200 questions with answers on basics of taxation

 Based on the content from the shared PDF titled “BASIC CONCEPT-TAX”, here are 100 interview questions with concise answers categorized for clarity:

🔹 SECTION A: BASIC CONCEPTS OF TAXATION (Q1–Q20)

  1. What is taxation?
    Taxation refers to the imposition of a financial charge by the government to fund public expenditures.

  2. Differentiate between direct and indirect taxes.
    Direct taxes are levied directly on income (e.g., income tax); indirect taxes are levied on goods/services (e.g., GST).

  3. Mention two examples of direct taxes.

    • Income Tax

    • Tax on Undisclosed Foreign Income and Assets

  4. Mention two examples of indirect taxes.

    • GST

    • Customs Duty

  5. Why are taxes levied?
    To generate revenue for government expenditure such as defense, education, and infrastructure.

  6. Who has the power to levy taxes in India?
    Both Central and State governments as per Article 246 of the Constitution.

  7. What are the three lists in the Seventh Schedule?

    • Union List

    • State List

    • Concurrent List

  8. Under which entry is income-tax levied?
    Entry 82 of the Union List.

  9. What are the components of income-tax law?

    • Income Tax Act, 1961

    • Annual Finance Act

    • Income Tax Rules

    • Circulars/Notifications

    • Legal Decisions

  10. When did the Income-tax Act come into force?
    On 1st April 1962.

  11. What is the role of the Finance Act?
    It updates tax rates and provisions annually.

  12. What are the parts of the Finance Act's First Schedule?
    Parts I–IV cover slab rates, TDS, advance tax, and agricultural income computation.

  13. What is the role of the CBDT?
    Administers direct taxes and issues rules and circulars.

  14. Are CBDT circulars binding?
    Yes, for tax authorities; beneficial ones can be used by assessees.

  15. Are case laws important in tax?
    Yes, they help resolve disputes and interpret provisions.

  16. Which court decisions are final?
    The Supreme Court.

  17. Which Act governs rule-making in income tax?
    The Income Tax Rules, 1962.

  18. Who prepares the Income-tax Rules?
    The Central Board of Direct Taxes (CBDT).

  19. Are rules and circulars legally binding?
    Yes, unless contradicted by a statute.

  20. What are provisos and explanations in law?

    • Proviso: exception or condition

    • Explanation: clarification of a provision

🔹 SECTION B: COMPUTATION & RESIDENTIAL STATUS (Q21–Q40)

  1. What is Section 4 of the Income-tax Act about?
    Charging section—levies tax on total income.

  2. What determines the scope of taxability?
    Residential status of the assessee.

  3. What are the residential statuses for individuals?

    • Resident and Ordinarily Resident

    • Resident but Not Ordinarily Resident

    • Non-Resident

    • Deemed Resident

  4. How many heads of income are there?
    Five.

  5. List the five heads of income.

    • Salaries

    • Income from House Property

    • Profits and Gains of Business or Profession

    • Capital Gains

    • Income from Other Sources

  6. What is clubbing of income?
    Including income of spouse/minor/others to prevent tax avoidance.

  7. What is set-off and carry forward of losses?
    Adjusting losses against profits in current or future years.

  8. What is Gross Total Income (GTI)?
    Aggregate of income after set-off and clubbing.

  9. What deductions are allowed from GTI?

    • Chapter VI-A deductions

    • Section 10AA

  10. What is Total Income (TI)?
    GTI minus deductions; rounded to the nearest ₹10.

  11. What is Section 115BAC?
    Default tax regime with concessional rates.

  12. What is the basic exemption under 115BAC?
    ₹3,00,000.

  13. What is the highest tax slab under 115BAC?
    30% above ₹15,00,000.

  14. What is the basic exemption under the old regime?
    ₹2,50,000.

  15. What is rebate u/s 87A?
    Tax rebate for individuals with TI ≤ ₹7,00,000 (new) or ₹5,00,000 (old).

  16. What is the rate of health and education cess?
    4% of tax + surcharge.

  17. What is Alternate Minimum Tax (AMT)?
    Minimum tax payable by non-corporate assessees under old regime.

  18. Who is exempt from AMT?
    Assessees under Section 115BAC.

  19. What is advance tax?
    Prepaid tax on estimated income in four installments.

  20. When is TDS applicable?
    At the time of credit/payment of specific incomes.

🔹 SECTION C: DEFINITIONS (Q41–Q60)

  1. Who is an Assessee?
    Any person liable to pay tax or in whose case proceedings are initiated.

  2. What is Assessment?
    Determination of income and tax payable.

  3. Define Person under the Act.
    Includes Individual, HUF, Company, Firm, AOP, BOI, Local Authority, AJP.

  4. What is a HUF?
    Hindu Undivided Family—a separate tax entity.

  5. What are co-parceners?
    Members of HUF with birthright in family property.

  6. Who is a deemed resident?
    Indian citizen with significant global income and presence.

  7. Define a Company under Income Tax.
    Includes Indian company, foreign company, and institutions deemed to be companies.

  8. What is a Domestic Company?
    Indian company or one paying dividends in India.

  9. What is a Firm?
    As defined under the Indian Partnership Act or LLP Act.

  10. What is AOP/BOI?
    Groups earning jointly without forming a partnership.

  11. Difference between AOP and BOI?
    BOI includes only individuals; AOP can include firms, companies.

  12. What is a Local Authority?
    Body managing local funds—e.g., municipalities.

  13. What is an Artificial Juridical Person?
    Non-human legal entity—e.g., universities, deities.

  14. Define income under Section 2(24).
    Inclusive definition—covers profits, perquisites, winnings, etc.

  15. Are gifts taxable?
    Yes, under Section 56(2)(x) unless received from relatives.

  16. What is capital receipt?
    Non-recurring, non-revenue income—taxable only if specified.

  17. Is capital gain taxable?
    Yes, under Section 45.

  18. What is application of income?
    Use of income after accrual—taxable.

  19. What is diversion of income?
    Pre-income diversion—generally not taxable.

  20. When is an expense disallowed?
    When related to exempt income—u/s 14A.

🔹 SECTION D: AGRICULTURAL INCOME (Q61–Q80)

  1. What is agricultural income?
    Income from land used for agriculture in India.

  2. Is agricultural income taxable?
    No, it is exempt.

  3. Give three sources of agricultural income.

    • Rent from land

    • Sale of produce

    • Income from farm buildings

  4. Is nursery income agricultural income?
    Yes, as per Explanation 3 to Section 2(1A).

  5. Are poultry and dairy farming agricultural income?
    No.

  6. What are basic operations in agriculture?
    Tilling, sowing, and cultivating.

  7. What are subsequent operations?
    Weeding, harvesting, and storing.

  8. What is Rule 7 of Income Tax Rules?
    Apportionment rule for mixed income (agricultural + business).

  9. How is tea income treated?
    60% agricultural, 40% business income.

  10. How is coffee income treated?

    • With curing: 75% agri, 25% business

    • With roasting/grinding: 60% agri, 40% business

  11. How is rubber income treated?
    65% agri, 35% business

  12. Is rent from agricultural land taxable?
    No, if from Indian agricultural land.

  13. Is foreign agricultural income exempt?
    No, it's taxable.

  14. Is income from processed agricultural goods exempt?
    Partially, depending on the extent of processing.

  15. Is income from sale of agricultural land taxable?
    No, if it's rural agricultural land.

  16. What is revenue vs capital receipt in agriculture?
    Revenue = recurring (e.g., crop sale); Capital = e.g., land sale.

  17. Are lease renewals of agri land taxable?
    No, if it qualifies under agricultural income.

  18. What is the significance of process in agri income?
    It must be a process ordinarily used to make produce marketable.

  19. Is sale of agri produce by trader agricultural income?
    No, it's business income.

  20. Is income from aquaculture agricultural income?
    No.

🔹 SECTION E: ADVANCED CONCEPTS & OTHER TOPICS (Q81–Q100)

  1. Is subsidy income taxable?
    Yes, unless reduced from asset cost u/s 43(1) Explanation 10.

  2. What is capital asset under Section 2(14)?
    Property of any kind held by a person.

  3. What are special income rates?
    LTCG, winnings from lotteries, etc., taxed at special rates.

  4. What is income from other sources?
    Residual income not covered under other heads.

  5. Is interest on savings taxable?
    Yes, under "Income from Other Sources".

  6. Is dividend income taxable?
    Yes, for shareholders.

  7. Is provident fund interest taxable?
    Partially, based on limits.

  8. Is perquisite taxable?
    Yes, under Section 17(2).

  9. What is Keyman Insurance?
    Policy on key person—maturity amount is taxable.

  10. What is transfer pricing?
    Pricing of transactions between associated enterprises.

  11. What is PAN?
    Permanent Account Number—used for tracking taxpayers.

  12. What is presumptive taxation?
    Estimated income basis—Section 44AD, 44ADA, 44AE.

  13. What is tax audit?
    Audit under Section 44AB if turnover exceeds threshold.

  14. What is form 16?
    TDS certificate for salary.

  15. Who is a representative assessee?
    Person liable to pay tax on behalf of another.

  16. What is double taxation relief?
    Relief from paying tax twice on the same income.

  17. What is e-verification?
    Digital verification of ITR.

  18. What is self-assessment tax?
    Balance tax payable before return filing.

  19. What is TCS?
    Tax Collected at Source—collected by seller.

  20. When is ITR filing mandatory?
    If income exceeds the basic exemption limit.

 SECTION F: ADVANCED DEFINITIONS & CLASSIFICATIONS (Q101–Q120)

  1. What is Previous Year (PY)?
    The financial year immediately preceding the Assessment Year.

  2. What is Assessment Year (AY)?
    The year in which income of the previous year is assessed.

  3. Is income taxable in the same year it is earned?
    Generally no, except under special provisions like income of non-residents leaving India.

  4. What is a Financial Year?
    1st April to 31st March.

  5. Is relief available for double taxation?
    Yes, under Section 90/91.

  6. Define exempt income.
    Income that is not chargeable to tax under any section.

  7. What is marginal relief?
    Relief when surcharge increases tax liability more than excess income.

  8. What is surcharge?
    Additional tax on income tax for high-income assessees.

  9. Who is liable to pay surcharge?
    Individuals with income exceeding ₹50 lakhs and companies over specified thresholds.

  10. What is slab rate system?
    Progressive rate of taxation based on income slabs.

  11. Define Total Income.
    Income computed under the five heads after set-off, clubbing, and deductions.

  12. What is rebate?
    Reduction in tax liability, e.g., Section 87A.

  13. What is a perquisite?
    Benefit or amenity provided by employer in addition to salary.

  14. Are reimbursements taxable?
    Only if not backed by bills or not related to official duty.

  15. What is gratuity?
    Retirement benefit paid to employees—partially exempt.

  16. What is leave encashment?
    Compensation for unused leave—taxable or exempt depending on employment.

  17. What is HRA?
    House Rent Allowance—exempt under conditions u/s 10(13A).

  18. Is pension taxable?
    Yes, except for commuted pension in certain cases.

  19. What is VRS compensation?
    Compensation for voluntary retirement—exempt up to ₹5 lakh under Section 10(10C).

  20. What is standard deduction under salary?
    ₹50,000 u/s 16(ia).

🔹 SECTION G: COMPUTATION OF HEADS OF INCOME (Q121–Q140)

  1. Is agricultural income used for rate purpose?
    Yes, in case of individuals with net income > ₹2.5 lakh.

  2. Is unrealized rent taxable?
    Not unless received later u/s 25A.

  3. What is NAV in house property?
    Net Annual Value = Gross Annual Value – municipal taxes.

  4. Is self-occupied property taxed?
    No; NAV is nil.

  5. What is deemed let-out property?
    A second self-occupied house considered as let out.

  6. What is standard deduction for house property?
    30% of NAV u/s 24(a).

  7. What interest on home loan is allowed?
    Up to ₹2 lakh for self-occupied property u/s 24(b).

  8. How is business income computed?
    Profits = Net profit as per P&L + disallowances – permissible deductions.

  9. Are capital receipts taxable under business head?
    Only if specifically mentioned.

  10. Are preliminary expenses allowed?
    Yes, under Section 35D over 5 years.

  11. How are capital gains classified?

    • Short-Term (≤36/24/12 months)

    • Long-Term (>36/24/12 months depending on asset)

  12. Is gain from equity shares exempt?
    Up to ₹1 lakh under Section 112A.

  13. What is full value of consideration?
    Sale price or deemed value on transfer.

  14. What is indexed cost of acquisition?
    Cost adjusted using Cost Inflation Index.

  15. What is long-term capital loss treatment?
    Can be set-off only against LTCG and carried forward for 8 years.

  16. What is deemed income under capital gain?
    Gains presumed even if consideration not received (e.g., gifts, inheritance).

  17. What is casual income?
    Non-recurring income like lottery winnings.

  18. Are lottery winnings exempt?
    No, taxable at flat 30% + cess.

  19. What is speculative income?
    Profit from transactions without delivery—treated separately.

  20. Is gift received from friend taxable?
    Yes, if exceeds ₹50,000.

🔹 SECTION H: LOSS ADJUSTMENT (Q141–Q160)

  1. Can losses be adjusted against exempt income?
    No.

  2. What is intra-head set-off?
    Set-off within the same head (e.g., business loss with business income).

  3. What is inter-head set-off?
    Set-off between different heads (e.g., business loss with income from other sources).

  4. Is speculation loss adjustable?
    Only against speculation profits.

  5. Is capital loss adjustable?

    • STCL: against both STCG and LTCG

    • LTCL: only against LTCG

  6. How many years can capital loss be carried forward?
    8 assessment years.

  7. What is loss from house property treatment?
    Up to ₹2 lakh can be adjusted against other heads.

  8. Can loss from other sources be adjusted?
    Yes, unless it’s casual income.

  9. Are unabsorbed depreciation and business loss same?
    No, depreciation has indefinite carry forward.

  10. What is the deadline for carrying forward losses?
    Return must be filed within due date u/s 139(1).

🔹 SECTION I: TAX REGIMES & PROCEDURES (Q161–Q180)

  1. What is the old tax regime?
    Offers deductions and exemptions.

  2. What is the new tax regime (Section 115BAC)?
    Lower rates but fewer deductions/exemptions.

  3. Can HUFs opt for new regime?
    Yes.

  4. Are standard deductions allowed under new regime?
    Yes (from FY 2023–24 onwards).

  5. Are NPS contributions deductible under new regime?
    No.

  6. Is HRA deduction allowed in new regime?
    No.

  7. What is Form 10IEA?
    Form to opt in/out of new tax regime.

  8. Can regime be changed every year?
    Yes, for salaried; no for business/profession once opted.

  9. What is Form 26AS?
    Annual tax credit statement.

  10. What is AIS (Annual Information Statement)?
    Consolidated record of all financial transactions.

🔹 SECTION J: TDS, ADVANCE TAX & RETURN (Q181–Q200)

  1. What is TDS?
    Tax deducted at source on specified payments.

  2. What is TAN?
    Tax Deduction and Collection Account Number.

  3. What is the threshold for TDS on salary?
    Applicable if salary exceeds exemption limit.

  4. Is TDS applicable on rent?
    Yes, above ₹2.4 lakh p.a.

  5. What is TDS on contractor payments?
    1% for individual/HUF; 2% for others.

  6. What is Section 194N?
    TDS on cash withdrawal > ₹1 crore.

  7. What is TCS?
    Tax Collected at Source on specified sales.

  8. When is TCS on foreign remittance applicable?
    If remittance exceeds ₹7 lakh.

  9. What is advance tax?
    Tax paid in advance in 4 installments if tax liability > ₹10,000.

  10. Who is exempt from advance tax?
    Resident senior citizens without business income.

  11. What is self-assessment tax?
    Final tax paid before filing return.

  12. What is defective return?
    Return not complete per Section 139(9).

  13. What is belated return?
    Return filed after due date u/s 139(4).

  14. What is updated return?
    Return filed within 24 months u/s 139(8A).

  15. What is revised return?
    Corrected return u/s 139(5).

  16. What is due date of ITR for individual?
    31st July.

  17. What is Form ITR-1 (Sahaj)?
    For individuals with salary, one house property, and other sources income.

  18. What is scrutiny assessment?
    Detailed checking of return u/s 143(3).

  19. What is best judgment assessment?
    Assessment done when no return or incorrect return filed u/s 144.

  20. What is reassessment?
    Reopening of assessment on new information u/s 147

Comments

Post a Comment

Popular posts from this blog

Unified vs Dual GST Model

    Unified vs Dual GST Model Aspect Unified GST Model Dual GST Model Definition A single tax levied and collected by central authority Two-level tax : levied by both Centre and States Tax Authority Only central/federal government Both central and state/provincial governments Structure One law, one administration, one tax rate Separate levies: CGST + SGST (intra-state), IGST (inter-state) Compliance Easier, as businesses deal with only one authority More complex, requires dealing with both Centre and State authorities Input Tax Credit Seamless across the country ITC available separately under CGST & SGST; cross-utilization restricted Uniformity High – same rates across the country Rates can vary if states have flexibility (though GST Council striv...
Read more

60 interview questions with answers on Income from Profits and Gains of Business or Profession (PGBP)

 Here are 60 interview questions with answers on Income from Profits and Gains of Business or Profession (PGBP) as per the Indian Income-tax Act, 1961 🔹 Section 1: Basic Concepts (Q1–Q10) 1.       Q: What is Income from PGBP? A: It includes income earned by carrying on any business or profession during the previous year. 2.       Q: Which section covers PGBP? A: Sections 28 to 44DB of the Income-tax Act, 1961. 3.       Q: What is 'Business' under the Income-tax Act? A: Any trade, commerce, manufacture, or adventure in the nature of trade. 4.       Q: What is 'Profession'? A: Vocation involving intellectual or manual skill, like doctors, lawyers, CAs. 5.       Q: What is the method of accounting under PGBP? A: Mercantile or cash system, regularly followed by the assessee. 6.       Q: Is speculative bus...
Read more