504a direct tax (1)

Dr.G.R.Damodaran College of Science(Autonomous, affiliated to the Bharathiar University, recognized by the UGC)Re-

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III B.Com (E.Com) [2012-2015]Semester V

CORE: DIRECT TAX – 504AMultiple Choice Questions.

1. The tax is__________________A. National incomeB. domestic incomeC. per capita incomeD. both Aand B

ANSWER: A

2. Direct Tax is getting from_______A. customerB. buyerC. employeesD. persons

ANSWER: D

3. Section 10 Deals withA. Exempted incomeB. National incomeC. Group incomeD. Taxable income

ANSWER: A

4. CBDT is control byA. central GovernmentB. State GovernmentC. both (A)and (b)D. none of this above

ANSWER: A

5. Assessment year is calledA. Tax paidB. income earnedC. lossD. profit earned

ANSWER: A

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6. previous year started fromA. AprilB. marchC. januarryD. september

ANSWER: A

7. Who is Tax payer?A. AssesseeB. businessmanC. trustD. farmer

ANSWER: A

8. Who is Resident?A. followed any one of the basic conditionB. not followedC. additional conditions followedD. none of this above

ANSWER: A

9. One of the basic conditions under residential Status _____daysA. 186B. 182C. 181D. 180

ANSWER: B

10. Who is an ordinarily Resident?A. both basic and additional

B. only basicC. only additionalD. not basic and additional conditions

ANSWER: A

11. Who is non resident?A. not followed by any one of the basic conditionsB. only basicC. only additional and basicD. none of this above

ANSWER: A

12. Who is assessee in HUF?A. FatherB. spouseC. kartaD. deemed karta


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ANSWER: C

13. Education cess on tax payable is at.A. 2%B. !%C. 3%D. 5%

ANSWER: A

14. The following is capital receiptA. Salary paid by HUF to a member is.B. Dividend from investment.C. Bonus shares.D. Sale of technological know- how.

ANSWER: B

15. Following is not a capital receiptA. Dividend on investmentB. Bonus sharesC. Sale of know - howD. Compensation received for vacating business place

ANSWER: D

16. Right to enforce partition of H.U.F is available to.A. Only male members.B. Only female members.C. Both male as well as female.D. None of these members.

ANSWER: B

17. Rent paid to a partner by a PFAF is.

A. Allowable expense.B. None business expenditure.C. Rebate to firm.D. None of these.

ANSWER: A

18. Share of profits from PFAF of a partner is.A. Business income.B. Exempted income.C. Income from other sources.D. Capital gain.

ANSWER: B

19. Salary from PFAF of partner is.A. Exempted income.B. Taxable Business income.C. Salary income.


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D. Capital gain.ANSWER: B

20. Interest on capital of partner from PFAF is.A. Business income.B. Income from other sourcesC. Exempted income.D. None of these.

ANSWER: A

21. Interest paid by AOP to members is.A. Allowable business expenses of AOP.B. Allowable business expenses of hUFC. Expense for members.D. None of these

ANSWER: B

22. Remuneration paid to members of AOP is.A. Inadmissible expense of AOP.B. Allowable business expenses of AOP.C. Expense for members.D. None of these.

ANSWER: A

23. Rent paid by AOP to a partner for using his premises is.A. Allowed fully.B. Allowed partially.C. DisallowedD. None of these.

ANSWER: A

24. Share of income received from AOP is entitled to rebate at.A. 10%B. Nil.C. Average rate.D. 20%.

ANSWER: C

25. There is no exemption limit and flat rate of tax is applicable to.A. Individuals.B. Partnership firms.C. AOP.D. Companies and partnership firms.

ANSWER: C

26. The following is exempt incomeA. Travel concession to employeeB. Remune ration received for valuation of answer scripts


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C. Encashment of leave salary whilst in serviceD. Perquisites in India

ANSWER: A

27. Capital gains arising to an individual/HUF is exempt from tax under section 10(37) if the land wasbeing used for agriculture purposes by such HUF or individual or parent of his during a period of or moreimmediately preceding the date of transfer.

A. 2 yearsB. 36 monthsC. 12 monthsD. 6 months

ANSWER: A

28. Agriculture Income is __________A. TaxableB. not taxableC. partly taxableD. none of this above

ANSWER: B

29. House rent allowances is _________A. Fully taxableB. partly taxableC. fully exemptedD. none of this above

ANSWER: B

30. Income Tax Authorities are grouped into two main wings Administrative and.A. Judicial.B. Managerial.C. Executives.

D. Clerical.ANSWER: A

31. The highest Administrative Authority for Income Tax in India is.A. Finance Minister.B. CBDT.C. President of India.D. Director of Income Tax.

ANSWER: B

32. What are the exemption limit in Children Education AllowancesA. Rs.100 pmB. Rs.200pmC. Rs.300pmD. Rs.250pm

ANSWER: A


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33. What are the exemption limit in Hostel Expenditure Allowance?A. Rs.200pmB. Rs.300pmC. Rs.400pmD. Rs.500pm

ANSWER: B

34. Determining the tax liability is called.A. AssessmentB. Scrutiny.C. Enquiry.D. Enquiry.

ANSWER: A

35. Belated return can be filed by an assessee earlier or before completion of assessment and.A. 6 months.B. 1 year.C. 2 years.D. 2 years.

ANSWER: B

36. The number allotted by income tax authorities to assessees for identification and which should bequoted in all documents and correspondence is.

A. I.D. No.B. Register No.C. Permanent Account Number (PAN).D. Licence No.

ANSWER: C

37. Deduction of tax at source made for incomes which can be calculated in advance is called.A. T.D.S.

B. PAS.C. FAS.D. MAS.

ANSWER: A

38. Liability of an employer to deduct tax at source is.A. LiabilityB. Liability Optimal.C. capitalD. None of these.

ANSWER: C

39. For tax deducted at source, employer issues to employee.A. Form 20.B. Form 12AC. Form 16.D. Form 31A.


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ANSWER: C

40. Advance tax should be paid during a financial year if such advance tax payable by the assesseeexceeds.

A. . Rs.50,000.B. Rs. 1,000.C. Rs.20,000.D. Rs. 1,00,000.

ANSWER: B

41. Due date of filing of return by a non business assessee is.A. 30th June.B. 31st August.C. 31st July.D. 30th November.

ANSWER: C

42. Under the income- tax act, the incidence of taxation depends onA. The citizenship of the tax-payer.B. The age of the taxpayerC. The residential status of the tax-payer.D. The gender of the taxpayer

ANSWER: C

43. Unabsorbed depreciation can be carried forward for set off.A. for a period of four years only.B. for a period of eight years only.C. for an unlimited number of years.D. for a period of eighteen years only.

ANSWER: C

44. Dividends declared by Indian company are assessable under the head.A. Income from other source.B. Fully taxable under the head other source.C. Capital gain.D. Casual income.

ANSWER: B

45. Rent received from building held by an assessee as stock-in-trade is taxable under the head.A. profit or gains of business or profession.B. income from house property.C. income from other source.D. income from salaries

ANSWER: B

46. short term capital asset (except financial assets) is the one held for not more than.A. 48 months.B. 36 months.


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C. 60 months.D. 70 months.

ANSWER: B

47. A person engaged in a profession of accountancy whose income exceeds Rs.. 1, 20,000 have tomaintain books of account, if the gross receipt in any one of the three years. immediately preceding theprevious year.

A. Rs. 10,00,000.B. Rs. 2,00,000.C. Rs. 2,50,000.D. Rs. 35,000

ANSWER: A

48. Deduction in respect of expenditure on advertisements through articles intended for presentation willbe allowed on the value of each article up to a limit of.

A. fully allowed.B. Rs. 1,000 per item.C. Rs. 800 per item.D. Rs. 1,800 per item.

ANSWER: A

49. Capital expenditure on scientific research which cannot be absorbed on account of insufficiency ofprofit in any accounting year can be carried forward for.

A. 16 years.B. 8 succeeding previous years.C. . Indefinite period.D. 12 years.

ANSWER: C

50. Embezzlement of cash in a money lending business shall be treated as.A. Business expenditure.

B. Revenue loss incidental to business.C. Capital expenditure.D. Capital loss.

ANSWER: B

51. Distinction between 'capital' and "Revenue' is made based on.A. Separate Act passed by government, and Tribunals.B. Definition of the terms given in Income Tax Act 1961.C. Judicial precedents from courts.D. None of the above.

ANSWER: C

52. Receipt of amount on maturity of LIC Policy is.A. A revenue receipt.B. A capital receipt.C. A casual receipt.D. None of these.


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ANSWER: B

53. Which of the following is not a capital receipt?A. 'Salami' for settlement of Tenancy.B. Insurance claim received on machinery lost by fire.C. Lumpsum received on sale of shares.D. Goods sold for cash "Patent rights'.

ANSWER: D

54. Compensation for cancellation of a licence by the government resulting in cessation of business is.A. a casual receipt.B. a capital receipt.C. a revenue receipt.D. None of the above.

ANSWER: C

55. Which of the following is NPT a revenue receipt?A. Insurance received for loss of stock.B. Compensation for surrender of future profits.C. Profit on sale of technical know.D. Subsidy from Govt, in the normal how course of business

ANSWER: B

56. Compensation received for loss of trading asset is a.A. Capital receipt.B. Revenue receipt.C. a casual receipt.D. None of these.

ANSWER: A

57. Any payment made to discharge a revenue liability, if refunded later on, shall be.

A. Revenue expenditure.B. Capital expenditure.C. Illegal expenditure.D. Personal expenditure.

ANSWER: D

58. Which of the following is not a revenue expense?A. Rent of office buildingB. Sales tax and excise duty paidC. Payment made on dismissal of companyD. Remuneration to promoters of a temporary employee

ANSWER: A

59. Loss due to fire of hired machinery is.A. Capital loss.B. Revenue loss.C. Capital expenditure


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D. None of the above.ANSWER: A

60. Embezzlement of cash by a cashier is.A. a revenue loss.B. a capital loss.C. a casual loss.D. None of these.

ANSWER: A

61. Remuneration paid to members of AOP is.A. Inadmissible expense of AOP.B. Allowable business expenses of AOP.C. Expense for members.D. None of these.

ANSWER: A

62. Share of income received from AOP is entitled to rebate at.A. 10%B. nilC. AverageD. 20%

ANSWER: C

63. The following is not taxable as income under the head "Salaries"A. Commission received by a full time directorB. Remuneration received by a partnerC. Allowances received by an employeeD. Free accommodation given to an employee

ANSWER: B

64. If individual shares of partners of AOP/BOI are unknown, tax is charged on the total income ofAOP/BOI at the Maximum Marginal rate of.

A. 20%B. 25%C. 28%0D. 30.9%

ANSWER: D

65. Unabsorbed depreciation can be carried forward for set off.A. for a period of four years only.B. for a period of eight years only.C. for an unlimited number of years.D. for a period of eighteen years only.

ANSWER: A

66. Mr. Shanker and Mrs. Shanker are qualified Chartered Accountants and are carrying on profession aspartners in the same professional firm.


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A. the share of income of both partners will be clubbed under the provisions of Section 64.B. the clubbing provisions of section 64 will not apply to them.C. the share income from the firm will be exempt form tax.D. the clubbing provisions of section 46 will not apply to them.

ANSWER: C

67. Dividends declared by Indian company are assessable under the head.A. Income from other source.B. Fully taxable under the head other sourceC. Capital gain.D. Casual income.

ANSWER: B

68. Rent received from building held by an assessee as stock-in-trade is taxable under the head.A. profit or gains of business or professionB. income from house property.C. income from other source.D. income from salaries.

ANSWER: B

69. A short term capital asset (except financial assets) is the one held for not more than.A. profit or gains of business or professionB. income from house propertyC. income from other source.D. income from salaries.

ANSWER: B

70. A short term capital asset (except financial assets) is the one held for not more than.A. 48 months.B. 36 months.C. 60 months.

D. 70 months.ANSWER: B

71. A person engaged in a profession of accountancy whose income exceeds Rs.. 1, 20,000 have tomaintain books of account, if the gross receipt in any one of the three years. immediately preceding theprevious year.

A. Rs. 10,00,000.B. Rs. 2,00,000.C. Rs. 2,50,000.D. Rs. 35,000.

ANSWER: A

72. Deduction for bad debts is allowed to an assessee carrying on businessA. In the year in which the debt is written off as badB. In the year in which the debt first aroseC. In the year in which provisions was made in respect of the bad debtD. In the year in which the debt becomes irrecoverable by operation of law


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ANSWER: A

73. Capital expenditure on scientific research which cannot be absorbed on account of insufficiency ofprofit in any accounting year can be carried forward for.

A. 16B. 8C. indefiniteD. 12

ANSWER: C

74. A senior citizen female assessee can claim deduction u/s 80u upto.A. Rs. 50,000.B. Rs. 60,000.C. Rs. 75,000.D. Rs. 85,000.

ANSWER: A

75. Embezzlement of cash in a money lending business shall be treated as.A. Business expenditure.B. Revenue loss incidental to business.C. Capital expenditure.D. Capital loss.

ANSWER: B

76. Distinction between capital and Revenue is made based on.A. Separate Act passed by government, and Tribunals.B. Definition of the terms given in Income Tax Act 1961.C. Judicial precedents from courts.D. None of the above.

ANSWER: C

77. receipt is determined as Capital Receipt or Revenue receipt.A. At the time it is receivedB. While preparing final accounts.C. When the received amount is used.D. None of the above.

ANSWER: A

78. Which of the following is a capital receipt?A. Commission received.B. Salary receivedC. Salary receivedD. Sale proceeds of Building.

ANSWER: C

79. Receipt of amount on maturity of LIC Policy is.A. A revenue receipt.B. A capital receipt.


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C. A casual receipt.D. None of these.

ANSWER: B

80. Which of the following is not a capital receipt?A. Salam for settlement of Tenancy.B. Insurance claim received on machinery lost by fire.C. Lumpsum received on sale of sharesD. Goods sold for cash Patent rights.

ANSWER: D

81. Compensation for cancellation of a licence by the government resulting in cessation of business is.A. a casual receipt.B. a capital receipt.C. a revenue receipt.D. None of the above.

ANSWER: C

82. Which of the following is NPT a revenue receipt?A. Insurance received for loss of stock.B. Compensation for surrender of future profits.C. Profit on sale of technical know.D. Subsidy from Govt, in the normal how course of business.

ANSWER: C

83. Compensation received for loss of trading asset is a.A. Capital receipt.B. Revenue receipt.C. Casual receipt.D. None of these.

ANSWER: B

84. Any payment made to discharge a revenue liability, if refunded later on, shall be.A. a revenue receipt.B. a capital receipt.C. a casual receipt.D. None of these.

ANSWER: A

85. Salary paid by an employer out of capital will be.A. a revenue receipt in the hands of employeeB. a capital receipt in the hands of employeeC. a casual receiptD. None of the above.

ANSWER: A

86. Which of the following is not a capital expense?A. Installation expenditure of plant of a company.


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B. Legal expenses for reduction of capital.C. Commission to employees to achieve sales Targets.D. Expenses of promoting a company.

ANSWER: C

87. Amount paid as secret commission to employees of buyer of assessees goods is a.A. Revenue expenditure.B. Capital expenditure.C. Illegal expenditure.D. Personal expenditure.

ANSWER: A

88. Which of the following is not a revenue expense?A. Rent of office building.B. Sales tax and excise duty paid.C. Payment made on dismissal of company.D. Remuneration to promoters of a temporary employee.

ANSWER: D

89. Loss due to fire of hired machinery is.A. Capital loss.B. Revenue loss.C. Capital expenditure.D. None of the above.

ANSWER: B

90. Embezzlement of cash by a cashier is.A. revenue loss.B. capital loss.C. casual loss.D. None of these.

ANSWER: A

91. Total income is determined on the basis of Residential Status of the assessee in the previous yearaccording to.

A. Sec. 3.B. Sec. 5.C. Sec. 8.D. Sec. 12.

ANSWER: B

92. Residential status of an assessee is ascertained as per the provisions of.A. Sec. 6.B. Sec. 7.C. Sec. 9.D. Sec. 11.

ANSWER: A


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93. For ascertaining residential status taxable entities are classified into.A. 2 categories.B. 4 categories.C. 5 categories.D. 7 categories.

ANSWER: C

94. Residential status of taxable entities is.A. Fixed in nature.B. Can change from year to year.C. Fixed once in 5 years.D. None of these.

ANSWER: B

95. As per the first basic condition to determine residential status, a person should have been in Indiaduring the previous year concerned for.

A. 60 days or moreB. 120 days or more.C. 182 days or more.D. 240 days or more.

ANSWER: C

96. As per the second basic condition to determine residential status, a person should have stayed in Indiatotally for 365 days in the 4 years before the relevant previous year and he should have stayed in India inthe relevant previous year at least

A. 60 days.B. 90 days.C. 120 days.D. 182 days.

ANSWER: A

97. An individual who wants to be resident of India must satisfy at least.A. One of the Two basic conditions.B. Both the basic conditions.C. Both the additional conditions.D. None of these.

ANSWER: A

98. An individual who wants to be resident of India u/s 6a. a. must stay in India for at least.A. 730 days in 10 previous years.B. 182 days in the previous year.C. 365 days in the previous year.D. 150 days in the previous year.

ANSWER: B

99. An individual who is leaving India for an employment and wants to be a resident must stay in India forat least.

A. 60 days in PY and 365 days in preceding the previous year.


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B. 182 days in PY 4 preceding years.C. 730 days or more during 7 years.D. None of these

ANSWER: B

100. A person who is of Indian origin visiting India during the previous year to be called resident must sayin India for at least.

A. 60 days in PY.B. 6 days in PY and 365 days or more during 4 years preceding the PY.C. 182 days in PY.D. 730 days during 7 years preceding the PY.

ANSWER: C

101. An individual who wants to be an ordinarily resident must satisfy.A. One of the basic conditions only.B. One of the basic conditions and both the additional conditions.C. Both the additional conditions only.D. One of the additional conditions only.

ANSWER: B

102. First additional condition for resident to be an ordinarily resident is that he must have been resident inat least two out of the.

A. 10 previous years proceeding the relevant previous year.B. 8 previous years proceeding the relevant previous year.C. 12 previous years proceeding the relevant previous year.D. None of these.

ANSWER: A

103. Second additional condition for resident to be an ordinarily resident is that he must have stayed inIndia during the seven previous years proceeding the relevant previous year at least.

A. 182 days.

B. 365 days.C. 60 days.D. 730 days.

ANSWER: D

104. A person is Non resident if he fails to fulfill.A. The additional conditions.B. At least on of the basic conditions.C. Both basic conditions.D. None of these.

ANSWER: B

105. In case of residential status of HUF firm AOP and EOP if control and management are wholly outsideIndia they are deemed as.

A. Resident.B. Ordinarily Resident.C. Nonresident .


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D. None of these.ANSWER: C

106. An Indian companys residential status is that it is always.A. Resident.B. Nonresident.C. Ordinarily resident.D. None of these.

ANSWER: A

107. If control and. management of its affairs was fully in India a foreign company becomes.A. Resident in India.B. Ordinarily resident in India.C. Non resident.D. None of these.

ANSWER: A

108. Resident but not ordinarily resident pays.A. No Income tax at all.B. More tax than a resident.C. Less tax than a resident.D. Less tax than a Non resident.

ANSWER: C

109. Salary paid by an Indian company to its employees working in one of its branches outside India is.A. Salary accruing in India.B. Salary deemed to accrue in India.C. Salary accruing outside India.D. None of these.

ANSWER: A

110. Income received in India is taxable in the hands of.A. Resident only.B. Resident and ordinarily resident only.C. Non-resident only.D. All assessees.

ANSWER: D

111. Income accrued in India is taxable in the hands of.A. Non-resident only.B. Resident and not ordinarily resident only.C. All assesses.D. Resident and ordinarily resident only.

ANSWER: C

112. Income received outside India from a business controlled from India is taxable in the hands of.A. Resident and ordinarily resident and resident and not ordinarily resident.B. Non-resident only.


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C. Not ordinarily resident only.D. None of these.

ANSWER: A

113. Income accrued and received outside India is taxable in the hands of.A. Non-resident.B. Resident and ordinarily resident.C. Resident and not ordinarily.D. None of these residents.

ANSWER: B

114. Past untaxed income brought to India is taxable in the hands of.A. Resident and not ordinarily resident.B. Resident and ordinarily resident.C. Non-resident.D. None of these.

ANSWER: D

115. Income received outside India from a business controlled from India is taxable in the hands of.A. Resident and ordinarily resident and resident and not ordinarily resident.B. Non-resident only.C. Not ordinarily resident onlyD. None of these.

ANSWER: A

116. Income accrued and received outside India is taxable in the hands of.A. Non-resident.B. Resident and ordinarily residentC. Resident and not ordinarily.D. None of these residents

ANSWER: B

117. Past untaxed income brought to India is taxable in the hands of.A. Resident and not ordinarily residentB. Resident and ordinarily residentC. Non-resident.D. None of these.

ANSWER: D

118. Incomes on which Income tax is not charged are calledA. Exceptional incomesB. Privileged incomesC. Exempted incomes.D. exempted

ANSWER: D

119. Exempted incomes are defined under sectionA. 15 of income tax Act.


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B. 18 of income tax ActC. 10 of income tax Act.D. 20 of income tax Act.

ANSWER: C

120. Exempted incomes do not form part of total income ofA. . Individual assessees onlyB. HUF only.C. Firm and company assessees onlyD. all assessee

ANSWER: D

121. Incomes absolutely exempt from Tax are listed underA. Sec 2.B. Sec 10.C. Sec 38.D. Sec. 80c.

ANSWER: B

122. Remuneration received by embassy or high commission employees of a foreign state is fully exemptfrom tax under.

A. Section 9a.B. Sec 14(e).C. Sec 10 b. (ii) to (vi)D. Sec 20 (s).

ANSWER: C

123. Scholarship granted is.A. Fully exempted.B. Fully taxable.C. Partly exempted.

D. None of these.ANSWER: A

124. Any payments made under and awards instituted by central or state Governments are.A. Fully exemptedB. Fully taxableC. Partly exempted.D. None of these.

ANSWER: A

125. Allowances of MP/M.L.A / or M.L.C are.A. Fully exempted.B. Fully taxable.C. Partly exempted.D. None of these.

ANSWER: A


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126. Income of political parties is not to be included in total income if certain conditions are satisfied. Therelevant section of IT Act 1961 is.

A. Section 13A .B. Sec. 10d.C. Sec. 233B.D. Sec.88G.

ANSWER: A

127. Income of Non profit seeking educational institutions, financed by government, is exempt fromIncome tax if its annual receipts do not exceed.

A. Rs. 50 lakhs .B. Rs. 1 crore.C. Rs. 5 crores.D. Rs. 50 crores.

ANSWER: B

128. When parents income is clubbed with minor childs income parent is eligible for exemption of the.A. Actual income of minor or Rs. 20,000 which ever is lessB. Actual income of minor or Rs. 10,000 whichever is less.C. Actual income of minor or Rs. 5,000 which ever is lessD. Actual income of minor or Rs. 1,500 whichever is less.

ANSWER: D

129. Tax Holiday is.A. Income tax on holiday income.B. Cancellation of tax for the entire country.C. Tax exemption for a specified period.D. None of the above.

ANSWER: C

130. Tax incentives for 100% export oriented units are specially provided under I.T Act section.

A. 20A.B. 40(Z).C. 1 CB.D. 80(S).

ANSWER: C

131. Sum received by a co-parcener from Hindu undividual family is.A. Exempted in the hands of co-parcenerB. Exempted in the hands of HUF.C. Taxable in the hands of co-parcenerD. None of these.

ANSWER: A

132. Share of income from firm is.A. Taxable in the hands of partnerB. Exempted in the hands of partner.C. Exempted in the hands of firm.


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D. None of these.ANSWER: B

133. Casual income is.A. Fully taxable.B. Partly taxable.C. Fully exempted.D. None of these.

ANSWER: A

134. In case of Tax free salary.A. Tax is to be paid by employerB. No tax is payable on such salaryC. Tax is to be paid by the employee.D. Govt, itself pays the tax at a future date.

ANSWER: A

135. Salary received by a member of parliament is.A. Taxable as salary incomeB. Exempt from tax sources.C. Taxable as income from other.D. None of these.

ANSWER: C

136. Which of the following is an exempted salary?A. Payment by employer in kind.B. Salary from former employer.C. Salary received by UNO employees.D. Leave salary.

ANSWER: C

137. Contributions into Public Provident Fund (PPF) are repayable afterA. 5 yearsB. 10 years.C. 20 years.D. 15 years.

ANSWER: D

138. Allowances received by a government employee posted abroad are.A. Fully exempted.B. Partly exempted.C. Fully taxable.D. Taxable by the country where posted.

ANSWER: A

139. Dearness allowance is taxable in the hands of.A. Govt employeesB. Non Govt employees


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C. All employees.D. None of these.

ANSWER: C

140. House rent allowance is.A. Fully exempted.B. Partly taxable.C. Fully taxable.D. Actual rent paid alone is taxable.

ANSWER: B

141. Exemption for house rent allowance is determined by.A. Rule 24C.B. Sec. 80C.C. Rule 2A.D. Sec. 91.

ANSWER: C

142. Exempted limit of HRA in metropolitan cities is.A. 50% of salary.B. 40% of salary.C. 15% of salary.D. none of these.

ANSWER: A

143. Exempted limit of HRA in non metropolitan cities is.A. 40% of salary.B. 50% of salary.C. 10% of salary.D. 7.5% of salary.

ANSWER: A

144. Education allowance is exempted upto a maximum of.A. One child.B. Two children.C. Three children.D. Four children.

ANSWER: B

145. Children education allowance is exempted upto.A. Rs. 200 p.m. per child.B. Rs. 300 p.m. per child.C. Rs. 100 p.m. per child.D. Rs. 400 p.m. per child.

ANSWER: C

146. Hostel expenditure allowance is exempted upto.A. Rs. 300 per month per child.


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B. Rs. 200 per month per child.C. Rs. 150 per month per child.D. Rs. 250 per month per child.

ANSWER: A

147. Entertainment allowance to govt, employees is exempted, which is least of 20% of basic salary oractual allowance or.

A. Rs. 1,000.B. Rs. 2,000.C. Rs. 20,000.D. Rs. 5,000.

ANSWER: D

148. Perk is.A. Cash paid by employer to employeeB. Facility provided by employer to employeeC. Amount credited to employees.D. None of these accounts.

ANSWER: B

149. Perquisites to employees are covered in the I.T. Act 1961 under.A. Sec 2a.B. Sec. 17b.C. Sec 28a.D. Sec. 36 c.

ANSWER: B

150. The value of Interest free concessional loans to employees is determined on the basis of lending ratesfor the same purpose

A. S.B.I.B. R.B.I.

C. Central govt.D. State govt.

ANSWER: A

151. An employee is deemed as specified employee if he is a director in the company or has substantial inthe company or his chargeable salary per annum exceeds.

A. Rs. 5,00,000.B. Rs. 2,00,000.C. Rs. 1,00,000.D. Rs. 50,000.

ANSWER: D

152. Value of RFA in case of Govt, employee shall be taxable uptoA. 15% of employees salary.B. 7.5% of employees salary.C. License fee fixed by Govt.D. 10% of employees salary.


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ANSWER: C

153. Value of RFA of a house owned by employer in case of non Govt, employee's with above 25 lakhspopulation is.

A. 10% of employees salaryB. 15% of employees salary.C. 7.5% of employee salaryD. 20% of employees salary.

ANSWER: B

154. Reimbursement of medical bill for treatment from a Govt, hospital is exempted upto.A. Full amount.B. Rs. 15,000.C. One months salary of employee.D. None of these.

ANSWER: D

155. Interest on RPF balance is exempted upto.A. 9.75%.B. 9.5%.C. 10%.D. 12%.

ANSWER: B

156. Employers contribution to RPF is exempted upto.A. 10% of salary.B. 13% of salary.C. 12% of salary.D. 11% of salary.

ANSWER: C

157. Death cum Retirement Gratuity paid to a government employeeA. Fully taxable.B. Partially taxable.C. Fully exempted.D. Government pays the tax.

ANSWER: A

158. Statutory limit for exemption of gratuity received by non-Govt. employeesA. Rs. 3,00,000.B. Rs. 5,00,000C. Rs. 3,50,000D. Rs. 4,00,000.

ANSWER: C

159. Service in terms of months in excess of 6 months is rounded off to one year in case of.A. Govt, employee.B. Non Govt employees covered under Gratuity Act.


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C. Non Govt, employees not covered under Gratuity ActD. None of these.

ANSWER: B

160. Commuted value of pension is fully exempted in case ofA. an employee of private sector.B. an employee of a public sector undertaking.C. a Govt, employee.D. none of these.

ANSWER: C

161. Leave encashment received during service by a govt or non govt employee is.A. Fully exempted.B. Partially exempted.C. Fully taxable.D. employer has to pay tax on it.

ANSWER: C

162. Statutory limit for exemption of compensation received at the time of voluntary retirement (VRS) is.A. Rs. 5,00,000.B. Rs. 8,00,000.C. Rs. 10,00,000.D. Rs. 15,00,000.

ANSWER: A

163. Scope of income which can be taxed under the head profits and gains of business or profession iidefined in I.T. Act 1961.

A. Rs. 7,500.B. Rs. 5,000.C. 15% of employees salary.D. 25% of employees salary.

ANSWER: A

164. Fringe benefits are taxable in the hands of.A. All the employees.B. If employer is subject to FBT.C. If employer is not subject to FBT.D. None of these.

ANSWER: D

165. Statutory limit of exemption of leave encashment is.A. Rs. 3,50.000.B. Rs. 3,00,000.C. Rs. 5,00,000D. 2,50,000.

ANSWER: B

166. Deduction from gross Total income is allowed under Sec. 80C upto lower of the Qualifying amount or


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a maximum of.A. Rs. 50,000.B. Rs. 80,000.C. Rs. 1,00,000.D. Rs. 2,00,000.

ANSWER: C

167. Profits earned from an illegal business areA. Taxable.B. Tax free.C. Ignored by Tax Authorities.D. treated as other income.

ANSWER: A

168. Contribution made to an approved research association is eligible for deduction upto.A. 50%.B. 80%.C. 100%.D. 125%.

ANSWER: D

169. Unabsorbed capital expenditure on scientific research can be carried forward for.A. 15 years.B. 14 years.C. 8 years.D. 10

ANSWER: C

170. Pre commencement period expenses upto 3 years spent for research areA. Ignored.B. Allowed as expenses in the year of commencement of business.

C. Treated as capital expenses.D. None of these.

ANSWER: A

171. Any expenditure incurred on the purchase of patent rights is allowed as deduction in equalinstallments over a period of.

A. 10 years.B. 14 yearsC. 5 years.D. It qualifies for depreciation.

ANSWER: D

172. Capital Expenditure on acquisition of Patent Rights and Copy Rights prior to 1.4.98 is deductible overa period of.

A. 5 years.B. 10 years.C. 14 years.


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D. 20 years.ANSWER: C

173. Excise duty and sales tax are allowed as deduction if paid before.A. Late date of filing of return.B. Previous year end.C. Before 31 st December of the previous year.D. after 31 st December of previous year.

ANSWER: A

174. Technical know-how acquired after 1.4.98 is eligible for depreciation at.A. 10% P.A.B. 20% P.A.C. 25% P.A.D. 40% P.A.

ANSWER: C

175. Contribution to RPF paid by cheque shall be encashedA. Within 15 days from due dateB. Within 6 months from due date.C. Within 3 months from due dateD. Within 12 months from due date.

ANSWER: A

176. Interest on capital borrowed for plant construction has to be.A. Ignored.B. Treated as Revenue expenditureC. Added to the asset cost as year of using the assetD. Written-off fully in the first Capital expenditure

ANSWER: C

177. General deductions for Business or Profession are covered in the I.T.Act 1961 under.A. Sec.20.B. Sec.31.C. Sec.37.D. Sec.45.

ANSWER: C

178. Specific disallowances while computing profits and gains of business or profession are included in theI.T. Act 1961.

A. Sec.20.B. Sec.40.C. Sec.60.D. Sec.80.

ANSWER: B

179. What is the limit beyond which expenses should be paid by crossed cheque or draft only otherwise thepayment is folly disallowed?


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A. Rs. 5,000.B. Rs. 10,000.C. Rs. 15,000.D. Rs. 20,000.

ANSWER: D

180. Preliminary expenses shall be allowed as deduction in.A. 5 Instalments.B. 10 Instalments.C. 15 InstalmentsD. 12 Instalments.

ANSWER: A

181. Bad debts allowed earlier and recovered latter on is.A. Business income.B. Non business income.C. Exempted income.D. Income from other sources.

ANSWER: A

182. Under valuation of opening stock is.A. deducted from net profit.B. added to net profit.C. credited to P & L A/cD. none of these.

ANSWER: A

183. Over valuation of closing stock is.A. deducted from net profit.B. added to net profit.C. adjusted in P&L A/c.

D. none of these.ANSWER: A

184. Persons in specified professions have to maintain prescribed books of account if their professionalincome exceeds.

A. Rs. 1.50,000.B. Rs.3.00.000.C. Rs.5.00.000.D. Rs. 10,00.000.

ANSWER: A

185. Professional expenses are allowed on.A. accrual basis.B. payment basis.C. accrual or payment basisD. none of the above.

ANSWER: D


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186. Gifts from clients are.A. Professional income.B. Income from other sources.C. Non taxable item.D. None of these.

ANSWER: A

187. Business Accounts should be compulsorily audited if the turnover exceeds.A. Rs. 10,00.000.B. Rs.20.00,000.C. Rs.40.00,000.D. Rs.80.00.000.

ANSWER: C

188. Provisions for allowing depreciation are included in Sec.32 of I.T Act and are Regulated under.A. Rule 1.B. Rule 3.C. Rule 5.D. Rule 7.

ANSWER: C

189. Intangible assets are.A. Not eligible for depreciationB. Eligible for depreciationC. Can be fully written-off in the year of acquisitionD. None of these.

ANSWER: B

190. Interest on loan borrowed for acquisition of an asset till the date of installation is.A. Revenue expenditure.

B. Capital expenditure.C. Non business expenditure.D. None of these.

ANSWER: B

191. Repairs incurred before installation of an assets is.A. Capital expenditure.B. Revenue expenditure.C. Non business expenditure.D. None of these.

ANSWER: A

192. Method of depreciation allowed is.A. WDV method.B. SLM method.C. Replacement method.D. Market value method.


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ANSWER: A

193. If a depreciable asset is acquired and used for less than 180 days in a financial year, depreciationallowed on it is.

A. Normal Rate.B. 50% of Normal Rate.C. Nil.D. None of these.

ANSWER: B

194. Into how many classes depreciable assets are divided for the purpose of depreciation?A. 2B. 3C. 5D. 4

ANSWER: D

195. Under each class of depreciable assets, assets with same rate of depreciation are formed into.A. Blocks.B. Categories.C. Aggregates.D. None of these.

ANSWER: A

196. Rate of depreciation on residential building is.A. 5%.B. 10%C. 15%D. 20%.

ANSWER: A

197. Rate of depreciation on non residential building is.A. 10%.B. 15%.C. 20%.D. 25%

ANSWER: A

198. Rate of depreciation on furniture is.A. 5%.B. 15%.C. 10%.D. 20%.

ANSWER: C

199. Apart from normal depreciation, additional depreciation is permitted for certain assets at the rate of.A. 10%B. 20%


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C. 40D. 50

ANSWER: B

200. Additional depreciation is allowed at half the rate, if the asset is used in the initial year for.A. 195 days.B. 199 days.C. 360 days.D. less than 180 days.

ANSWER: D

201. Rate of depreciation on furniture is.A. 5B. 15C. 10D. 20

ANSWER: C

202. Apart from normal depreciation, additional depreciation is permitted for certain assets at the rate of.A. 10%.B. 20%C. 25%D. 30%

ANSWER: B

203. Net annual value is calculated from in GAV atA. 23%B. 24%C. 22%D. 30%

ANSWER: D

204. Additional depreciation is allowed at half the rate, if the asset is used in the initial year for.A. 195 days.B. 199 days.C. 360 days.D. less than 180 days.

ANSWER: D

205. Exempted Capital gains, the fourth among the five major heads of Income, is assessable to tax under.A. Section 5.B. section 25C. section 54D. Section 65.

ANSWER: B

206. Income from sale of house hold furniture is.A. Taxable capital gain.


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B. Exempted capital gain.C. Short term capital gain.D. Long term capital gain.

ANSWER: B

207. Income from sale of rural Agricultural land is.A. Taxable capital gain.B. Exempted capital gain.C. Taxable income.D. None of these.

ANSWER: B

208. Which of the following is not an exempted asset for the purpose of capital gains tax?A. Assets held for personal use.B. Shares of domestic companies.C. Gold deposit bonds under 1999.D. Special Bearer Bonds issued by central scheme govt, in 1991.

ANSWER: B

209. How many months a Non Financial Capital Asset must be held to be called a short Term CapitalAsset?

A. Not more than 36 months.B. Not more than 24 monthsC. Not more than 12 months.D. Not more than 6 months.

ANSWER: A

210. What is the time limit for holding of a Financial Asset, to be called Short Term Capital Asset?A. Not more than 6 months.B. Not more than 12 months.C. Not more than 24 months.

D. Not more than 36 months.ANSWER: B

211. To be a long term capital asset, a non financial asset should be held more than.A. 12 months.B. 24 months.C. 36 months.D. 60 months.

ANSWER: C

212. Shares held for less than 12 months are.A. Short term capital asset.B. Long term capital asset.C. Exempted capital asset.D. projected capital asset.

ANSWER: A


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213. House property held for less than 36 months is.A. Long term capital asset.B. Short term capital asset.C. Exempted capital asset.D. projected capital asset.

ANSWER: B

214. Shares held for 15 months are.A. Long term capital asset.B. Short term capital asset.C. Exempted capital asset.D. projected capital asset.

ANSWER: A

215. Land held for 56 months is.A. Short term capital asset.B. Long term capital asset.C. Exempted capital asset.D. projected capital asset.

ANSWER: B

216. transfer of capital assets is defined under I.T Act 1961.A. Section 1 (32).B. 9 (26).C. 26c.D. 2(47).

ANSWER: D

217. In case of movable property, title to property passes at the time when.A. Consideration is paid.B. Contract is entered for sale.

C. Sale is registered.D. Property is delivered pursuant to a contract to sell.

ANSWER: A

218. Indexation is applicable to.A. Sale of short term capital assets.B. Sale of long term debentures.C. Sale of depreciable capital assets.D. Sale of long term capital assets which are not depreciable assets

ANSWER: D

219. Full value of consideration for the purpose of transfer of capital assets is governed by I.T Act 1961.A. Section 24.B. Section 48.C. Section 60.D. Section 80c.

ANSWER: B


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220. Cost of long term debentures are.A. Eligible for indexing.B. Not eligible for indexing.C. None of these.D. All the above.

ANSWER: B

221. What is the date on which Fair Market Value of capital assets acquired is determined?A. 1.4.2001.B. 1.4.1971.C. 1.4.1981.D. 1.4.1971.

ANSWER: C

222. FMV on 1.4.81 is applicable to assets.A. acquired prior to 1.4.81.B. transferred prior to 1.4.81.C. acquired after 1.4.81.D. none of the above.

ANSWER: A

223. What is the date from which cost of improvements to capita assets is taken into account whilecomputing capital gains?

A. 1.4.2001.B. 1.4.1971.C. 1.4.1991.D. 1.4.1981.

ANSWER: D

224. Cost of improvement incurred prior to 1.4.81 is.

A. Indexed separately.B. Indexed along with cost of acquisition.C. Ignored fully.D. None of these.

ANSWER: C

225. Cost inflation rules for the purpose of long term capital gain has been notified by central governmentevery year starting from the financial year.

A. 1991-92.B. 1985-86.C. 1981-82.D. 1975-76.

ANSWER: C

226. Short term capital gain on sale of listed shares are.A. Exempted.B. Taxable.


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C. Partially Exempted.D. Partially Taxable.

ANSWER: B

227. Short term capital gain on sale of unlisted shares are.A. Taxable.B. Exempted.C. Partially Exempted.D. Partially Taxable.

ANSWER: A

228. Long term capital gain on sale of listed shares are.A. Exempted.B. Taxable.C. Partially Exempted.D. Partially Taxable.

ANSWER: A

229. Long term capital gain on sale of unlisted shares are.A. Taxable.B. Exempted.C. Partially Exempted.D. Partially Taxable.

ANSWER: A

230. Section 10(13A) deals withA. DAB. HRAC. RFAD. Perks

ANSWER: B

231. Exemption u/s 54 is allowed.A. on sale of land.B. on sale of shares.C. on sale of residential house.D. sale of personal effects.

ANSWER: C

232. Which of the following is not a Self generating Asset?A. Goodwill.B. Tenancy Rights.C. Right to Process an Article.D. Computers purchased for office use.

ANSWER: D

233. Exemption u/s 54 is allowed for investment in.A. another residential house.


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B. land.C. shares.D. jewellery.

ANSWER: A

234. Exemption u/s 54B is allowed for investment in.A. Agricultural land.B. Residential house.C. Shares.D. Non agricultural land.

ANSWER: A

235. Capital gains on compulsory acquisition of lands and buildings are exempted from tax under.A. Section 54D.B. Section 72E.C. Section 81B.D. Section 93A.

ANSWER: A

236. Exemption u/s 54EC is allowed for investment in.A. Bonds of NHAI and REC.B. Shares of companies.C. Residential house.D. Bonds issued by Govt.

ANSWER: A

237. Tax on short-term gain on sale of listed shares is.A. 20%.B. 25%.C. 30%.D. 15%.

ANSWER: D

238. Tax on long term capital gain is.A. 10%.B. 20%.C. 30%.D. 25%.

ANSWER: B

239. Income from other sources is a.A. Residuary head of income.B. Major head of income.C. Income from a single source.D. Constant and regular income.

ANSWER: A

240. Which one of the following is not an income from other sources?


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A. Interest on fixed deposit in bank.B. Winnings from cross word puzzles.C. gift in excess of Rs.50,000 from an unrelated person.D. profit on sale of building.

ANSWER: D

241. Which of the following income from other sources is not taxable?A. Dividend from co-operative society.B. Dividend from foreign company.C. Dividend from domestic company.D. Winnings from lottery.

ANSWER: C

242. Dividends from co-operative society are.A. Exempted.B. Taxable.C. Partially Exempted.D. Partially Taxable.

ANSWER: B

243. Interest on securities accrues.A. Day by day.B. Quarterly.C. After a fixed period mentioned on the face of the security.D. None of these.

ANSWER: C

244. Grossing up of interest on securities is required when.A. Interest is received after T.D.S.B. They are central govt. securities.C. The interest on bank deposit is less than Rs. 10,000.

D. None of these.ANSWER: A

245. Tax is reduced from casual incomes at.A. 10% + surcharge and cesses.B. 20% + surcharge and cesses.C. 30%.D. none of these.

ANSWER: C

246. Interest on Bank Term Deposits is subject to tax deduction at source if the interest amount during therelevant previous year exceeds.

A. Rs..2,000.B. Rs.5,000.C. Rs.. 10,000.D. Rs.30,000.

ANSWER: C


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247. Above 80 aged persons are called asA. Senior CitizenB. Old manC. Super Senior CitizenD. Retired person

ANSWER: C

248. Rate of T.D.S for unlisted securities, including cesses is.A. 10.6%.B. 15.6%.C. 10%.D. 30.6%.

ANSWER: C

249. CCA Stands forA. City compensatory allowancesB. City collection allowancesC. Computer compensatory allowancesD. All the above

ANSWER: A

250. Self occupied house property meansA. House occupied by assesseeB. Rented houseC. House owned by othersD. None

ANSWER: A

Staff Name

Dr Ravi Shankar C.


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