Tag: tax and its importance

Questions Related to tax and its importance

Consider the following statements and identify the right ones.
i. Central government does not have exclusive power to impose tax which is not mentioned in state or concurrent list.

ii. The constitution also provides for transferring certain tax revenues from union list to states.

social science government budget and taxation indian taxation system taxation : need, principles and importance tax and its importance

  1. i only

  2. ii only

  3. both

  4. none

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Correct Option: B
Explanation:

Among the two options, only second one is true because first one says that only central government has exclusive powers to levy taxes which is not true. Taxes in India are levied by the Central Government and the state governments. The constitution also provides for transferring certain tax revenues from union list to states list.

Aid from abroad is a _______.

social science government budget and taxation indian taxation system taxation : need, principles and importance tax and its importance

  1. Tax revenue

  2. Non-tax revenue

  3. National income

  4. None

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Correct Option: B
Explanation:

Aid from abroad is a non-tax revenue.

The war reparations paid by the defeated Central Powers after the First World War is a best example of _______.

social science government budget and taxation indian taxation system taxation : need, principles and importance tax and its importance

  1. tax revenue

  2. non-tax revenue

  3. both A and B

  4. none of the above

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Correct Option: B
Explanation:

The war reparations paid by the defeated Central Powers after the First World War is a best example of non-tax revenue which is revenue receipts that are not generated by taxing the public.

The following is an example of commercial non-tax revenue ______. 

social science government budget and taxation indian taxation system taxation : need, principles and importance tax and its importance

  1. Gifts and grants

  2. Fees

  3. Fines

  4. Surpluses

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Correct Option: D
Explanation:

Among the following options, the commercial non-tax revenue is the surpluses. For instance, the central government runs railways. Surplus from railway earnings can be normally contributed to the revenue budget of the central budget.

Which of the following is considered a capital receipt?

1. Loan recoveries

2. Provident funds deposits

3. Grants

social science government budget and taxation indian taxation system taxation : need, principles and importance tax and its importance

  1. 1 and 2 only

  2. 1 and 3 only

  3. 2 and 3 only

  4. 1, 2 and 3

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Correct Option: B
Explanation:

Capital receipts: This is the income flow from one of the following sources. Cash from the sale of fixed assets, Cash from the sale of shares in the business, Cash from the issuance of a debt instrument which includes loans and bonds and also grants. Among the given options, provident fund deposits are not included under capital receipts.

Entrance fee of Rs. 2000 received by social club is _____.

social science government budget and taxation indian taxation system taxation : need, principles and importance tax and its importance

  1. capital expenditure

  2. capital receipts

  3. revenue expenditure

  4. revenue deficit

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Correct Option: B
Explanation:

Entrance fee of Rs. 2000 received by social club is an example of capital receipt. This is the income flow from one of the following sources. 

1.  Cash from the sale of fixed assets
2. Cash from the sale of shares in the business
3. Cash from the issuance of a debt instrument which includes loans and bonds. 
This should result either the reduction in government assets (sale of share, disinvestment) or increase in some liability (government borrowings).

Non-tax revenue can be in the form of ______.

social science government budget and taxation indian taxation system taxation : need, principles and importance tax and its importance

  1. currency

  2. dividend

  3. interest receipts

  4. all the above

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Correct Option: D
Explanation:

Non-tax revenue can be in the form of currency, dividend which is the amount paid to shareholders from profits and also in the form of interest receipts.

Money obtained through the issues of debenture is ______.

social science government budget and taxation indian taxation system taxation : need, principles and importance tax and its importance

  1. revenue receipt

  2. capital receipt

  3. revenue profit

  4. capital profit

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Correct Option: B
Explanation:

Money obtained through the issues of debenture is capital receipt. It is the amount received from the sale of assets, shares and debentures. Nature of the capital receipt is that it is non-recurring. This should result either in the reduction in government assets (sale of share, disinvestment) or increase in some liability (government borrowings).

Receipt on account of fixed asset is ______.

social science government budget and taxation indian taxation system taxation : need, principles and importance tax and its importance

  1. revenue receipt

  2. capital receipt

  3. revenue profit

  4. capital profit

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Correct Option: B
Explanation:

Receipt on account of the sale of fixed asset is called capital receipt unlike revenue receipt which is the amount realised by sale of goods and services.

Amount received from IDBI as a medium-term loan for augmenting working capital is _____.

social science government budget and taxation indian taxation system taxation : need, principles and importance tax and its importance

  1. capital expenditure

  2. revenue expenditure

  3. capital receipts

  4. none of the above

Show answer
Correct Option: C
Explanation:

Amount received from IDBI as a medium-term loan for augmenting working capital is a capital receipt. Cash from the sale of fixed asset; cash from the sale of shares in the business; cash from the issuance of a debt instrument which includes loans and bonds are also included in capital receipts.