Sample MCQ for unit 2
Note: Kindly practice numerical also.
1. To be an ordinarily resident in India, an individual must satisfy ……………………….
A) Both Basic Conditions and One Additional Condition
B) One Basic Condition and Both Additional Conditions
C) One Basic Condition and One Additional Condition
D) Both Basic Conditions and Both Additional Conditions
Answer- B
2. A person is said to be a non resident when he is _______________.
A. not fulfilling any one of the basic conditions
B. fulfilling only basic conditions
C. fulfilling only additional conditions
D. fulfilling both basic and additional conditions
Answer- A
3. A Company has …………. types of residential status.
A) 2
B) 3
C) 1
D) 4
Answer- A
4. The Residential Status of the following parties can be classified into only two
Categories- Resident of India and Non- Resident in the previous year
a) Company, Firm
b) Association of persons
c) Both a and b
d) Only a
Answer- C
5. If the ‘karta’ of a resident HUF satisfies _____ condition(s) given u/s _____, HUF is said to be an
ordinarily resident.
A) both; 6(1)
b) One; 6(1)
C) Both; 6(6)
D) One; 6(6)
Answer- C
6. An individual is said to be resident and ordinarily resident if he satisfies –
A) Both conditions given in sec. 6(1) and any one condition given in sec. 6(6)
B.any one condition given in sec. 6(1) and both conditions given in sec. 6(6)
C.any one condition given in sec. 6(1) and any one condition given in sec. 6(6)
D.any one condition given in sec. 6(1) or both conditions given in sec. 6(6)
Answer- B
7. As per section 5, the following is not included in the total income of a non-resident company —
A. Income which arises or accrues outside India
B.Income which deemed to accrue or arise in India
C.Income which accrues or arise in India during the previous year
D.Income which is received or deemed to be received in India.
Answer- A
8. An individual (aged 28 Years) born in India left for first time for employment in France on
30.10.2019. His visit outside India is for the first time. His residential status for the assessment
year 2020-21 will be –
A.Non-resident
B.Residential Status is not applicable
C.Resident and ordinarily resident
D.Resident but not ordinarily resident
Answer- C
9. Which section of the Income-tax Act deals with determination of residential status of the
person?
A.5
B.2
C.4
D.6
Answer- D
10. An Indian company would –
A, be always resident in India irrespective of location of its place of effective management
B.be resident in India if its control and management is wholly situated outside India
C.be resident in India if its place of effective management is situated in India
D.be resident in India if its control and management is wholly or partly situated in India
Answer- A
11. The following is the correct criteria to identify a resident of India for an Individual
a) Must stay in India for more than 60 days in the PY
b) Must stay in India for more than 365 days in preceding four years
c) Must stay in India for more than 182 days in India, in the PY
Answer- C
12. If a person is the resident of India, in a PY----------
a) He can still be the resident of other Country in the PY
b) He cannot be the resident of any other country in the PY
c) None of the above
Answer- A
13. An individual who is a resident will become resident and ordinarily resident if ------------
a) He has been resident in India at least 2 out of 10 preceding years and
b) stayed in India for at least 730 days in preceding 7 years
c) He has been the resident in India for 3 out of 10 preceding
d) He has been in India for 765 days in preceding 7 years
Answer- A
14. Income received in India during the previous year is taxable in the case of
(a) ROR
(b) RNOR
(c) NR
(d) All
Answer- D
15. Incomes which accrues in India but received outside India are taxable in case of .
(a) ROR
(b) RNOR
(c) NR
(d) All
Answer- D
16. Foreign Income means.
(a) Income accrued. Deemed to be accrued in India
(b) Income received. Deemed to be received in India
(c) Both (a) & (b)
(d) None of the above.
Answer- D
17. Income which are not includible in the total income of the assessee are called.
(a) Exempt Incomes
(b) Incomes deductible/c VI-A.
(c) Taxable Incomes
(d) None of the above
Answer- A
18. Gross Total Income means Aggregate of Incomes under all heads of Income .
(a) After claiming deduction u/c VI-A
(b) Before claiming deduction u/c VI-A.
(c) Income for which no deduction u/c VI-A.
(d) None of the above
Answer- B
19. Total (taxable) Income means Aggregate of Incomes under all heads of Income .
(a) After claiming deduction u/c VI-A
(b) Before claiming deduction u/c VI-A.
(c) Income for which no deduction u/c VI-A.
(d) None of the above
Answer- A
20. Share of the profits from the firm by the partner is:
(a) Fully taxable
(b) Fully Exempt u/s 10(2A)
(c) Fully taxable u/h “Salary”
(d) Exempt upto Rs.2.5 lacs
Answer- B
21. Mr., Z working in XYZ ltd, along with the salary was offered accommodation at a concessional
rate. The compensation can be termed as ------------------ under the head income from salary
a) Allowance
b) Bonus
c) Perquisite
Answer- C
22. Mr. Z working in a private organization was given education allowance of Rs 400 per month per
child for his three children. Maximum amount he can claim exemption for children education
allowance is ----------.
a) Rupees Two Thousand Four Hundred p.a.
b) Rupees Four Thousand Eight Hundred p.a.
c) Rupees Three Thousand Six Hundred p.a.
Answer- A
23. Gratuity received by a government employee is.......................
A) Fully exempted
B) Partly exempted
C) Fully taxable
D) Exempted up to Rs: 1, 00,000
Answer- A
24. Income received in India whether occurred in India or outside India, the tax incidence in case of
resident is …………………………...
A) Taxable as per slabs
B) Exempted from tax
C) Partly exempted
D) None of the above
Answer- A
25. Pension is taxable under ..........................head.
A) Salary
B) House property
C) Capital gains
D) other sources
Answer- A
26. The Income TaxAct, 1961 broadly covers ………………………...
A) Basic charging income
B) Rebates and reliefs
C) Incomes exempted from income tax
D) All of the above
Answer- D
27. Residential Status of an assesses can be …………………………..
A) Different for different previous year in the same assessment year
B) Different for different assessment year
C) None of the above
D) All of the above
Answer- B
28. Which of the following is not included in salary income.
A) Commuted pension
B) Un commuted pension
C) Family pension
D) Leave salary
Answer- C
29. A Perk is.........................
A) Cash paid by employer to employee
B) Facility provided by employer to employee
C) Amount credited to employees.
D) None of these accounts.
Answer- B
30. Perquisites to employees are covered in the I.T. Act 1961 under...................
A) Sec 2a.
B) Sec. 17b.
C) Sec 28a.
D) Sec. 36 c.
Answer- B
31. The value of Interest free concessional loans to employees is determined on the basis of lending
rates of ..................... for the same purpose.
A) S.B.I.
B) R.B.I.
C) Central govt.
D) State govt.
Answer- A
32. Under Section 15 of Income Tax Act, the salary due in previous years and even if it is not
received is ………………………...
A) Taxable
B) Not taxable
C) Partially taxable
D) None of the above
Answer- A
33. The Payment of Gratuity Act came into force in ……………………..
A) 1973
B) 1980
C) 1991
D) 1972
Answer- D
34. In accordance with the provisions of Section 17(1) of Income Tax Act, 1961, the term salary
includes ……………………..
A) Any annuity or pension
B) Any gratuity
C) Any fees, commission, perquisite or profits in lieu of or in addition to any salary or wages
D) All of the above
Answer- D
35. The family pension received by the family members of armed forces after death of employee is
……………………………….
A) Exempt fully
B) Exempted after fulfilling of certain conditions
C) Not exempted
D) None of the above
Answer- B
36. The entertainment tax allowed as a deduction under Section 16 of Income Tax Act is the least of
………………………….
A) Actual amount of entertainment allowance received
B) 20% of basic salary of the individual
C) 50,000
D) All of the above
Answer-D
37. Encashment of earned leave is given by ……………………… of Income Tax Act, 1961.
A) Section 10(10AA)
B) Section12 (10A)
C) Section 15(10B)
D) None of the above
Answer- A
38. The assesses can claim relief under ………………………… for arrears or advance salary.
A) Section 89(1)
B) Section89 (2)
C) Section 89(3)
D) Section89 (4)
Answer- A
39. U/s 15 salary is taxable on __ basis.
(a) Receipt
(b) Due
(c) Earlier of (a) or (b)
(d) None
Answer- C
40. Pension/leave salary paid abroad for services rendered in India is deemed to accrue _____.
(a) In India
(b) Outside India
Answer- A
41. Which of the following is not the condition for claiming exemption for HRA?
(a) Employee is in receipt of HRA.
(b) Location of the employer.
(c) Rent paid by employee > 10% of salary.
(d) Location of the accommodation of employees
Answer- B
42. Maximum Exemption in case of leave encashment is:
(a) Rs. 2.4 lac
(b) Rs. 3.5 lac
(c) Rs. 3 lac
(d) Rs. 10 lac
Answer- C
43. The maximum ceiling limit for exemption u/s 10(10) in respect of gratuity for employees
covered by the Payment of Gratuity Act, 1972 is:
(a) Rs. 10 lac
(b) Rs. 5 lac
(c) Rs. 3.5 lac
(d) Rs. 20 lac
Answer- D
44. An employee is covered under Payment of Gratuity Act, 1972 For purpose of computing 15 days’
salary; the number of days in a month shall be taken as _____ days.
(a) 30
(b) 26
(c) 31
(d) Any of the above
Answer- B
45. An employee is covered under Payment of Gratuity Act, 1972 If the employee has completed
service of 16 years 6 months & 5 days then to calculate exemption of Gratuity the number of
completed years shall be taken as.
(a) 16 years
(b) 17 years
(c) 16 years 6 months & 5 days
(d) 16 years &7 months
Answer- B
46. Maximum Standard deduction u/h Salary shall be __.
(a) Rs. 40,000
(b) Rs. 50,000
(c) Rs. 2,500
(d) Rs. 5,000
Answer- B
47. Professional Tax is charged under which Article of Constitution of India
(a) 274
(b) 275
(c) 276
(d) 277
Answer- C
48. The deduction for Professional Tax u/s 16(iii) is for
(a) Actual amount paid
(b) Actual amount due
(c) Actual amount charged by SG
(d) Always 2,500
Answer- A
49. Entertainment allowance for govt. employee is.
(a) Fully exempt & therefore not included in Gross Salary
(b) Fully Taxable & therefore added in Gross Salary
(c) Not added in Gross Salary but deduction is allowed as per limits of section 16(ii)
(d) First added in full in Gross Salary & thereafter deduction allowed from Gross Salary is
allowed u/s 16(ii)
Answer- D
50. Limit u/s 16(ii) for deduction of entertainment allowance in case of government employee is __
% of salary
(a) 12.5 %
(b) 20 %
(c) 15%
(d) 7.5%
Answer- B
