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Ramesh Singh Test: Tax Structure In India - UPSC MCQ


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9 Questions MCQ Test Indian Economy for UPSC CSE - Ramesh Singh Test: Tax Structure In India

Ramesh Singh Test: Tax Structure In India for UPSC 2024 is part of Indian Economy for UPSC CSE preparation. The Ramesh Singh Test: Tax Structure In India questions and answers have been prepared according to the UPSC exam syllabus.The Ramesh Singh Test: Tax Structure In India MCQs are made for UPSC 2024 Exam. Find important definitions, questions, notes, meanings, examples, exercises, MCQs and online tests for Ramesh Singh Test: Tax Structure In India below.
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Ramesh Singh Test: Tax Structure In India - Question 1

Consider the following statements about progressive taxation.

1. The idea here is less tax on the people who earn less and higher tax on the people who make more.

2. This method is believed to discourage more earnings by the individual to support low growth and development unintentionally.

3. Being poor is punished while richness is rewarded.

Which of these statements is/are correct?

Detailed Solution for Ramesh Singh Test: Tax Structure In India - Question 1
  • The idea here is less tax on the people who earn less and higher tax on the people who earn more classifying income earners into different slabs.

  • This method is believed to discourage more earnings by the individual to support low growth and development unintentionally.

  • Being poor is rewarded while richness is punished.

  • Taxpayers also start evading tax by showing lower unreal income.

Ramesh Singh Test: Tax Structure In India - Question 2

Consider the following statements.

1. If not converted into proportional taxes, every progressive tax will go on increasing and similarly every regressive tax will decrease to zero, becoming ultimately futile tax methods.

2. That is why every tax, be it progressive or regressive, must be converted into proportional taxes after a certain level.

Which of these statements is/are incorrect?

Detailed Solution for Ramesh Singh Test: Tax Structure In India - Question 2
  • Proportional Taxation: Generally, this mode is used as a complementary method with either progressive or regressive taxation.

  • If not converted into proportional taxes, every progressive tax will go on increasing and similarly every regressive tax will decrease to zero, becoming ultimately futile tax methods.

  • That is why every tax, be it progressive or regressive, must be converted into proportional taxes after a certain level.

Ramesh Singh Test: Tax Structure In India - Question 3

Consider the following statements.

1. Individuals in identical or similar situations paying identical or similar taxes is known as horizontal equity'.

2. When 'better-off' people pay more taxes, it is known as vertical equity.

Which of these statements is/are correct?

Detailed Solution for Ramesh Singh Test: Tax Structure In India - Question 3
  • Individuals in identical or similar situations paying identical or similar taxes are known as horizontal equity'.

  • When 'better-off' people pay more taxes, it is known as vertical equity.

Ramesh Singh Test: Tax Structure In India - Question 4

Consider the following statements.

1. The Securities Transaction Tax (STT) is a type of 'financial transaction tax levied in India on transactions done on the domestic and foreign stock exchanges.

2. The rates of STT are prescribed by the Central Government through its budget from time to time.

3. In tax parlance, this is categorised as an indirect tax.

Choose from the following options.

Detailed Solution for Ramesh Singh Test: Tax Structure In India - Question 4

Explanation:
 


  • Statement 1: The Securities Transaction Tax (STT) is indeed a type of financial transaction tax levied in India on transactions done on the domestic and foreign stock exchanges. This tax is aimed at taxing the transaction rather than the income or profit generated from it.



  •  
  • Statement 2: The rates of STT are indeed prescribed by the Central Government through its budget from time to time. The government can change the rates of STT in order to regulate the stock market and generate revenue.



  •  
  • Statement 3: In tax parlance, STT is categorised as an indirect tax. Indirect taxes are taxes that are imposed on goods and services, rather than on individuals or businesses directly. In the case of STT, it is levied on transactions and not directly on the individuals or businesses involved in the transaction.


  •  



Therefore, the correct answer is C: 2 Only as only statements 2 is true.

Ramesh Singh Test: Tax Structure In India - Question 5

Consider the following statements.

1.Commodities Transaction Tax (CTT) is a tax similar to Securities Transaction Tax (STT),

2. It is levied in India on transactions done on domestic commodity derivatives exchanges.

Which of these statements is/are incorrect?

Detailed Solution for Ramesh Singh Test: Tax Structure In India - Question 5
  • Commodities Transaction Tax (CTT) is a tax similar to Securities Transaction Tax (STT), proposed to be levied in India, on transactions done on the domestic commodity derivatives exchanges.

  • Globally, commodity derivatives are also considered as financial contracts. Hence CTT can also be considered as a type of financial transaction tax'.

 

 

 

Ramesh Singh Test: Tax Structure In India - Question 6
  1. Consider the following statements:

    1. The principles of a good tax system include fairness, efficiency, simplicity, flexibility, and transparency.
    2. Horizontal equity means 'better off' people pay more taxes.
    3. Administrative simplicity helps in checking tax evasion.

    How many of the statements given above are correct?

Detailed Solution for Ramesh Singh Test: Tax Structure In India - Question 6

Answer: (d) Only two
Explanation:

  • Statement 1 is correct: A good tax system includes fairness, efficiency, simplicity, flexibility, and transparency.
  • Statement 2 is incorrect: Horizontal equity means individuals in identical or similar situations pay identical or similar taxes.
  • Statement 3 is correct: Administrative simplicity helps in checking tax evasion.
Ramesh Singh Test: Tax Structure In India - Question 7

Consider the following statements.

1. There has been a divergence between the official tax rate and effective tax rate in India, which is defined as the ratio of the total tax collected to the aggregate tax base.

2. The divergence occurs mainly on account of tax exemptions.

3. Tax expenditure is also known as revenue foregone.

Which of these statements is/are correct?

Detailed Solution for Ramesh Singh Test: Tax Structure In India - Question 7
  • There has been a divergence between the official tax rate and effective tax rate in India-defined as the ratio of the total tax collected to the aggregate tax base.

  • The divergence occurs mainly on account of tax exemptions. A tax expenditure is also known as revenue foregone.

  • But such forgone taxes does not necessarily mean that the Government has waived them off.

Ramesh Singh Test: Tax Structure In India - Question 8

Consider the following statements.

1. Collection rate is the ratio of total customs revenue and the total value of imports for a year.

2. This is an indicator of overall incidence of customs, including countervailing duties (CVD) and special additional duties (SAD) on imports.

Which of these statements is/are incorrect?

Detailed Solution for Ramesh Singh Test: Tax Structure In India - Question 8
  • The collection rate is the ratio of total customs revenue and the total value of imports for a year. This is an indicator of overall incidence of customs including countervailing duties.(CVD) and special additional duties (SAD) on imports.

  • The Gol offers several exemptions in customs duty on a variety of imports. This is the reason why India's customs collection does not increase as much as its imports increase.

 

 

 

Ramesh Singh Test: Tax Structure In India - Question 9

Consider the following statements.

1. It is that portion of gross tax revenue which is distributed between the Centre and the States.

2. The divisible pool consists of all taxes, except surcharges and cess levied for a specific purpose, net of collection charges.

Which of these statements is/are correct?

Detailed Solution for Ramesh Singh Test: Tax Structure In India - Question 9

Explanation:

1. Definition of Divisible Pool:
- The first statement is correct. The divisible pool refers to that portion of gross tax revenue which is distributed between the Centre and the States.

2. Composition of Divisible Pool:
- The second statement is also correct. The divisible pool consists of all taxes, except surcharges and cess levied for a specific purpose, net of collection charges. This means that it includes all taxes collected by the government which are then shared between the Centre and the States, excluding certain specific types of taxes.

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