MCQs on Taxation Terms (For JKSSB Accounts Assistant, SSC, UPSC Exams)
By Home Academy – With Explanation
Question 1
Which term refers to the illegal practice of avoiding tax by hiding income?
A. Tax planning
B. Tax avoidance
C. Tax evasion
D. Tax shifting
Answer: C
Explanation: Tax evasion is the illegal act of hiding income or falsifying financial information to avoid paying taxes. It is punishable under the **Income Tax Act 1961.
Question 2
Which term refers to reducing tax liability using legal methods?
A. Tax evasion
B. Tax avoidance
C. Tax shifting
D. Tax incidence
Answer: B
Explanation: Tax avoidance involves using legal provisions such as deductions and exemptions to reduce tax liability.
Question 3
The person who finally bears the burden of a tax is known as:
A. Tax payer
B. Tax collector
C. Tax incidence
D. Tax authority
Answer: C
Explanation: Tax incidence refers to the person who ultimately bears the burden of the tax.
Question 4
The initial burden of tax imposed by the government is known as:
A. Tax incidence
B. Impact of tax
C. Tax evasion
D. Tax deduction
Answer: B
Explanation: Impact of tax refers to the person on whom the tax is first imposed.
Question 5
Which type of tax burden can be transferred from one person to another?
A. Direct tax
B. Indirect tax
C. Corporate tax
D. Income tax
Answer: B
Explanation: In indirect taxes such as GST, the burden of tax can be shifted to consumers.
Question 6
Which of the following is an example of direct tax?
A. GST
B. Customs duty
C. Income tax
D. Excise duty
Answer: C
Explanation: Income tax is a direct tax because the person who pays the tax also bears the burden.
Question 7
GST is an example of which type of tax?
A. Direct tax
B. Indirect tax
C. Proportional tax
D. Wealth tax
Answer: B
Explanation: GST is an indirect tax where the tax burden is shifted to the final consumer.
Question 8
A tax imposed based on the value of goods or services is called:
A. Specific tax
B. Ad valorem tax
C. Regressive tax
D. Direct tax
Answer: B
Explanation: Ad valorem tax is charged as a percentage of the value of goods or services.
Question 9
A tax imposed based on quantity rather than value is called:
A. Specific tax
B. Ad valorem tax
C. Direct tax
D. Progressive tax
Answer: A
Explanation: Specific tax is imposed based on quantity such as ₹5 per litre of petrol.
Question 10
Which term refers to taxation of the same income in two different countries?
A. Progressive taxation
B. Regressive taxation
C. Double taxation
D. Proportional taxation
Answer: C
Explanation: Double taxation occurs when the same income is taxed in two different countries.
Question 11
Which tax system imposes higher tax rates as income increases?
A. Proportional tax system
B. Progressive tax system
C. Regressive tax system
D. Degressive tax system
Answer: B
Explanation: In progressive taxation the tax rate increases with the level of income.
Question 12
Which tax system charges the same rate for all income levels?
A. Progressive tax
B. Regressive tax
C. Proportional tax
D. Degressive tax
Answer: C
Explanation: In proportional taxation the tax rate remains constant regardless of income.
Question 13
Which tax system places a higher burden on low-income groups?
A. Progressive tax
B. Regressive tax
C. Proportional tax
D. Direct tax
Answer: B
Explanation: In a regressive tax system the tax rate decreases as income increases.
Question 14
Which agreement helps prevent double taxation between countries?
A. WTO Agreement
B. Free Trade Agreement
C. Double Taxation Avoidance Agreement
D. Fiscal Responsibility Agreement
Answer: C
Explanation: Countries sign Double Taxation Avoidance Agreements to prevent the same income from being taxed twice.
Question 15
Which tax authority administers direct taxes in India?
A. Central Board of Indirect Taxes and Customs
B. Central Board of Direct Taxes
C. Reserve Bank of India
D. Finance Commission
Answer: B
Explanation: Direct taxes are administered by the **Central Board of Direct Taxes under the **Income Tax Act 1961.