Payments and Income MCQ Quiz - Objective Question with Answer for Payments and Income - Download Free PDF

The correct answer is Production goods.

Key Points

• Excise duty is a tax on manufacture or production of goods.
• Excise duty on alcohol, alcoholic preparations, and narcotic substances is collected by the State Government and is called "State Excise" duty.
• The Excise duty on rest of goods is called "Central Excise" duty and is collected in terms of Section 3 of the Central Excise Act, 1944.

Important Points

• Types of excise duty in India are:
• Basic Excise Duty:
  • Basic excise duty is also known as the Central Value Added Tax (CENVAT). This category of excise duty was levied on goods that were classified under the first schedule of the Central Excise Tariff Act, 1985.
  • This duty was levied under Section 3 (1) (a) of the Central Excise Act, 1944. This duty applied to all goods except salt.
• Additional Excise Duty:
  • Additional excise duty was levied on goods of high importance, under the Additional Excise under Additional Duties of Excise (Goods of Special Importance) Act, 1957. This duty was levied on some special category of goods.
• Special Excise Duty:
  • This type of excise duty was levied on special goods classified under the Second Schedule to the Central Excise Tariff Act, 1985.

The correct answer is in the Consolidated Fund of India.

Key Points

• The Consolidated Fund of India is the most important of all the government accounts.
• Revenues received by the government and expenses made by it, excluding the exceptional items, are part of the Consolidated Fund.
• All types of government income and expenditure go to this fund.
• All revenues received, loans raised and all money received by the Government in repayment of loans are credited to this fund and all government expenditures are incurred from this fund.
• This fund was constituted under Article 266 (1) of the Indian Constitution.

 Thus, we can say that all types of government income and expenditure go to the Consolidated Fund of India.

Additional Information

• The Public Account Fund states that 'All other money (other than the ones covered in Consolidated Fund) received by or on behalf of the Indian government are credited to this account.
• The Contingency Fund enables the government to meet unforeseen expenditure.

Key Points

• A surcharge certificate is a document issued by a court or legal authority that acts as a Court Decree.
• It is a formal declaration by the court determining liability for surcharge (financial mismanagement or malfeasance).
• It has the same enforceability as a court decree, meaning that the certificate can be used to recover the amount declared in it.
• It is not equivalent to a "Judgement" or a "Penalty/Fine" because it specifically deals with financial mismanagement and is enforceable similar to a decree.

Additional Information

• Judgement:
  • A judgement is a formal decision made by a court regarding the legal rights and obligations of parties in a case.
  • It is the final determination by the court after evaluating the evidence and arguments presented.
  • While a judgement may result in a decree, it is not equivalent to a surcharge certificate.
• Court Decree:
  • A decree is a formal order issued by a court that conclusively determines the rights and liabilities of parties in a suit.
  • Surcharge certificates are considered equivalent to court decrees for the purpose of enforcement and recovery of amounts.
  • They are legally binding documents issued in cases involving financial misconduct.
• Penalty/Fine:
  • A penalty or fine is a monetary punishment imposed by a court or authority for violating laws or regulations.
  • It is a punitive measure and not directly related to financial mismanagement as addressed by a surcharge certificate.
• Surcharge Certificate:
  • A surcharge certificate is issued when an individual is found liable for financial mismanagement, such as misuse of public funds.
  • It declares the amount recoverable from the individual and has the same enforceability as a court decree.
  • This makes it a legal tool for ensuring accountability in cases of financial irregularities.

The correct answer is Gross Total Income.

Key Points

• The Gross Total Income is the aggregate amount arrived at by adding income under all five heads of income.
• The five heads of income as per the Income Tax Act, 1961 are:
  • Salaries
  • Income from house property
  • Profits and gains of business or profession
  • Capital gains
  • Income from other sources
• After computing the income under each head, they are summed up to arrive at the Gross Total Income.
• The Gross Total Income is computed before applying any deductions under Chapter VI-A of the Income Tax Act.

 Additional Information

• Net Income
  • Net Income is the income that remains after all expenses, taxes, and deductions have been subtracted from the total revenue or gross income.
  • In the context of individual income taxation, it is often referred to as taxable income.
• Actual Income
  • Actual Income is not a specific term used in the context of income tax.
  • It generally refers to the real income earned by an individual or entity but lacks a formal definition in tax laws.
• Net Total Income
  • Net Total Income is often used synonymously with taxable income.
  • It is the income on which tax is actually levied after deductions and exemptions.

The correct answer is Section 10(1).

Key Points

• As per section 10(1), agricultural income earned by the taxpayer in India is exempt from tax.
• Agricultural income is defined under section 2(1A) of the Income-tax Act. 
• Any income derived from saplings or seedlings grown in a nursery shall be deemed to be agricultural income.

Additional Information 

• As per section 2(1A), agricultural income generally means:
  • Any rent or revenue derived from land which is situated in India and is used for agricultural purposes.
  •  Any income derived from such land by agriculture operations including processing of agricultural produce so as to render it fit for the market or sale of such produce.
  • Any income is attributable to a farm house subject to satisfaction of certain conditions specified in this regard in section 2(1A).

The correct answer is GDP - Depreciation.

Key Points

• Net domestic product (NDP) is an annual measure of the economic output of a nation that is adjusted as per the depreciation effect.
• The NDP is calculated by subtracting depreciation from the gross domestic product (GDP).
• An increased NDP indicates growth in economic health, while a decrease would indicate a slowdown of the economy of the country.
• Depreciation is the measure of the decreased monetary value of an asset over time due to use, wear and tear, or obsolescence.

Additional Information Gross National Income (GNI)

• Gross National Income (GNI) is the total amount of money earned by a nation's people and businesses.
• It is used to measure and track a nation's wealth from year to year.
• The number is calculated using the nation's gross domestic product (GDP) plus the income it receives from abroad.
• India GNI per capita for 2020 was $1,900.

Net National Product (NNP)

• Net national product (NNP) is the monetary value of finished goods and services produced by a country's citizens, overseas and domestically, in a given period.
• It is the equivalent of the Gross National Product (GNP), the total value of a nation's annual output, minus the depreciation.
• NNP is often examined on an annual basis as a way to measure a nation's success.

The correct answer is ​A common market.

• The Goods and Services Tax allowed India to become a common market.

Key Points

• ​GST is a comprehensive indirect tax on the manufacture, sale, and consumption of goods and services throughout India.
• The basic rate structures of GST are 5%, 12%, 18%, and 28%.
• Three types of taxes in Indian GST are Central GST (CGST), State GST (SGST) / Union Territory GST(UTGST), and Integrated GST (IGST).
• The motto of GST - "One Nation, One Tax, One Market".

Important Points

• GST was passed as 101^st Amendment Act 2016 (122^nd Amendment Bill)
• GST was passed by Rajya Sabha on 3^rd August 2016.
• GST was passed by Lok Sabha on 8^th August 2016.
• GST was signed by President on 8^th September 2016.
• GST came into effect from 1^st July 2017.

Additional Information

• Article 279A deals with the formation of the GST council.
• The Chairman of the GST council is Union Finance Minister.
• The first Chairman of the GST council - Arun Jaitley
• The concept of GST was first presented in Parliament by P. Chidambaram.
• The first country introduce GST - France in 1954
• India has chosen the Canadian model of dual GST.

The correct answer is 10.

Additional Information

• PAN stands for Permanent Account Number.
• PAN card is issued by the Income Tax Department under the supervision of the Central Board of Direct Taxes.
• PAN enables the department to link all transactions of the "person" with the department.
• PAN Card is an electronic system in which all the tax-related information of a person or company is recorded against a single PAN number.
• PAN is a 10 digit unique alphanumeric number issued by the Income Tax Department under the Indian Income Tax Act 1961.
• The first three characters are normal letters starting from AAA to ZZZ.
• The Department of I.T allocates the digits randomly which is a combination of the letters like AZT or ZRT.
• The fourth character represents the status of the PAN cardholder. It is one of the most important characters and those who deal in PAN cards usually look at this character to identify the status of that particular person.
• The fourth character for a majority of PAN holders is the letter “P”, which stands for “person”.

• The fifth character represents the first alphabet of the PAN holder’s last name or surname.
• The sixth to ninth four characters are sequential numbers starting from 0001 to 9999.

• The tenth character in the PAN card is an alphabetic check digit which can be any alphabet.

The correct answer is personal taxKey Points

• Personal Disposal Income = Personal Income - Personal Income tax.
• Personal disposable income can be calculated by subtracting personal income tax payable from personal income (wages, commission, salary).
• Personal Disposable Income refers to the amount of money available to an individual or household to spend or save after income tax and other mandatory taxes have been deducted. 
• It helps economists to measure the savings and spending rates of households.

Additional Information

• A subsidy is a benefit given to an individual, household, or institution by the government usually in order to reduce the beneficiary's expense.
• Rent is referred to as the part of the produce which is paid to the owner of land for the use of his goods and services.
• Wages are the remunerations that a person gets in return for the service provided by him.

The correct answer is Trade Surplus

Key Points

• Trade surpluses occur when a country exports more products than it imports.
• A trade surplus is an economic measure of a positive balance of trade. 
• Trade Balance = Total Value of Exports - Total Value of Imports. 
• A trade surplus represents a net inflow of domestic currency from foreign markets. 

Additional Information

The correct answer is The expenditure is on interest payments.

Key Points

• Non-plan expenditures of the Central Government (or Union Government) in India refer to government expenditures that are not part of the planned development activities and projects outlined in the Five-Year Plans.
• These non-plan expenditures are recurring or non-development expenditures that are necessary for the day-to-day functioning of the government. They cover a wide range of expenses and are typically categorized into two main components:
• Revenue Expenditure: This includes the day-to-day operational expenses of the government, such as salaries and wages of government employees, pensions, subsidies, interest payments on loans, maintenance of government offices and infrastructure, and other routine expenses necessary for the functioning of government departments and services. Hence option 1 is correct.
• Capital Expenditure: This category covers government spending on assets that have a long-term value. Capital expenditures include investments in infrastructure development, the purchase of assets like land, buildings, machinery, and equipment, and other items that contribute to the growth and development of the country. While this is not directly related to planned development, it is essential for the overall economic and social progress of the nation.

The correct answer is ​Income Tax Returns.

• In the context of Income Tax, the acronym ITR stands for Income Tax Returns.

Key Points

• Income Tax Returns contains information about the person’s income and the taxes to be paid on it during the year.
• The Income Tax Department is a government agency which undertakes direct tax collection of the Government of India.
• It comes under the Department of Revenue of the Ministry of Finance.
• The Department is headed by the Central Board of Direct Taxes (CBDT).

Additional Information

• Income tax is a tax paid by individuals or entities depending on the level of earnings or gains during a financial year.
• It is calculated on the basis of tax rates determined by the government for a particular year.

The correct answer is in the Consolidated Fund of India.

Key Points

• The Consolidated Fund of India is the most important of all the government accounts.
• Revenues received by the government and expenses made by it, excluding the exceptional items, are part of the Consolidated Fund.
• All types of government income and expenditure go to this fund.
• All revenues received, loans raised and all money received by the Government in repayment of loans are credited to this fund and all government expenditures are incurred from this fund.
• This fund was constituted under Article 266 (1) of the Indian Constitution.

 Thus, we can say that all types of government income and expenditure go to the Consolidated Fund of India.

Additional Information

• The Public Account Fund states that 'All other money (other than the ones covered in Consolidated Fund) received by or on behalf of the Indian government are credited to this account.
• The Contingency Fund enables the government to meet unforeseen expenditure.

The correct answer is Excise duty.Key Points

• Excise duty is a tax imposed on goods for their production, licensing, and sale, Excise duty is an indirect tax.
• Central excise duty is a tax that is charged on such excisable goods that are manufactured in India and are meant for domestic consumption.
• It is mandatory to pay Central Excise duty payable on the goods manufactured unless exempted.
• Excise duty is the opposite of Customs duty.
• The Goods and Services Tax (GST) subsumed many types of excise duty.
• The union excise duties form the most significant part of the central taxes.

Additional Information

• Goods and Service Tax (GST).​
  • GST is an indirect tax used in India on the supply of goods and services.
  • It is a value-added tax levied on most goods and services sold for domestic consumption.
  • GST was passed as the 101st Amendment Act of 2016.
  • GST was launched in India on 1 July 2017 as a comprehensive indirect tax for the entire country.
  • The four basic rate structures of GST are 5%. 12%, 18% and 28%. 
  • The GST Council headed by the Union Finance Minister is the governing and key decision-making body for GST.​
  • India has chosen the Canadian model of dual GST.
  • The first country to introduce GST: was France in 1954.