DIRECT TAX – Question Bank-2020

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MCOM/BCOM/BBI/BAF/BMS/OTHERS
1) Income-Tax Act extends to
a) Whole of India
b) Whole of India except Jammu & Kashmir
c) Whole of Maharashtra only
d) None of these

2) A.O.P should consist of:

a) Individual only
b) Person other than individual only
c) Both the above
d) None of these
3) A new business was set up on 15-11-2019 and it commenced its business from 1-12-
2019.The previous year in this case shall be:
a) 15-11-2019 to 31-3-2020
b) 1-12-2019 to 31-3-2020
c) 2019-20
d) None of these
4) Shivaji university is assessable under the Income Tax Act as
a) An individual
b) An artificial juridical person
c) A local authority
d) None of these
5) In which Year Income Tax liability computed?
a) Assessment year
b) Previous year
c) Financial year
d) Calendar year
6) Income earned during what period is taxed?
a) Assessment year
b) Previous year
c) Financial year
d) Calendar year
7) Whose income is chargeable to income tax?
a) Income of only Indian citizens
b) Income of only residents
c) Income of all persons
d) Income of only assessees
8) One who is liable to pay the income tax in India
a) Indian citizen
b) Resident in India
c) Any person
d) An assessee
9) Assessment year is the period of twelve months commencing on
a) The first day of march every year
b) The first day of January every year
c) Financial year immediately preceding the previous year
d) The first day of April every year
10) A charitable trust is treated under income tax law as
a) A company
b) An association of a persons
c) A body of individuals
d) An artificial juridical person
11) A club is treated under income tax law as
a) A company
b) An association of persons
c) A body of individuals
d) An artificial juridical person
12) Life insurance corporation is treated under income tax law as
a) A company
b) Local authority
c) A body of individuals
d) An artificial juridical person
13) Recovery of bad debt is
a) Allowed as deduction from gross income
b) Exempt from tax
c) Chargeable to tax as income from business
d) Chargeable to tax as capital gains
14) A capital receipt
a) Is always exempt
b) Is always taxable
c) Is always taxable unless specifically exempted under the income tax
d) Is exempt unless specifically made taxable under the income tax act
15) The rates of income tax are laid down by
a) The income tax act
b) The income tax rules
c) The finance act 1994
d) The finance act passed by the parliament every year
16) Residential status is to be determined for
a) Previous year
b) Assessment year
c) Accounting year
d) None of these
17) Incomes which accrue or arise outside India but are received directly into India are taxable in
case of
a) Resident only
b) Both ordinarily resident and NOR
c) Non-resident
d) All the assesses
18) Total income of a person is determined on the basis of his
a) Residential status in India
b) Citizenship in India
c) None of these
d) Both of the above
19) Income which accrue or arise outside India and also received outside India is taxable in case
of
a) Resident only
b) Not ordinarily resident
c) Both ordinarily resident and NOR
d) None of the above
20) Income which accrue outside India from a business controlled from India is taxable in case
of
a) Resident only
b) Not ordinarily resident only
c) Both ordinarily resident and NOR
d) Non-resident
21) Mr. Sameer Khanna, a German citizen, came to India on 23-05-2018 and left India on 03-05-
2019. For the assessment year 2020-21, he is
a) A resident and ordinarily resident
b) A resident but not ordinarily a resident
c) A non- resident
d) None of these
22) Mr. Manmohan Sharma goes out of India every year for 247 days. For the assessment year
2020-21, he is
a) A resident and ordinarily resident
b) A resident but not ordinarily a resident
c) A non-resident
d) None of these
23) Mr.Rishab Patil, a citizen of Japan, has come to India for the first time on 03-10-2019 for 200
days. For the assessment year 2020-21, he is
a) A resident and ordinarily resident
b) A resident but not ordinarily a resident
c) A non-resident
d) None of these
24) Un-commuted pension received by a government employee is
a) Exempt
b) Taxable
c) 1/3 is exempt
d) None of these
25) Compensation received on voluntary retirement is exempt under sec.10(10C) to the
maximum extent of
a) ₹ 2,40,000
b) ₹ 3,00,000
c) ₹ 5,00,000
d) None of these
26) M is entitled children education allowance @ ₹ 80 p.m. per child for 3 children amounting
₹240 p.m. it will be exempt to the extent of
a) ₹ 200 p.m.
b) ₹ 160 p.m.
c) ₹ 240 p.m.
d) None of the above
27) Entertainment allowance in case of government employee is
a) Fully exempt
b) Fully taxable
c) Exempt upto certain limits mentioned in sec.16(ii)
d) First included in full in gross salary and thereafter deduction allowed from gross
salary under sec.16 (ii)
28) Pension received by an employee of the central or state government who has been awarded
“Param Vir Chakra”
a) Is taxable as income from salary
b) Is exempt from tax
c) Is taxed after deducting ₹ 15000 or 1/3 whichever is lower
d) Is taxable as income from other source
29) Compensation for termination of employment
a) Is not taxable
b) Is taxable as capital gain
c) Is taxable in case of only ‘specified’ employees
d) Is taxable as ‘profit in lieu of salary’
30) Gas, electricity or water supply provided free of cost
a) Is exempt from tax
b) Is a perquisite taxable in case of all employees
c) Is a perquisite taxable in case of only ‘specified’ employees
d) Is a perquisite taxable in case of only non-government employees
31) Value of rent-free accommodation provided by the employer
a) Is exempt from tax
b) Is a perquisite taxable in case of all employees
c) Is a perquisite taxable in case of only ‘specified’ employees
e) Is a perquisite taxable in case of only non-government employees
32) Salary received by partner from firm
a) Salary
b) Income from other sources
c) Income from business
d) Exempt income
33) Salary received by a member of parliament
a) Salary
b) Income from other sources
c) Income from business
d) Exempt income
34) Payment received by a college lecturer from University for setting question papers
a) Salary
b) Income from other sources
c) Income from business
d) Exempt income
35) Municipal valuation of the house is ₹1,00,000 fair rent ₹1.20,000, standard rent ₹1,10,000 and
actual rent received or receivable is ₹1,40,000. The Gross Annual Value in this case shall be
a) ₹1,10,000
b) ₹1,20,000
c) ₹1,40,000
d) None of above
 36) Municipal valuation of the house is ₹1,20,000, fair rent ₹1,40,000, standard rent ₹1,30,000
and actual rent received or receivable is ₹1,25,000. The gross annual value in this case shall
be
a) ₹1,30,000
b) ₹1,25,000
c) ₹1,40,000
d) None of above

37) A has two house properties. Both are self-occupied. The annual value of
a) Both house shall be nil
b) One house shall be nil
c) No house shall be nil
d) None of the above
38) An Assessee has borrowed money for purchase of a house & Interest is payable outside
India. Such interest shall :
a) Be allowed as deduction
b) Not to be allowed as deduction
c) Be allowed as deduction if the tax is deducted at source
d) None of the above

39) Municipal tax is deducted from

a) Net Annual Value
b)Gross Annual Value
c) Municipal Valuation
d) None of the above

40) Unrealised rent is a deduction from

a) Gross annual value
b) Net annual value
c) Municipal Value
d) None of the above

41) Following will be taxable as Income from house property

a) sub-letting of a house
b) letting of an office building
c) sale of house at profit
d) rent from open land used for wedding functions

42) Municipal taxes to be deducted from GAV should be

a) Paid by the tenant during the previous year
b) Paid by the owner during the previous year
c) Accrued during the previous year
d) Accrued or paid by owner whichever is lower

43) Standard Deduction under section 24(a) from Income from House Property is
a) 1/3 rd of NAV
b) repairs actually incurred by the owner
c) 30% of NAV
d) ₹30,000

44) The maximum limit of deduction under section 24(b) in respect of interest on loan taken on 1-4-
2017 for repairs of a self-occupied house is
a) 30,000 p.a.
b) 2,00,000 p.a.
c) No limit
d) Nil
45) Municipal valuation of the house is ₹1,30,000, fair rent is ₹1,50,000 standard rent is ₹1,40,000
whereas actual rent receivable is ₹1,35,000; municipal taxes paid are 40,000. Net Annual
Value is
a) ₹1,10,000
b) ₹90,000
c) ₹95,000
d) ₹1,00,000

46) If a house has been constructed on 01-07-2019 by taking a loan on 01-11-2015, pre-construction
period for allowing interest in Ass. Year 2020-21 shall be
a) from 01.07.2015 to 31.03.2019
b) from 01.07.2015 to 01.11.2015
c) from 01.11.2015 to 31.03.2019
d) from 01.11.2015 to 31.03.2020

47) L received ₹30,000 as arrears of rent during the P.Y. 2019-20. The amount taxable under section
25A would be
a) ₹30,000
b) ₹21,000
c) ₹20,000
d) Nil

48) Salary, bonus, commission or remuneration due to or received by a working partner from the
firm is taxable under the head.
a) Income from salaries
b) Other sources
c) Business Income
d) None of the above

49) Under the head Business or Profession, the method of accounting which an assessee can follow
shall be:
a) Mercantile system only
b) Cash system only
c) Mercantile or cash system
d) Hybrid system

50) Export incentives received by an assessee are

a) Exempt
b) Taxable as business income
c) Exempt upto certain limits
d) None of the above

51) Depreciation is allowed in case of

a) Tangible Fixed Assets Only
b) Intangible assets only
c) Tangible and intangible assets
d) Wasting assets only
52) Which of the following tax is allowed as a deduction while computing the business income?
a) Wealth Tax
b) Income tax
c) GST
d) None of the above

53) Where the amount of an expenditure claimed as deduction exceeds ₹10,000, it should be paid
by
a) Crossed cheque
b) Account payee cheque/ draft
c) Cash
d) None of these

54) Expenditure incurred on family planning amongst the employees is allowed to

a) Any assessee
b) A company assessee
c) An assessee which is a company or co-operative society
d) None of the above

55) Profit on sale of Import Licence is

a) exempt from tax
b)Taxed as profits and gains of business
c) taxed as income from other sources
d) taxed as capital gains

56) Profit on transfer of Duty Entitlement Pass Book is

a) exempt from tax
b) taxed as income from other sources
c) taxed as profits and gains of business
d) taxed as capital gains

57) Any sum received under a Keyman Insurance Policy including bonus is
a) wholly exempt from tax
b) exempt from tax to the extent of the bonus
c) taxed as income from other sources
d) taxed as profits and gains of business

58) Income from illegal business e.g. smuggling is

a) wholly exempt from tax
b) taxed as income from other resources
c) taxed as profits and gains of business
d) taxed as profits and gains of business

59) The following business loss is deductible from profits of business

a) theft of cash
b) loss of machinery in fire
c) estimated bad debts likely to arise in next year
d) expenditure on new business not ultimately set up
60) Any sum paid to an approved university to be used for scientific research
a) is allowed to be deducted @ 100%
b) is allowed to be deducted @ 125%
c) is allowed to be deducted @ 175%
d) is allowed to be deducted @ 200%

61) Any sum paid to an approved National Laboratory for an approved research programme
a) is allowed to be deducted @ 100%
b) is allowed to be deducted @ 125%
c) is allowed to be deducted @ 175%
d) is allowed to be deducted @ 200%

62) Section 35D provides for the amortisation of preliminary expenses

a) in the year such expenses are incurred
b) in the year such expenses are paid
c) over a period of 5 years
d) over a period of 10 years

63) Capital gain arises from the transfer of

a) Any asset
b) Any fixed asset
c) Any capital asset
d) Land and buildings only lond

64) Which asset is not treated as capital asset for capital gain purposes.
a) Motor car for business use
b) Jewellery
c) Tenancy rights
d) Plant and Machinery held as stock in trade

65) Short-term capital gain arise on transfer of listed shares and units held by the assessee for not
more than
a) 36 months from the date of acquisition
b) 12 months from the date of acquisition
c) 54 months from the date of acquisition
d) None of the above

66) The assessee is allowed to opt for market value as on 1-4-2001 in case of
a) All capital assets
b) All capital assets other than depreciable asset
c) Only house properties
d) None of the above

67) Cost of improvement of goodwill of a business shall be

a) Nil
b) The capital expenditure incurred
c) Capital expenditure incurred on or after 1-4-2001
d) None of the above
68) Income from sale of household furniture is
a) Taxable capital gain
b) Not taxable as capital gain
c) Short term capital gain
d) Long term capital gain

69) Income from sale of rural agricultural land is

a) Taxable capital gain
b) Not taxable as capital gain
c) Taxable income
d) None of these

70) To be a long term capital asset, a residential house property should be held for more than
a) 12 months
b) 24 months
c) 36 months
d) 60 months

71) shares held for less than 12 months are

a) Short term capital gain
b) Long term capital gain
c) Exempted capital asset
d) Excluded from definition of capital asset

72) Indexation is applicable to

a) Sale of short-term capital assets
b) Sale of long term debentures
c) Sale of depreciable capital assets
d) Sale of long term capital assets which are not depreciable assets

73) FMV on 1-4-2001 is applicable to assets

a) acquired prior to 1-4-2001
b) transferred prior to 1-4-2001
c) acquired after 1-4-2001
d) none of the above

74) The cost inflation index number of the previous year 2019-20 is
a) 289
b) 200
c) 100
d) 300

75) Conversion of debentures into shares shall

a) be regarded as transfer for capital gain purpose
b) not be regarded as transfer for capital gain purpose
c)Both A & B
d)none of these
76) If self-generated goodwill of a profession is transferred, there will
a) be capital gain
b) not be any capital gain
c) be a short-term capital gain
d) None of the above

77) Exemption under section 54 is available to

a) all assessees
b) individuals only
c) individual as well as HUF
d) HUF only

78) For claiming exemption under section 54, the assessee should purchase residential property

a) 2 years after the date of transfer

b) 3 years after the date of transfer
c) one year before and two years after the date of transfer
d) one year before and 3 years after the date of transfer

79) Under section 54EC, the assessee shall be allowed exemption

a) to the extent of capital gain invested subject to maximum of ₹ 50 lakhs per financial year
b) proportionate to the net consideration price so invested
c) to the extent of the capital gain invested
d) None of these

80) Income under the head income from other sources is taxable on
a) Due basis
b) Receipt basis
c) On the basis of method of accounting regularly employed by the assessee
d) None of the above

81) Dividends declared by Unit Trust of India is

a) Fully exempt in the hands of unit holders
b) Fully taxable in the hands of unit holders
c) Taxable but deduction is allowed under sec. 80
d) None of the above

82) Gift received by an individual ₹70,000 from his relative M shall be

a) Fully exempt
b) Fully taxable
c) Exempt upto₹ 50,000
d) None of the above

83) Rakesh received ₹70,000 from his friend on the occasion of his birthday.
a) The entire amount of ₹70,000 is taxable
b) ₹20,000 is taxable
c) The entire amount is exempt
d) None of the above
84) Family pension received by a widow of a member of the armed forces is, subject to conditions,
a) Exempt upto ₹3,00,000
b) Exempt upto ₹3,50,000
c) Totally exempt under section 10(19)
d) Totally chargeable to tax

85) The deduction allowable in respect of family pension taxable under "Income from other sources
is
a)33- 1/3% of the pension
b) 30% of the pension or 15,000, whichever is less
c) 33-1/3% of the pension or ₹15,000, whichever is less
d) Nil
86) Agricultural income from a place outside India is
a) exempt from tax
b) taxable only in case of a non-resident
c) taxable as income from business
d) taxable as income from other sources

87) The deduction in respect of interest on enhanced compensation of ₹1,50,000 received during
previous year 2019-20, would be
a) ₹1,50,000 being 100% of 1,50,000
b) ₹75,000 being 50% of 1,50,000
c) ₹45,000 being 30% of 1,50,000
d) Nil

88) Deduction u/s 80C in respect of LIP, Contribution to provident fund, etc. is allowed to :
a) Any assessee
b) An individual
c) An individual or HUF
d) An individual or HUF who is resident in India

89) Deduction u/s 80C is allowed to the maximum of

a) ₹50,000
b) ₹1,50,000
c) ₹1,00,000
d) None of the above

90) Deduction u/s 80C in respect of tuition fee is allowed to

a) An individual only
b) Individual or HUF
c) Any assessee
d) None of the above

91) Deduction under section 80CCC is allowed to the extent of:

a) ₹2,00,000
b) ₹1,00,000
c)₹2,50,000
d)₹1,50,000
92) Deduction u/s 80D is allowed to an individual for premium paid to insure the health of
a) Individual himself
b) Individual and his family
c) Individual, his spouse, parents and dependent children
d) None of the above

93) The payment for Insurance premium under section 80D should be :
a) In cash
b) By any mode other than cash
c) Cash / by cheque
d) None of the above

94) The quantum of deduction allowed under section 80D for self and spouse shall be limited to:
a) ₹25,000
b) ₹10,000
c) ₹15,000
d) None of the above

95) Deduction u/s 80DD in case of dependent with severe disability shall be allowed
a) To the extent of actual expenditure
b) ₹75,000
c) ₹1,25,000 irrespective of actual expenditure
d) None of the above

96) The deduction u/s 80E is allowed for repayment of interest to the extent of:
a) ₹25,000
b) ₹40,000
c) Any amount
d) None of the above

97) Deduction u/s 80E shall be allowed for the higher

education of
a) Assessee himself
b) Assessee, spouse and children
c) Assessee and dependent children
d) None of the above

98) The quantum of deduction allowed u/s 80U

a) ₹40,000
b)₹75,000
c) ₹60,000
d) ₹70,000

99) Annual interest accrued on NSC’s VII issue shall be

a) Exempt
b) Taxable only in VIth year
c) Taxable on the basis of annual accrual
d) None of the above
100) If Gross Total Income is ₹90,000 and Life Insurance Premium paid is ₹95.000. the Net Taxable
Income would be
a) ₹90.000
b)₹(-) 5,000
c) NIL
d) None of these

101) Dividend received from Credit Co-operative Society is

a) Fully exempt u/s 10
b) Partly taxable 10H3 3
c) Fully taxable
d) None of these

102) Mr. Vilas had taken housing loan for his self occupied property from HDFC Bank on 18-11-1991.
During the Previous Year 2019-20 he paid interest on housing loan ₹1,60,000. He is entitled to a
deduction from Net Annual Value equal to
a) ₹1,50,000
b) ₹30,000
c) ₹1,60,000
d) None of these

103) Mr. Sirsat, an employee of C Ltd. drawing salary of ₹10,000 p.m. took advance salary for April,
2020 alongwith salary of March, 2020 on 31-3-2020. The Gross Salary of Mr. Sirsat for A.Y.
2020-21 is
a) ₹1,20,000
b) ₹1,10,000
c) ₹1,30,000
d) None of these

104) Interest payable on loan from a Non-scheduled bank not paid before the due date of filling
Income Tax Return is
a) fully allowed as expenditure
b) Partly allowed as expenditure
c) Fully disallowed as expenditure
d) None of these

105) Smt. Vidya received family pension of ₹81,000 during the P.Y. 2019-20. She is eligible for
standard deduction of
a) ₹15000
b) Nil
c) ₹27,000
d) None of these

106) Salary received by Manager of Agricultural Farm is,

a) Fully exempt
b) Fully taxable
c) Partly taxable
d) None of these
107) Mr. Shivaprasad pays tuition fees of ₹10,000 for M.Com Partl for his wife. The amount
deductible under section 80C shall be
a) ₹10,000
b) ₹5,000
c) Nil
d) None of these

108) Donation of Chief Minister's Relief Fund is

a) Allowed as business expenditure
b) Not allowed as business expenditure
c) Partly allowed as business expenditure
d) None of these

109) Deduction under section 80DD in the case of dependent with severe disability (85%) shall be
allowed
a) To the extent of actual expenditure
b) ₹ 1,25,000 irrespective of actual expenditure
c) ₹ 75,000
d) None of these

110) If full office building used for business purpose is given on rental basis, the income arising
therefrom is taxable as
a) Business income
b) Income from other sources
c) income from house property
d) None of these

111) Income earned by minor on the investments made by his father is taxed in the hands of
a) a minor
b) his father
c) no person
d) None of these

112) Commission on sales received in addition to salary by a salesman is income from

a) Business
b) Salary
c) Other Sources
d) None of these

113) Mediclaim premium paid by employer on the medical health policy of the employee is
a) Taxable perquisite
b) Tax-free Perquisite
c) Not a perquisite
d) None of these
114) Mr. Anil is a person with a physical disability of 50%. He is entitled to a deduction under section
80U of
a) ₹75,000
b) ₹1,25,000
c) Nil
d) None of these
115) Mr. Dinkar earns Saving Bank Interest of ₹ 90,000 during the previous year 2019-20. He is
entitled to a deduction under section 80TTA of
a)₹ 90,000
b)₹10,000
c) Nil
d) None of these

116) Income earned in India by a 'Non-Resident' is

a) Tax free in India
b) Taxable in India
c) Not an income
d) None of these

117) Reimbursement by employer of the expenses incurred by the employee for employer's business
is
a) Taxable as income from business
b) Not taxable at all
c) Taxable as income from salary
d) None of these

118) Interest received on Public Provident Fund is

a) Tax Free Income
b) Taxable income
c) Not an Income
d) None of these

119) Agricultural income from land in Nepal is______ for an ordinarily resident individual.
a) Taxable
b) Tax free
c) Partly taxable
d) None of these

120) Interest received on company debenture is

a) Taxable
b) Tax free
c) Partly taxable
d) None of these