1. An Indian citizen leaves India for employment abroad on 25th September 2023. He has never left India before. For the Financial Year 2023-24, his residential status will be:
Deemed Resident.
Resident but Not Ordinarily Resident (RNOR).
Resident and Ordinarily Resident (ROR).
Non-Resident (NR).
Explanation:
He stays in India from 1st April to 25th Sept (approx 178 days). Since he leaves for employment, the 60-day rule is replaced by 182 days. Since 178 < 182, he is a Non-Resident.
2. Under Section 194A, TDS is deducted on interest (other than securities) paid by banks to resident individuals if the amount exceeds _____ in a financial year (for senior citizens).
?40,000
?10,000
?50,000
?1,00,000
Explanation:
The threshold limit for TDS on interest income for Senior Citizens is ?50,000. For others, it is ?40,000.
3. Liability for payment of Advance Tax arises if the estimated tax liability of the assessee for the year is:
?10,000 or more.
?1,00,000 or more.
?5,000 or more.
?20,000 or more.
Explanation:
As per Section 208, every person whose estimated tax liability for the year is ?10,000 or more is liable to pay advance tax.
4. Deferred Tax Assets (DTA) arise when:
Tax rate increases.
Accounting Income is higher than Taxable Income due to permanent differences.
Accounting Income is higher than Taxable Income due to timing differences.
Taxable Income is higher than Accounting Income due to timing differences.
Explanation:
If Taxable Income > Accounting Income, you pay more tax now but will pay less later. This prepayment creates an Asset (DTA). Example: Disallowance of expenses in tax that are allowed in books.
5. Short Term Capital Gain (STCG) on the sale of listed equity shares (where STT is paid) is taxed at:
Explanation:
Under Section 111A, STCG on listed equity shares is taxed at a concessional rate of 15% (plus surcharge/cess).
6. The maximum deduction available under Section 80C (including 80CCC and 80CCD(1)) of the Income Tax Act is:
?1,50,000
?50,000
?2,00,000
?1,00,000
Explanation:
The aggregate limit for deductions under sections 80C, 80CCC, and 80CCD(1) is currently capped at ?1.5 Lakh per financial year.
7. Under Section 139A, quoting PAN is mandatory for cash deposits in a bank account aggregating to _____ or more in a financial year.
?10 Lakh
?2.5 Lakh
?20 Lakh
?50,000
Explanation:
A recent rule change mandates PAN/Aadhaar for cash deposits or withdrawals aggregating to ?20 Lakh or more in a financial year, or for opening a current account.
8. Income of a minor child is clubbed with the income of the parent:
Who is the mother.
Whose total income (excluding minor's income) is greater.
It is not clubbed; filed separately.
Who is the father.
Explanation:
Under Section 64(1A), a minor's income is clubbed with the parent having the higher income. Exception: Income earned through manual work or skill/talent of the minor.
9. The quarterly TDS return to be filed by banks for interest payments (other than salary) is:
Form 16A
Form 26Q
Form 24Q
Form 27Q
Explanation:
Form 26Q is for TDS on payments other than salary to residents. 24Q is for Salary. 27Q is for non-residents.
10. Income earned in the Financial Year 2023-24 is taxed in the Assessment Year:
2024-25
2025-26
2023-24
2022-23
Explanation:
The year in which income is earned is the Previous Year (FY 2023-24). The year in which it is assessed and taxed is the Assessment Year (AY 2024-25).
11. Form 15H is submitted to the bank by:
Senior Citizens (60+ years) to claim NIL TDS on interest if tax liability is nil.
NRIs to claim lower TDS.
Any individual to avoid TDS.
Companies to avoid TDS.
Explanation:
Form 15G is for individuals below 60 years, and Form 15H is exclusively for Senior Citizens (60 years and above).
12. Deduction under Section 80E is available for:
Interest paid on Loan taken for Higher Education.
Medical Insurance Premium.
Donations to Charity.
Rent paid.
Explanation:
Section 80E allows deduction of the entire interest amount paid on education loans for self, spouse, or children, for a maximum of 8 years.
13. Agricultural Income in India is:
Fully Taxable.
Partially Taxable.
Taxed at a special rate.
Exempt under Section 10(1).
Explanation:
Agricultural income is exempt from central income tax. However, it is included for rate purposes to determine the tax slab for other income (Partial Integration).
14. Income Tax is charged on the income of the "Previous Year". The Previous Year is defined as:
The calendar year before the tax year.
The year in which tax is paid.
Any period of 12 months chosen by the taxpayer.
The Financial Year immediately preceding the Assessment Year.
Explanation:
In India, the Previous Year always runs from 1st April to 31st March immediately preceding the Assessment Year.
15. Income from subletting a house property is taxable under the head:
Profits and Gains of Business or Profession
Income from House Property
Income from Other Sources
Capital Gains
Explanation:
Income from House Property is applicable only to the OWNER. A tenant subletting the house is not the owner, so the rent received is taxed under "Other Sources" or Business (if it's their business).
16. Under Section 54EC, capital gains arising from the transfer of long-term capital assets are exempt if invested in specified bonds (like NHAI/REC) within:
Before the due date of filing return.
3 months from the date of transfer.
6 months from the date of transfer.
1 year from the date of transfer.
Explanation:
To claim exemption on Long Term Capital Gains, the assessee must invest the gains in specified bonds of NHAI, REC, etc., within a strict timeline of 6 months from the date of asset transfer. The maximum limit for investment in a financial year is ?50 Lakh.
17. Under Section 194C, what is the TDS rate for payments made to individual/HUF contractors if PAN is provided?
Explanation:
For payments to resident contractors: If the payee is an Individual or HUF, TDS is 1%. For others (like companies/firms), it is 2%. If PAN is not provided, the rate jumps to 20%.
18. Loss from a "Speculation Business" can be set off against:
Income from House Property.
Income from any other business.
Only against profits of another Speculation Business.
Income from Salary.
Explanation:
Under Section 73, losses from a speculation business are treated distinctly. They cannot be set off against normal business profits or other heads. They can only be set off against speculation profits and carried forward for 4 years.
19. The maximum deduction available under Section 80D for health insurance premium paid for Senior Citizen parents is:
?30,000
?25,000
?1,00,000
?50,000
Explanation:
The general limit is ?25,000. However, for senior citizens (age 60 or above), the limit is enhanced to ?50,000. This is separate from the self/family limit.
20. A "Best Judgment Assessment" under Section 144 is carried out by the Assessing Officer when:
The assessee fails to file a return or fails to comply with notices.
The assessee requests for it.
The assessee has filed a correct return.
There is a refund claim.
Explanation:
If the taxpayer is non-compliant (doesn't file return, doesn't produce documents), the officer estimates the income to the best of their judgment and determines the tax liability.
21. Under Section 194N, TDS is deducted on cash withdrawals from a bank account if the aggregate amount exceeds _____ in a year (for a person who has filed returns).
?2 Crore
?1 Crore
?50 Lakh
?20 Lakh
Explanation:
For compliant taxpayers (who filed returns), TDS @ 2% applies on cash withdrawals exceeding ?1 Crore. For non-filers, the threshold is lower (?20 Lakh).
22. Deduction under Section 80TTA regarding interest on savings accounts is available up to:
?10,000
?50,000
?5,000
No limit
Explanation:
For individuals (other than senior citizens) and HUF, interest on savings accounts (bank/post office) up to ?10,000 is deductible. (For Senior Citizens, Sec 80TTB gives ?50,000 limit including FD interest).
23. Tax Collection at Source (TCS) under Section 206C(1G) applies to remittances under the Liberalized Remittance Scheme (LRS) if the amount exceeds _____ in a financial year.
?10 Lakh
?5 Lakh
?7 Lakh
?2 Lakh
Explanation:
For LRS remittances (other than for education via loan), TCS @ 20% (revised rate) applies on amounts exceeding ?7 Lakh in a financial year.
24. What is the due date for filing Income Tax Return for a working partner of a firm whose accounts are required to be audited?
30th September
31st July
31st October
31st December
Explanation:
If a firm is subject to audit, the due date for the firm AND its working partners is 31st October of the Assessment Year.
25. The standard deduction available for Salaried Employees under Section 16(ia) is:
?50,000
?1,00,000
?40,000
?75,000
Explanation:
The standard deduction for salaried individuals is ?50,000 (or the amount of salary, whichever is less) under both Old and New Tax Regimes.
26. If a person holds more than one PAN card:
The second PAN is automatically cancelled.
It is legal.
They can use one for business and one for personal use.
A penalty of ?10,000 can be levied under Section 272B.
Explanation:
Holding more than one PAN is illegal. The Income Tax Act imposes a penalty of ?10,000 for possessing multiple PANs.
27. Compensation received for the termination of an agency business is treated as:
Revenue Receipt (Taxable).
Casual Income.
Capital Receipt (Taxable as Capital Gains).
Capital Receipt (Not Taxable).
Explanation:
As per Section 28(ii), compensation for termination or modification of terms of agency is taxable as "Profits and Gains of Business or Profession".
28. Allowances paid to High Court Judges are:
Fully Taxable.
Fully Exempt.
Taxable as "Other Sources".
Partially Exempt.
Explanation:
Under Article 222(2) of the Constitution and Income Tax Act, allowances paid to Judges of High Court and Supreme Court are fully exempt from tax.
29. For individuals, the highest rate of Surcharge (under the new regime for income > ?5 Crore) has been capped at:
Explanation:
In Budget 2023, the highest surcharge rate was reduced from 37% to 25% under the New Tax Regime to provide relief to high income earners.