Public Finance & Taxation MCQs

Consider the following statements: 1. Revenue deficit is the excess of revenue expenditure over revenue receipts. 2. Fiscal deficit includes borrowings as a financing item, not as a receipt that reduces the deficit. 3. Primary deficit is fiscal deficit minus interest payments. Which of the statements given above are correct?

• A1 and 2 only
• B2 and 3 only
• C1 and 3 only
• D1, 2 and 3Correct

If the fiscal deficit is Rs. 50,000 crore and interest payments are Rs. 1,500 crore, the primary deficit will be:

• ARs. 48,500 croreCorrect
• BRs. 50,000 crore
• CRs. 51,500 crore
• DRs. 58,500 crore

With reference to the income-tax provisions regarding agricultural income, consider the following statements: Statement I: Income from allied agricultural activities like poultry farming is exempted from tax. Statement II: Rural agricultural land is not considered a capital asset under the Income-tax Act, 1961. Which one of the following is correct?

• ABoth statements are correct and Statement II explains Statement I
• BBoth statements are correct but Statement II does not explain Statement I
• CStatement I is correct but Statement II is incorrect
• DStatement I is incorrect but Statement II is correctCorrect

Consider the following statements about the 15th Finance Commission: 1. It recommended 41% vertical devolution of the divisible pool to States. 2. It used demographic performance and forest & ecology among its criteria. 3. It recommended performance-based incentives for certain reforms. Which of the statements given above are correct?

• A1 and 2 only
• B2 and 3 only
• C1 and 3 only
• D1, 2 and 3Correct

Which of the following best describes a capital receipt of the Government?

• AIt neither creates a liability nor reduces an asset
• BIt creates a liability or reduces an assetCorrect
• CIt is always non-tax revenue
• DIt is always credited to the Public Account

With reference to the 15th Finance Commission, which of the following criteria were used for horizontal tax devolution apart from population, area and income distance? 1. Demographic performance 2. Forest and ecology 3. Tax and fiscal efforts Select the correct answer using the code given below:

• A1 and 2 only
• B2 and 3 only
• C1 only
• D1, 2 and 3Correct

Household financial savings can help the government finance its deficit when households invest in:

• ATreasury bills and dated government securitiesCorrect
• BOnly corporate equity shares
• COnly commercial paper issued by firms
• DGold held at home

Which of the following best describes the concept of 'Indirect Transfers' in taxation?

• AAn Indian company investing in a foreign subsidiary and paying taxes in that country
• BA foreign company investing in India and remitting taxes to its home country
• CAn Indian company transacting tangible assets in a foreign jurisdiction
• DA foreign company transferring shares of an entity that derives substantial value from assets located in IndiaCorrect

The main cause of concern from black money in India is:

• AIts diversion into real estate and luxury housing markets
• BIts investment in unproductive activities and speculation
• CIts use for large political donations
• DLoss of government revenue due to tax evasionCorrect

Which of the following items are GST-exempt? 1. Cereal grains hulled 2. Chicken eggs cooked 3. Fish processed and canned 4. Newspapers containing advertising supplement

• A1, 2 and 4 onlyCorrect
• B2 only
• C1, 3 and 4 only
• D1, 2, 3 and 4

Which of the following statements about the N.K. Singh Committee on FRBM review is correct?

• AIt recommended a debt-to-GDP ratio of 60% for the general government by 2023, with 40% for the Centre and 20% for StatesCorrect
• BIt recommended abolishing the FRBM Act entirely
• CIt recommended that States should not borrow from markets at all
• DIt recommended that fiscal deficit targets should be replaced by revenue deficit targets only

The Equalization Levy in India is best described as:

• AA tax under the Income Tax Act on domestic e-commerce transactions
• BA levy outside the Income Tax Act on specified digital services by non-residentsCorrect
• CA customs duty on imported digital goods
• DA state-level tax on electronic payments