Ramesh Singh Test: Tax Structure In India


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


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This mock test of Ramesh Singh Test: Tax Structure In India for UPSC helps you for every UPSC entrance exam. This contains 9 Multiple Choice Questions for UPSC Ramesh Singh Test: Tax Structure In India (mcq) to study with solutions a complete question bank. The solved questions answers in this Ramesh Singh Test: Tax Structure In India quiz give you a good mix of easy questions and tough questions. UPSC students definitely take this Ramesh Singh Test: Tax Structure In India exercise for a better result in the exam. You can find other Ramesh Singh Test: Tax Structure In India extra questions, long questions & short questions for UPSC on EduRev as well by searching above.
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?

Solution:
  • 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.

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?

Solution:
  • 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.

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?

Solution:
  • 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.

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.

Solution: The Securities Transaction Tax (STT) is a type of 'financial transaction tax levied in India on transactions done on the domestic stock exchanges. The Central Government prescribes the rates of STT through its budget from time to time. In tax parlance, this is categorised as a direct tax.

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?

Solution:
  • 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'.

 

 

 

QUESTION: 6

Which of these correctly matched?

1. Short Term Capital Gain - It applies if the asset has been sold within 36 months of owning it.

2. Long Term Capital Gain - It applies if the asset has been sold after 36 months of owning it.

Which of these statements are not correct?

Solution:

The tax is classified into two-

(i) Short Term Capital Gain (STCG): It applies 'if the Asset has been sold within 36 months of owning it'.

(ii) Long Term Capital Gain (LTCG): It applies 'if the asset has been sold after 36 months of owning it'.

 

 

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?

Solution:
  • 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.

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?

Solution:
  • 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.

 

 

 

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?

Solution: It is that portion of gross tax revenue which is distributed between the Centre and the States. The divisible pool consists of all taxes, except surcharges and cess levied for a specific purpose, net of collection charges.

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