.

Section 139(1) is the correct answer to “Return of income is submitted under which Section of Income Tax Act”. This question is standard in competitive examination syllabi for Income Tax And Corporate Tax.

Municipal value and fair rent is the correct answer to “Expected rent shall be higher of:”. This question is standard in competitive examination syllabi for Income Tax And Corporate Tax.

Financial year just before assessment year is the correct answer to “The term previous year means”. This question is standard in competitive examination syllabi for Income Tax And Corporate Tax.

15 years is the correct answer to “On fulfilling certain conditions, for an undertaking set up in special economic zones, deduction under section 10 AA of the Income Tax Act is allowed for”. This question is standard in competitive examination syllabi for Income Tax And Corporate Tax.

More than one residential house is the correct answer to “Exemption, under Sec. 54 F of the Income Tax Act, 1961, shall not be allowed if the assessee, on the date of transfer owns:”. This question is standard in competitive examination syllabi for Income Tax And Corporate Tax.

a-4, b-1, c-2, d-3 is the correct answer to “Match the items of List I with the items of List-II and choose the correct answer: List-I (Types of Income) List-II (Heads of Income) a. Salary, bonus, commission etc received by a working partner from the firm 1. Income from other Sources b. Pension received by the widow of a government employee 2. Income from (short-term) Capital Gains c. Profits on the sale of machinery used in business 3. Income from Capital Gains d. Compensation received from the government on compulsory acquisition of land and profit earned 4. Income from Business and Profession 5. Income from Salaries”. This question is standard in competitive examination syllabi for Income Tax And Corporate Tax.

two is the correct answer to “Section 80C provides for deduction in respect of tuition fee to . . . . . . . . children.”. This question is standard in competitive examination syllabi for Income Tax And Corporate Tax.

Both (A) and (R) are true and (R) is the correct explanation of (A) is the correct answer to “Given below are two statements. One is labelled as Assertion (A) and the other is labelled as Reason (R) . Assertion (A): Tax should not be charged on dividend income from the shareholders. Reason (R): Some economists are of the opinion that when tax has already been paid on the profit of the company and balance is distributed as dividend to the owners, tax need not be levied on them. In the light of the above two statements, choose the correct answer from the options given below.”. This question is standard in competitive examination syllabi for Income Tax And Corporate Tax.

All companies is the correct answer to “Minimum Alternate Tax (MAT) is imposed on”. This question is standard in competitive examination syllabi for Income Tax And Corporate Tax.

All partnership firms formed under the Indian Partnership Act, 1932, are assessed as firms under the Income Tax Act, 1961 is the correct answer to “Which one of the following statements is not correct with reference to the assessment of firms”. This question is standard in competitive examination syllabi for Income Tax And Corporate Tax.

Interest on capital received by a partner from the firm engaged in agricultural operations is the correct answer to “Which one of the following is agricultural income under the Income Tax Act, 1961”. This question is standard in competitive examination syllabi for Income Tax And Corporate Tax.

Individuals and HUF is the correct answer to “Any amount of money received in excess of Rs. 50,000 without consideration is fully taxable in the hands of”. This question is standard in competitive examination syllabi for Income Tax And Corporate Tax.

Deduction for interest on loan taken for the construction / purchase of house property is the correct answer to “Which of the following deductions will not come under Sec. 80 of the Income Tax Act”. This question is standard in competitive examination syllabi for Income Tax And Corporate Tax.

Both basic and additional conditions is the correct answer to “An ordinarily resident is who follows:”. This question is standard in competitive examination syllabi for Income Tax And Corporate Tax.

Any one of the three is the correct answer to “If a person is resident in any previous year, then in the next previous year”. This question is standard in competitive examination syllabi for Income Tax And Corporate Tax.

Value of all those assets to which one rate of depreciation is applicable is the correct answer to “Under the Income Tax Act, 1961 "block of assets" for the purpose of charging depreciation means:”. This question is standard in competitive examination syllabi for Income Tax And Corporate Tax.

The BPO unit constitutes it is permanent establishment is the correct answer to “A non-resident entity or the foreign company having an IT-enabled BPO in India, would be liable to tax in India only if:”. This question is standard in competitive examination syllabi for Income Tax And Corporate Tax.

1, 3 and 4 is the correct answer to “Under which of the following situations, the appellate tribunal can rectify the mistake in the order passed by it Under Section 254 (2) of Income Tax Act? 1. If subsequent decision of the Supreme Court/High Court is available on the subject after the appellate tribunal's order. 2. If an assessee apply for rectification of the tribunal's order by raising fresh grounds before the tribunal. 3. If the omission or mistake is on the part of appellate tribunal. 4. If the order is passed by the appellate tribunal under an erroneous impression of fact or law. Select the correct answer:”. This question is standard in competitive examination syllabi for Income Tax And Corporate Tax.

(A) is true and (R) is the correct explanation of (A) is the correct answer to “Assertion (A): Tax evasion is undertaken by employing unfair means. Reason (R): Payment of tax is avoided through illegal means or fraud for tax evasion.”. This question is standard in competitive examination syllabi for Income Tax And Corporate Tax.

1 → 3 → 4 → 2 is the correct answer to “Arrange the steps to e-filing of Income Tax Return in correct sequence: 1. Register yourself 2. Verify ITR V 3. Select the requisite form 4. Fill form and upload Choose the correct option from those below:”. This question is standard in competitive examination syllabi for Income Tax And Corporate Tax.

Rs. 2,78,100 is the correct answer to “If the taxable income of a domestic company for the Assessment Year 2011-12 is Rs. 9,00,000, its tax liability will be”. This question is standard in competitive examination syllabi for Income Tax And Corporate Tax.