Paper 7 Direct Taxation MCQ : Multiple Choice Questions and Answers

CMA INTERMEDIATE EXAMINATION

Paper  7  DIRECT TAXATION



Paper 7 Direct Taxation Multiple Choice Questions and Answers


A. Choose the most appropriate alternative for the following  

(i) In the case of a domestic company (turnover/gross receipts Rs. 70 crores), the basic rate of income-tax applicable for computing as per normal provisions would be ________, when the turnover of the company has been Rs. 45 crores in the previous year relevant to the assessment year 2017-18. (Note: Ignore surcharge, education cess, etc.)

a)         30%.

b)         29%.

c)          25%.

d)         35%.

Ans.  25%

(ii) The maximum marginal rate of tax applicable for individual taxpayer having total income of Rs. 1.5 crore (including surcharge and health & education cess) is ________.

a)         34.32%.

b)         35.88%.

c)          34.944%.

d)         29.12%.

Ans. 35.88%

(iii) When a charitable trust registered u/s 12AA pays Rs. 50,000 towards rent to a resident for the premises occupied by it without deduction of tax at source for the entire previous year 2018-19, the amount of rental expenditure liable for disallowance would be ________.

a)         Nil.

b)         Rs. 6,00,000.

c)          Rs. 4,20,000.

d)         Rs. 1,80,000.

            Ans.  Rs. 1,80,000

(iv) The lock-in-period for capital gain bonds issued by National Highway Authority of India for the purpose of deduction under section 54EC is ________.

a)         5 years.

b)         3 years.

c)          7 years.

d)         1 year.

Ans. 5 Years

(v) The TDS rate for payments made to a non-resident sportsman is ________ %.

a)         20.

b)         20.8.

c)          30.

d)         Nil.

Ans. 20.8

(vi) Where a partner of a firm transfers any capital asset to the firm by way of capital contribution, for the purpose of computing capital gain in the hands of the partner, the amount of deemed consideration is

a)         cost to the partner.

b)         fair market value of the asset on the date of transfer.

c)          the amount recorded in the books of the firm.

d)         value as determined by the Stamp valuation authority.

Ans. the amount recorded in the books of the firm.

(vii) When the gross receipts from profession exceed Rs. ________ lakhs, it is liable for audit under section 44AB and the provisions of section 44ADA will not apply.

a)         50.

b)         25.

c)          100.

d)         20.

Ans. 50

(viii) Medical insurance premium incurred for senior citizen is eligible for deduction up to Rs. ________ under section 80D.

a)         30,000.

b)         50,000.

c)          1,00,000.

d)         60,000.

Ans. 50,000.

(ix) When a resident senior citizen having gross total income of Rs. 5,56,000, has derived interest from savings account in a nationalized bank of Rs. 8,200 and fixed deposit interest of Rs. 47,000 from such bank, he is eligible for deduction of Rs. ________ from the gross total income.

a)         55,200.

b)         8,200.

c)          47,000.

d)         50,000.

Ans. 50,000

(x) Seshan, a retired civil servant received monthly pension of Rs. 60,000 during the previous year 2018-19. The amount of pension liable to tax after standard deduction would be Rs. ________.

a)         7,10,000.

b)         7,00,000.

c)          6,80,000.

d)         6,30,000.

Ans. 6,80,000.


B. Choose the most appropriate alternative for the following

(i) Which of the following is not a case of deemed ownership of house property?

a)         Transfer to spouse for inadequate consideration.

b)         Transfer to minor child for inadequate consideration.

c)          Co-owner of a Property.

d)         None of the above.

Ans. Co-owner of a Property

(ii) Where assessment has not been completed, belated income tax return for the A.Y. 2018-19 can be filed up to:

a)         31.03.2019.

b)         31.02.2019.

c)          31.03.2020.

d)         Cannot be filed belatedly.

Ans. 31.03.2019

(iii) An individual estimates that he is required to pay Rs. 1,00,000 as advance tax. By 15th of December, how much amount must be paid by the individual?

a)         Rs. 30,000.

b)         Rs. 75,000.

c)          Rs. 1,00,000.

d)         Nil.

Ans. Rs. 75,000

 

(iv) Section 80 RRB the Income-tax Act, 1961 deals with deduction from gross total income in respect of income by way of

a)         Interest on debentures of a government company.

b)         Royalty income on authors.

c)          Royalty on patents.

d)         Royalty from text-books.

Ans. Royalty on patents

(v) Preliminary expenses that can be amortized under the Income-tax Act 1961 has to be restricted to ______________ of the cost of the Project.

a)         5%.

b)         15%.

c)          20%.

d)         None of the above.

Ans. 5%

(vi) Maximum Marginal Rate for the A.Y. 2018-19 is _______________________ .

a)         34.5%.

b)         33.99%.

c)          35.535%.

d)         None of the above.

Ans. 35.535%

(vii) Rebate u/s 87A can be claimed by

a)         Any resident.

b)         Resident Individual.

c)          Any person.

d)         Any person other than nonresident.

Ans. Resident Individual

(viii)As per section 115BBDA dividend from Indian companies is taxable in the hands of certain recipients at _______ when the aggregate dividend exceeds Rs. _______.

a)         10%, 1 lakh.

b)         15%, 10 lakhs.

c)          10%, 10 lakhs.

d)         5%, 5 lakhs.

Ans. 10%, 10 lakhs

(ix) ICDS VIII deals with ____________________ .

a)         Government Grants.

b)         Securities.

c)          Revenue recognition.

d)         Construction Contract.

Ans. Securities

(x) Income escaping assessment is covered under section _________ .

a)         144.

b)         156.

c)          143(3).

d)         147.

Ans. 147


C. Choose the most appropriate alternative for the following

(i) Short-term capital gain on sale of listed shares (STT paid) in a recognized stock exchange is chargeable to income-tax @ ______ %.

a)         10.

b)         15.

c)          20.

d)         30.

Ans. 15

(ii) When the total income of an individual exceeds Rs.50 lakhs, the surcharge is payable @

a)         5%.

b)         7%.

c)          10%.

d)         12%.

Ans. 10%

(iii) When the amount is withdrawn from National Pension System Trust, it is chargeable to tax to the extent the withdrawal exceeds ______________ % of the contribution of the assessee.

a)         10.

b)         25.

c)          15.

d)         20.

Ans. 25

(iv) Ms. Jothi (aged 23) got married and left India to join her husband in the United Kingdom on 10.06.2017. She had never left India earlier. Her residential status for the assessment year 2018-19 is:

a)         Resident and ordinarily resident.

b)         Resident but not ordinarily resident.

c)          Non-resident.

d)         None of the above.

Ans. Resident and ordinarily resident

(v) While computing TDS on salary paid to employees, the losses given below to the applicable extent would be considered by the employer:

a)         Loss from business.

b)         Loss from house property.

c)          Long-term capital loss.

d)         Short-term capital loss.

Ans. Loss from house property

(vi) When tax is not deducted at source on annual rent of Rs.2 lakhs paid to landlord by a company, the amount liable for disallowance under section 40(a) (ia) is

a)         Nil.

b)         Rs.2,00,000.

c)          Rs.20,000.

d)         Rs.60,000.

Ans. Rs.60,000

(vii) When the assessee has loss from house property, the maximum amount of such loss eligible for set of against other permissible incomes would be

a)         Rs.30,000.

b)         Rs.1,50,000.

c)          Rs.2,00,000.

d)         No Limit.

Ans. Rs.2,00,000

(viii) When a capital asset was acquired on 01.04.1980 and sold in June, 2017, the cost of acquisition or the fair market value of the asset as on ------, at the option of the assessee is to be adopted for indexation purpose:

a)         01.04.2011.

b)         01.04.2001.

c)          01.04.1991.

d)         01.04.1981.

Ans. 01.04.2001

(ix) When a motor car is sold for Rs.12 lakhs by a dealer to a buyer holding PAN, the amount of tax collectible as source shall be _______ .

a)         Rs.12,000 (1%).

b)         Rs. 24,000 (2%).

c)          Rs. 1,20,000(10%).

d)         NIL.

Ans. Rs.12,000 (1%)

(x) Cash donation given to a charitable trust (approved under section 80G) is eligible for deduction under that section, when the amount of donation does not exceed Rs.----------.

a)         2,000.

b)         5,000.

c)          7,000.

d)         10,000.

Ans. 2,000


D. Choose the most appropriate alternative for the following

(i) When Mr. Balu paid royalty to Dr. Peter of Sweden for use of know-how in India, such payment is

a)         Exempt from tax.

b)         Accruing in India.

c)          Accrues in Sweden.

d)         Received in India.

Ans. Accruing in India

(ii) In the case of foreign company with total income of more than Rs. 1 crore but less than Rs. 10 crores the surcharge leviable is at

a)         5%.

b)         12%.

c)          2%.

d)         1%.

Ans. 2%

(iii) Mr. Hari resident in India received Rs. 11 lakhs by way of dividend from Indian companies. Such dividend is

a)         Exempt from tax.

b)         Taxable at regular rates.

c)          Taxable at maximum marginal rate.

d)         Taxable at 10%.

Ans. Taxable at 10%

(iv) When an employee receives money on closure of national pension system trust it is

a)         Chargeable to tax.

b)         Exempt from tax.

c)          40% is exempt from tax.

d)         60% is exempt from tax.

Ans. 60% is exempt from tax

(v) When employer contributes to approved superannuation fund it is chargeable to tax as perquisite when the contribution exceeds

a)         Rs. 1,50,000.

b)         Rs. 1,00,000.

c)          Rs. 50,000.

d)         Rs. 20,000.

Ans. Rs. 1,50,000

(vi) When the shares are held in unlisted company, it is treated as long term capital asset when the holding period exceeds

a)         36 months.

b)         24 months.

c)          12 months.

d)         6 months.

Ans. 24 months

(vii)Long term capital gain arising from transfer of unlisted securities in the hands of nonresident/foreign company is chargeable to tax at

a)         10%.

b)         20%.

c)          30%.

d)         40%.

Ans. 10%

(viii)Interest on housing loan taken by individual being his first residential house is eligible for deduction under section 80EE up to a maximum of

a)         Rs. 30,000.

b)         Rs. 50,000.

c)          Rs. 1,50,000.

d)         Rs. 2,00,000.

Ans. Rs. 50,000

(ix) A start-up can claim deduction under section 80-IAC for ______ consecutive years beginning from the year in which the eligible start-up was incorporated.

a)         1.

b)         2.

c)          3.

d)         5.

Ans. 3

(x) When the return of income for the assessment year 2017-18 is filed under section 139(4), the assessee can revise the return on or before

a)         31.03.2018.

b)         31.12.2018.

c)          31.03.2019.

d)         31.12.2019.

Ans. 31.03.2019


E. Choose the most appropriate alternative for the following

(i) The number of identities included in the definition of persons is

a)         Five.

b)         Six.

c)          Seven.

d)         Eight.

            Ans. Seven

(ii) A trust shall not be considered as charitable trust for according the benefits of section II, when the commercial activities in the previous year exceed _______.

a)         10 lakhs.

b)         25 lakhs.

c)          15 lakhs.

d)         30 lakhs.

            Ans. There is no option in respect of correct answer as it should be 20% of gross receipt.

(iii) Deduction available under section 24(a) is _________________________ of NAV.

a)         30%.

b)         50%.

c)          15%.

d)         70%.

            Ans. 30%

(iv) Expenditure incurred by a businessman for ready to use software is entitled to benefit of

a)         15% as depreciation.

b)         30% as depreciation.

c)          60% as depreciation.

d)         100% as revenue expenditure.

            Ans. 100% as revenue expenditure

(v) The basic exemption limit for a resident super senior citizen above the age of 80 is

a)         Rs. 2,00,000.

b)         Rs. 2,50,000.

c)          Rs. 5,00,000.

d)         None of the above.

            Ans. Rs. 5,00,000

(vi) The provisions relating to interest on delay in payment of refund are given in section

a)         234A.

b)         234B.

c)          244A.

d)         244B.

            Ans. 244A

(vii)Which of the following can be corrected while processing the return of income under section 143(1)?

a)         Any arithmetical error in the return.

b)         Any mistake in the return of income.

c)          Any error of principle in the return of income.

d)         Any claim by the taxpayer which is against law.

            Ans. Any arithmetical error in the return

(viii)Notice under section 156 is given for

a)         Failure to submit return.

b)         Tax demand.

c)          Deferment of tax.

d)         None of the above.

            Ans. Tax demand

(ix) As per section 271H, where a person fails to file the statement of tax deducted/collected at source i.e. TDS/TCS return on or before the due dates prescribed in this regard, then he shall be liable to pay penalty under section 271H. Maximum penalty that can be levied is _______________.

a)         1,00,000, but not exceeding the amount of TDS/TCS.

b)         2,00,000.

c)          3,00,000.

d)         3,00,000.

            Ans. 1,00,000, but not exceeding the amount of TDS/TCS

(x) The threshold exemption limit for Equalization levy is?

a)         Rs. 5 lakh.

b)         Rs. 3 lakh.

c)          Rs. 2 lakh.

d)         Rs. 1 lakh.

            Ans. Rs. 1 lakh