Income Tax Act, 1961 - Free MCQ Practice Test with solutions, CLAT PG

A direct tax is one that individuals or organizations pay directly to the government, meaning the burden cannot be transferred to others. In contrast, indirect taxes, like sales tax, are collected by intermediaries and can be passed on to consumers.

The Income Tax Act, 1961 aims to promote economic growth and stability by redistributing income among different segments of society, ensuring that the tax system is fair and equitable.

An 'assessee' is defined as anyone who is liable to pay tax or any sum of money under the Income Tax Act, which includes individuals and organizations being assessed for tax purposes.

Under the Income Tax Act, 'income' encompasses various forms such as profits from business, salaries, capital gains, and income from other sources, making it comprehensive in nature.

The Assessment Year (AY) is the year following the Previous Year (PY), during which the income earned in the PY is assessed and taxed.

An individual who has been a non-resident in 9 out of the last 10 years is classified as Resident but Not Ordinarily Resident (RNOR), indicating a unique tax status.

Income from Foreign Investments is not explicitly classified as a head of income under the Income Tax Act; rather, it typically falls under income from other sources or specific categories based on its nature.

As per recent amendments, the standard deduction available for salaried individuals has been set at ₹50,000, helping to reduce taxable income.

Section 139 of the Income Tax Act outlines the provisions related to the filing of Income Tax Returns (ITR), specifying the requirements and timelines for taxpayers.

Section 80D provides deductions for health insurance premiums, allowing individuals to claim up to ₹25,000 and ₹50,000 for senior citizens, effectively promoting health insurance coverage.

Individuals with an income exceeding ₹10 lakh fall under the 30% tax slab in the old tax regime, which is the highest rate applicable to personal income tax.

TDS stands for Tax Deducted at Source, which is the tax collected by the payer before making the payment to the recipient. It ensures that tax is collected at the point of income generation.

The 4% health and education cess is levied on the total tax payable, aimed at funding health and education initiatives in the country, enhancing social welfare.

Tax Collected at Source (TCS) is a tax collected by sellers on specific transactions, such as the sale of scrap or jewelry, where the seller collects tax from the buyer at the time of sale.

The Central Board of Direct Taxes (CBDT) heads the Income Tax Department in India, overseeing tax policies and administration.