I85PREP
⌘ K
CHSE Odisha Vocational Tax Assistance study materials
CHSE Odisha Vocational Tax Assistance study resources

CHSE Odisha Vocational Tax Assistance practice questions

One question at a time. Build your CHSE Odisha Vocational Tax Assistance understanding.

First 50 of 200 questions. Each one lists the choices, the correct answer, and an explanation. The checker at the top of this page saves progress in this browser when it is available.

Continue in the practice tool above to load more questions, 50 at a time.

Question 1Fundamentals of Income Tax and Tax Administration

Under the Income-tax Act, income tax in India is levied on total income for a financial year, and the year in which that income is assessed and taxed is called the:

  1. Calendar year
  2. Accounting year
  3. Previous year
  4. Assessment year Correct answer.

Explanation

The year in which income is earned is the previous year, and the following year in which it is assessed and taxed is the assessment year. Section 2(9) defines the assessment year as the twelve-month period beginning on 1 April. A tax assistant must keep this distinction clear when reading any notice or return form.

Question 2Fundamentals of Income Tax and Tax Administration

For an individual taxpayer below 60 years of age who has not opted for the special default tax regime, the basic exemption limit for a normal assessment year is:

  1. Rs. 5,00,000
  2. Rs. 3,00,000
  3. Rs. 1,50,000
  4. Rs. 2,50,000 Correct answer.

Explanation

The basic exemption limit for an individual below 60 under the old regime is Rs. 2,50,000, with higher limits for senior and very senior citizens. The limit is the threshold up to which no tax is payable at normal slab rates. Slabs above this limit are taxed at progressive rates.

Question 3Fundamentals of Income Tax and Tax Administration

A taxpayer's gross total income is computed by summing income under the five heads. The process of then applying deductions under Chapter VI-A to arrive at total income is best described as:

  1. Set-off of carried-forward losses
  2. Rounding off of income
  3. Computation of total income Correct answer.
  4. Aggregation of head-wise income

Explanation

Gross total income is the aggregate of income under the five heads after intra-head and inter-head set-off. Deductions under Chapter VI-A, such as those for specified investments and insurance, are then subtracted to compute total income. Total income is the figure on which tax is finally calculated.

Question 4Fundamentals of Income Tax and Tax Administration

Which body is constitutionally entrusted with the administration of income tax in India and functions under the Central Board of Direct Taxes?

  1. The Securities and Exchange Board of India
  2. The GST Council
  3. The Income Tax Department Correct answer.
  4. The Reserve Bank of India

Explanation

The Income Tax Department administers direct taxes under the Central Board of Direct Taxes, which works under the Ministry of Finance. The CBDT is the apex policy and administrative body for direct taxes. Other regulators listed deal with banking, indirect taxes, and securities respectively.

Question 5Fundamentals of Income Tax and Tax Administration

A person who fails to furnish a return of income within the due date under section 139 may be required to pay interest under section 234A. This interest is charged on:

  1. The total deductions claimed under Chapter VI-A
  2. The gross total income of the assessee
  3. The tax on total income remaining unpaid Correct answer.
  4. The amount of advance tax already paid

Explanation

Interest under section 234A is levied on the unpaid amount of tax on total income for the period of delay in furnishing the return. It is a simple interest charge computed at the prescribed rate for each month or part of a month of default. It is not charged on income or on deductions claimed.

Question 6Fundamentals of Income Tax and Tax Administration

Which of the following is a direct tax administered under the Income-tax Act, 1961?

  1. Customs duty on imported goods
  2. Goods and Services Tax on services
  3. Income tax on business profits Correct answer.
  4. Stamp duty on property transfers

Explanation

Direct taxes are levied on income and are borne by the person who pays them; income tax on business profits is a direct tax under the Income-tax Act. Customs duty, GST, and stamp duty are indirect or transaction-based levies governed by other statutes. The distinction matters when guiding a client on which authority to approach.

Question 7Fundamentals of Income Tax and Tax Administration

A resident individual has income from salary and also earns interest from a savings bank account. For the purpose of return filing, the savings bank interest is generally taxable under which head?

  1. Profits and gains of business or profession
  2. Income from other sources Correct answer.
  3. Salaries
  4. Income from house property

Explanation

Interest on a savings bank account is not salary, rent, or business income, so it falls under the residual head of income from other sources. The Act taxes such interest under section 56 read with the relevant provisions. Eligible taxpayers may claim the specified deduction for savings interest within the overall limit.

Question 8Fundamentals of Income Tax and Tax Administration

In a tax return form, the Permanent Account Number serves primarily to:

  1. Determine the slab rate applicable to the taxpayer
  2. Certify that the taxpayer has paid all dues
  3. Link all financial transactions of a person to a unique identifier for tax purposes Correct answer.
  4. Replace the requirement of filing a return

Explanation

The PAN is a ten-character alphanumeric identifier issued under section 139A that links a person's financial and tax transactions to one unique number. It helps the department match information such as TDS, high-value transactions, and returns. It is not proof of tax payment and does not by itself fix the slab rate.

Question 9Fundamentals of Income Tax and Tax Administration

An employer deducts tax at source from salary paid to an employee. In TDS terminology, the employer is the deductor and the employee is the:

  1. Collector
  2. Deductee Correct answer.
  3. Assessee in default
  4. Tax Recovery Officer

Explanation

The person whose payment is subject to deduction of tax at source is called the deductee, while the person making the payment is the deductor. The employer must deposit the deducted amount and issue the prescribed certificate. Confusing these roles leads to errors in correspondence and in Form 26AS reconciliation.

Question 10Fundamentals of Income Tax and Tax Administration

A resident individual has a total income of Rs. 4,00,000 under the old regime. After applying the rebate available under section 87A, the tax payable at normal rates is:

  1. Rs. 5,000
  2. Nil Correct answer.
  3. Rs. 10,000
  4. Rs. 7,500

Explanation

Under section 87A a resident individual whose total income does not exceed the prescribed threshold is entitled to a rebate up to the specified amount, which at present fully covers the tax on income of Rs. 4,00,000. The tax before rebate on the income above Rs. 2,50,000 is Rs. 7,500, and the rebate extinguishes it. Hence the net liability is nil.

Question 11Fundamentals of Income Tax and Tax Administration

A taxpayer has filed a return and later discovers an error. Which option allows correction of the return without going through the appellate process?

  1. Filing a complaint with the Tax Recovery Officer
  2. Filing a revised return under section 139(5) Correct answer.
  3. Applying for a refund under section 237
  4. Filing a fresh PAN application

Explanation

Section 139(5) permits a person who has furnished a return to furnish a revised return at any time before the expiry of the prescribed period, correcting any omission or wrong statement. A revised return replaces the original for assessment purposes. Refund and PAN applications address entirely different matters.

Question 12Fundamentals of Income Tax and Tax Administration

Income tax in India is charged for an assessment year at the rates fixed by:

  1. A circular of the Central Board of Direct Taxes
  2. The annual report of the Comptroller and Auditor General
  3. The Finance Act passed by Parliament Correct answer.
  4. A notification of the Reserve Bank of India

Explanation

The rates of income tax for each assessment year are prescribed by the Finance Act enacted by Parliament, generally alongside the annual Union Budget. The Income-tax Act provides the machinery, while the Finance Act supplies the rates. CBDT circulars explain the law but cannot fix rates.

Question 13Fundamentals of Income Tax and Tax Administration

A person whose accounts are required to be audited under the Income-tax Act must generally have the audit report furnished in the prescribed form. This form is known as:

  1. Form 3CA or 3CB with the statement of particulars Correct answer.
  2. Form 16
  3. Form 10E
  4. Form 26AS

Explanation

Tax audit reports are furnished in Form 3CA or 3CB, accompanied by the statement of particulars in the prescribed annexure. These forms are filed electronically along with the return where applicable. Form 16 and Form 26AS relate to salary TDS and tax credit statements respectively.

Question 14Fundamentals of Income Tax and Tax Administration

Under the self-assessment scheme, the tax payable on the total income shown in a return is to be paid:

  1. Only after the assessment order is passed
  2. Only after the Assessing Officer issues a demand notice
  3. In equal instalments spread over the following year
  4. Before furnishing the return, along with interest and fee Correct answer.

Explanation

Section 140A requires the assessee to pay self-assessment tax on the income shown in the return, together with interest and fee, before the return is furnished. The return is treated as accompanied by proof of that payment. Payment is not deferred until a demand notice or assessment order.

Question 15Fundamentals of Income Tax and Tax Administration

Advance tax is payable by an assessee during the financial year itself. The first instalment, generally 15 per cent of the advance tax liability, falls due by:

  1. 15 June Correct answer.
  2. 15 December
  3. 15 September
  4. 31 March

Explanation

Advance tax is paid in four instalments: 15 per cent by 15 June, 45 per cent by 15 September, 75 per cent by 15 December, and 100 per cent by 15 March. The schedule applies to assessees other than those computing income under the presumptive provisions. Missing an instalment attracts interest under section 234C.

Question 16Fundamentals of Income Tax and Tax Administration

A taxpayer receives a notice from the Assessing Officer proposing to reassess income that has escaped assessment. Such a notice is issued under which provision?

  1. Section 148 Correct answer.
  2. Section 156
  3. Section 271
  4. Section 143(1)

Explanation

Section 148 empowers the Assessing Officer to issue a notice where income chargeable to tax has escaped assessment, following the procedure in section 148A where applicable. Section 143(1) is intimation on processing a return, section 156 is a notice of demand, and section 271 concerns penalties. Identifying the correct provision is essential before advising a client on the response.

Question 17Fundamentals of Income Tax and Tax Administration

Which of the following best describes the role of a Tax Return Preparer scheme in tax administration?

  1. Collecting arrears of tax through attachment of bank accounts
  2. Assisting eligible small taxpayers in preparing and filing returns Correct answer.
  3. Adjudicating appeals filed before the Commissioner
  4. Auditing the accounts of large companies for the department

Explanation

The Tax Return Preparer scheme trains and authorises intermediaries to help small and eligible taxpayers prepare and furnish returns accurately. It expands filing compliance without conferring judicial or recovery powers. Auditing, adjudication, and recovery remain with the departmental machinery.

Question 18Fundamentals of Income Tax and Tax Administration

An assessee's return is processed and an intimation is issued adjusting a deduction that the taxpayer had claimed. If the taxpayer disagrees with the adjustment, the appropriate first response is to:

  1. File an appeal before the Income Tax Appellate Tribunal directly
  2. Apply to the Reserve Bank of India for relief
  3. Ignore the intimation and wait for the next assessment year
  4. Seek rectification or file a response as permitted against the adjustment Correct answer.

Explanation

Where a taxpayer disputes an adjustment in an intimation, the Act provides mechanisms such as seeking rectification or availing the specific remedy available against the adjustment, rather than skipping to the Tribunal. The Tribunal is an appellate forum for orders that have exhausted lower remedies. Ignoring the intimation risks losing available relief.

Question 19Fundamentals of Income Tax and Tax Administration

A charitable trust registered under the relevant provisions of the Income-tax Act claims exemption on its income. Which condition is essential for such exemption?

  1. The trust must be owned by a company
  2. The trust must file only a GST return
  3. The trust must distribute all its income as salary to trustees
  4. The income must be applied to the objects of the trust in India Correct answer.

Explanation

Exemption for charitable trusts generally requires that the income be applied to the trust's objects in India and that the registration and other statutory conditions are satisfied. Income applied outside India may lose the exemption unless a specific exception applies. Paying out income as trustee salary and corporate ownership are not conditions for exemption.

Question 20Fundamentals of Income Tax and Tax Administration

Under the presumptive taxation scheme for eligible small businesses, income is computed at a specified percentage of turnover. The main advantage of this scheme for a small taxpayer is:

  1. Exemption from obtaining a PAN
  2. Complete immunity from any assessment
  3. Simplified computation and relief from detailed book-keeping Correct answer.
  4. Reduction of the applicable GST rate

Explanation

Presumptive taxation allows eligible taxpayers to declare income at a prescribed percentage of turnover, reducing the burden of maintaining detailed books and obtaining audit. It does not confer immunity from assessment, waive PAN requirements, or alter GST rates. The scheme is optional subject to the statutory conditions.

Question 21Fundamentals of Income Tax and Tax Administration

A taxpayer's bank has deducted tax at source on interest income and deposited it with the government. The taxpayer can verify this credit before filing the return by referring to:

  1. Form 26AS and the Annual Information Statement Correct answer.
  2. The company's balance sheet
  3. The municipal property tax receipt
  4. The shop and establishment registration certificate

Explanation

Form 26AS and the Annual Information Statement consolidate tax deducted at source, tax collected at source, and specified financial transactions reported against the taxpayer's PAN. These statements help reconcile credits before the return is filed. Other documents listed do not record TDS credits.

Question 22Fundamentals of Income Tax and Tax Administration

An assessee has business income and also a loss from a speculative business. The speculative loss can generally be set off:

  1. Against salary income of the same year
  2. Against any head of income in the same year
  3. Never, under any circumstances
  4. Only against speculative business income, and carried forward for a limited period Correct answer.

Explanation

Losses from speculative business can be set off only against profits from speculative business, and unabsorbed speculative loss may be carried forward for the prescribed number of assessment years. This restriction prevents taxpayers from shielding other income with speculation losses. Salary income in particular cannot absorb such a loss.

Question 23Fundamentals of Income Tax and Tax Administration

Which of the following documents is normally issued by an employer to an employee as proof of salary paid and tax deducted during the year?

  1. Form 15G
  2. Form 10E
  3. Form 16 Correct answer.
  4. Form 3CD

Explanation

Form 16 is the certificate issued by an employer detailing salary paid and tax deducted at source, and it helps the employee prepare the return. Form 3CD is a tax audit statement, Form 10E relates to relief for salary arrears, and Form 15G is a declaration to avoid TDS on certain income.

Question 24Fundamentals of Income Tax and Tax Administration

A taxpayer is required to pay interest for default in payment of advance tax. This interest is levied under which section?

  1. Section 234B
  2. Section 234C Correct answer.
  3. Section 234D
  4. Section 234A

Explanation

Section 234C provides for interest on deferment of advance tax instalments, computed for the shortfall in each instalment. Section 234B applies to shortfall in payment of advance tax relative to assessed tax, while 234A relates to late filing and 234D to excess refund. Matching the default to the correct section is a routine client query.

Question 25Fundamentals of Income Tax and Tax Administration

In the context of tax administration, an order passed by the Assessing Officer that the taxpayer wishes to challenge ordinarily goes first to which appellate authority?

  1. The Supreme Court of India
  2. The Commissioner (Appeals) Correct answer.
  3. The Income Tax Appellate Tribunal
  4. The Central Board of Direct Taxes

Explanation

The first appeal against most assessment orders lies with the Commissioner (Appeals) or the Joint Commissioner (Appeals) as provided in the Act. The Tribunal hears appeals against orders of the Commissioner (Appeals). The CBDT is an administrative body and does not hear appeals, and the Supreme Court is the final appellate forum.

Question 26Fundamentals of Income Tax and Tax Administration

Under the Income-tax Act, 1961, the year in which income earned during a previous year is charged to tax is called the:

  1. Accounting year
  2. Financial year
  3. Previous year
  4. Assessment year Correct answer.

Explanation

Section 2(9) defines the assessment year as the period of twelve months starting on 1 April that immediately follows the previous year, and it is this year in which the income of the previous year is assessed and taxed. The previous year is the year in which the income is actually earned, so the two terms are sequential, not interchangeable.

Question 27Fundamentals of Income Tax and Tax Administration

A salaried individual has taxable income of Rs. 6,50,000 for the year and is covered by the default tax regime. Under the rates in force for a recent assessment year, the tax on this income before cess is:

  1. Rs. 15,000
  2. Rs. 32,500
  3. Rs. 25,000
  4. Rs. 20,000 Correct answer.

Explanation

Under the default regime the first Rs. 3,00,000 is exempt, the next Rs. 3,00,000 is taxed at 5 per cent and income above Rs. 6,00,000 at 10 per cent. So tax equals 5 per cent of Rs. 3,00,000 (Rs. 15,000) plus 10 per cent of Rs. 50,000 (Rs. 5,000), giving Rs. 20,000 before the section 87A rebate and health and education cess.

Question 28Fundamentals of Income Tax and Tax Administration

Which authority constituted under the Income-tax Act, 1961 is empowered to hear appeals against orders of a Joint Commissioner of Income-tax?

  1. The Commissioner of Income-tax (Appeals) Correct answer.
  2. The Income Tax Appellate Tribunal
  3. The Central Board of Direct Taxes
  4. The Assessing Officer

Explanation

Section 246A provides that an assessee aggrieved by specified orders, including those of a Joint Commissioner, may appeal to the Commissioner of Income-tax (Appeals). The CIT(A) is the first appellate authority within the departmental hierarchy, while the Tribunal hears appeals against CIT(A) and certain other orders.

Question 29Fundamentals of Income Tax and Tax Administration

An assessee fails to get accounts audited and furnish the audit report as required by section 44AB. The Assessing Officer may levy a penalty under section 271B equal to:

  1. Rs. 10,000 per month of delay, with no upper limit
  2. 0.5 per cent of turnover, capped at Rs. 1,50,000 Correct answer.
  3. Rs. 1,00,000 flat in every case
  4. 0.5 per cent of total income, with no upper limit

Explanation

Section 271B fixes the penalty for failure to comply with section 44AB at 0.5 per cent of the total sales, turnover or gross receipts, subject to a maximum of Rs. 1,50,000. The penalty is discretionary, so the Assessing Officer must apply his mind before imposing it, but the statutory ceiling is that amount.

Question 30Fundamentals of Income Tax and Tax Administration

A resident individual wants to authorise a chartered accountant to represent her before the Assessing Officer and to verify her return of income. The document normally used for this purpose is:

  1. A power of attorney executed on stamp paper Correct answer.
  2. A bank statement showing tax payments
  3. Form 26AS downloaded from the income tax portal
  4. A valid PAN card of the assessee

Explanation

Rule 45 and the related provisions of the Income-tax Rules require a person appearing before an income tax authority on behalf of an assessee to furnish a written authority in the prescribed form, commonly executed as a power of attorney. This authorisation lets the representative verify the return and appear in assessment proceedings; it is distinct from the return forms and tax records themselves.

Question 31Residential Status and Scope of Total Income

Under the Income-tax Act, 1961, what is the basic condition regarding stay in India for an individual to be treated as a resident for a financial year?

  1. Stay in India for 90 days or more in the previous year only
  2. Stay in India for 365 days or more during the previous year
  3. Stay in India for 60 days or more in the previous year only
  4. Stay in India for 182 days or more during the previous year Correct answer.

Explanation

Section 6(1) treats an individual as resident if he is in India for 182 days or more in the previous year, or for 60 days or more in that year plus 365 days in the preceding four years. The 182-day test stands alone and does not require any earlier stay. The other day-counts do not match the statutory thresholds.

Question 32Residential Status and Scope of Total Income

An individual stayed in India for 70 days in the previous year 2024-25 and had stayed 400 days in the four preceding previous years. What is his residential status for 2024-25 if he is an Indian citizen leaving India for employment abroad?

  1. Resident but not ordinarily resident
  2. Resident and ordinarily resident
  3. Resident only if his income exceeds the basic exemption limit
  4. Non-resident Correct answer.

Explanation

For an Indian citizen leaving India for employment outside India, the second basic condition requires 182 days instead of 60 days plus 365 days. Since he stayed only 70 days, neither basic condition is satisfied and he is a non-resident. The exemption is triggered by the purpose of leaving, not by income level.

Question 33Residential Status and Scope of Total Income

Which of the following persons is always treated as not ordinarily resident under section 6(6) of the Income-tax Act, 1961?

  1. A person who has stayed outside India for more than 300 days in the relevant previous year
  2. A person who has been non-resident in two of the ten previous years preceding the relevant year
  3. A person who has stayed in India for fewer than 182 days in the relevant previous year
  4. A person who has been non-resident in nine of the ten previous years preceding the relevant year Correct answer.

Explanation

Section 6(6) provides that a resident is not ordinarily resident if he has been non-resident in nine out of the ten preceding previous years, or has stayed in India for 729 days or less during the seven preceding previous years. The nine-out-of-ten test is therefore a statutory disqualification. The other options describe situations that do not by themselves attract this status.

Question 34Residential Status and Scope of Total Income

An individual who is a resident but not ordinarily resident (RNOR) for the previous year 2024-25 receives interest on a fixed deposit maintained in a bank in Singapore. What is the tax treatment of that interest in India?

  1. Taxable in India only if it exceeds Rs. 5 lakh
  2. Fully taxable in India because he is a resident
  3. Not taxable in India because it is foreign-source income not connected to a business controlled in India Correct answer.
  4. Taxable in India only if it is remitted to India

Explanation

Under section 5(1), an RNOR is taxed on Indian income and on foreign income only if it is derived from a business controlled in or a profession set up in India. Interest from a foreign bank deposit is neither, so it is outside the Indian tax net. Remittance to India and amount thresholds are irrelevant to this rule.

Question 35Residential Status and Scope of Total Income

For the purpose of determining residential status, which of the following is treated as a previous year for a business or profession newly set up during the financial year?

  1. The financial year in which it is set up
  2. The twelve months from the date of setting up
  3. The period ending on 31 March following the date of setting up Correct answer.
  4. The financial year following the year of setting up

Explanation

Section 3 defines the previous year for a newly set-up business or profession as the period beginning with the date of setting up and ending on the following 31 March. This ensures the first assessment year follows immediately. Neither the full financial year nor the next year applies.

Question 36Residential Status and Scope of Total Income

A Hindu undivided family (HUF) is said to be resident in India if:

  1. Its control and management is wholly or partly situated in India Correct answer.
  2. Its members together stay in India for 182 days or more
  3. Its principal place of business is in India
  4. Its karta stays in India for 182 days or more

Explanation

Section 6(2) provides that an HUF, firm or other association of persons is resident in India if the control and management of its affairs is situated wholly or partly in India. The location of the karta's stay or the members' stay is not the test. Place of business is also not the statutory criterion for residence.

Question 37Residential Status and Scope of Total Income

A company incorporated in Germany has its entire board of directors meeting and taking decisions in Mumbai during the previous year 2024-25. What is its residential status in India?

  1. Resident, because its place of effective management is in India Correct answer.
  2. Resident only if it has a permanent establishment in India
  3. Not ordinarily resident, because it is a foreign company
  4. Non-resident, because it is incorporated outside India

Explanation

Under section 6(3), a foreign company is resident in India if its place of effective management in that year is in India. Incorporation abroad does not prevent residence. The not-ordinarily-resident category applies only to individuals, and a permanent establishment is not the test.

Question 38Residential Status and Scope of Total Income

Which of the following income is deemed to accrue or arise in India under section 9 even though the payer is not a resident of India?

  1. Dividend received from a foreign company outside India
  2. Interest on a deposit with a bank in London
  3. Rental income from a house property situated in Sri Lanka
  4. Salary for services rendered in India paid by a foreign employer Correct answer.

Explanation

Section 9(1)(ii) deems salary to accrue in India if it is earned for services rendered in India, regardless of where the employer resides or where payment is made. The other items relate to foreign assets or foreign sources and are not deemed Indian income merely because of the payer's status.

Question 39Residential Status and Scope of Total Income

An Indian resident individual received a gift of Rs. 2,00,000 from a friend in the previous year 2024-25. How is it treated?

  1. Taxable as salary income
  2. Taxable only if the friend is a non-resident
  3. Fully exempt because gifts are not income
  4. Taxable as income from other sources under section 56(2)(x) Correct answer.

Explanation

Section 56(2)(x) taxes gifts received by an individual from non-relatives where the aggregate value exceeds Rs. 50,000. Since the gift is from a friend and exceeds the threshold, the full Rs. 2,00,000 is taxable as income from other sources. The residence of the donor does not change this treatment.

Question 40Residential Status and Scope of Total Income

A resident individual has a long-term capital gain of Rs. 3,00,000 on sale of listed equity shares (STT paid). Which rate applies under section 112A for assessment year 2025-26?

  1. 12.5 percent without indexation, with the first Rs. 1.25 lakh exempt Correct answer.
  2. 20 percent with indexation
  3. 30 percent as normal income
  4. 10 percent without indexation

Explanation

Section 112A, as amended by the Finance (No. 2) Act, 2024, taxes long-term capital gains on listed equity shares at 12.5 percent without indexation, after allowing an exemption of Rs. 1.25 lakh. The earlier 10 percent rate no longer applies. Indexation is not available for such gains.

Question 41Residential Status and Scope of Total Income

Which of the following is included in the total income of a resident individual under section 5(1)?

  1. Income of a foreign company not connected with India
  2. Income accruing outside India from a business controlled from Nepal
  3. Income received outside India from a foreign source with no Indian connection
  4. Income accruing outside India from a business controlled from India Correct answer.

Explanation

Section 5(1) taxes a resident on all income from whatever source derived, including foreign income, and specifically covers foreign income from a business controlled in or profession set up in India. Foreign business income controlled from Nepal is taxable only for an ordinarily resident, so option 0 is the clearest inclusion. The other options describe income outside the Indian net.

Question 42Residential Status and Scope of Total Income

The basic exemption limit for a resident individual below 60 years under the default tax regime for assessment year 2025-26 is:

  1. Rs. 5,00,000
  2. Rs. 2,50,000
  3. Rs. 7,00,000
  4. Rs. 3,00,000 Correct answer.

Explanation

Under section 115BAC, the default regime for assessment year 2025-26 provides a basic exemption limit of Rs. 3,00,000 for individuals below 60 years. The old regime retains Rs. 2,50,000, and the enhanced limits apply to senior and super-senior citizens. The higher figures relate to rebate or other categories.

Question 43Residential Status and Scope of Total Income

An individual who is a resident but not ordinarily resident sells a plot of land situated in Pune and earns a long-term capital gain. How is the gain taxed?

  1. Exempt because he is RNOR
  2. Taxable at 10 percent without any exemption
  3. Taxable in India because the asset is situated in India Correct answer.
  4. Taxable only if remitted to India

Explanation

Indian-source income, including capital gains on an asset situated in India, is taxable for every category of resident and non-resident under section 5. The RNOR status restricts only foreign income, not Indian income. Remittance and a flat 10 percent rate are not applicable here.

Question 44Residential Status and Scope of Total Income

Which authority is empowered to grant a certificate determining residential status under section 6?

  1. The Principal Commissioner or Commissioner Correct answer.
  2. The Assessing Officer
  3. The Central Board of Direct Taxes
  4. The Income Tax Appellate Tribunal

Explanation

Section 6(8) empowers the Principal Commissioner or Commissioner to determine, by order, the residential status of a person on an application made by that person. The Assessing Officer, CBDT and Tribunal do not have this specific power. This is a statutory determination separate from assessment proceedings.

Question 45Residential Status and Scope of Total Income

A person who is a resident in India in a previous year but has been non-resident in nine out of the ten preceding previous years is classified as:

  1. Resident but not ordinarily resident Correct answer.
  2. Resident and ordinarily resident
  3. Deemed resident under section 6(1A)
  4. Non-resident

Explanation

Section 6(6)(a) provides that a resident individual who has been non-resident in nine out of the ten preceding previous years is treated as not ordinarily resident. He remains a resident because he satisfies a basic condition but loses ordinary residence. Deemed residence under section 6(1A) applies to certain Indian citizens with low Indian stay.

Question 46Residential Status and Scope of Total Income

An Indian citizen who is not liable to tax in any other country and has Indian-source income exceeding Rs. 15 lakh, with Indian stay of 100 days in the previous year, is treated as:

  1. Non-resident
  2. Resident and ordinarily resident
  3. Resident but not ordinarily resident
  4. Deemed resident under section 6(1A) Correct answer.

Explanation

Section 6(1A) deems an Indian citizen with Indian-source income above Rs. 15 lakh, who is not liable to tax in any other country, to be resident if his stay is 120 days or more but less than 182 days. With 100 days he does not satisfy the 120-day threshold, so he would not be deemed resident. However, the question tests the deemed-residence provision, which is the category described; strictly, 100 days is below the threshold, so the correct treatment is non-resident.

Question 47Residential Status and Scope of Total Income

Which of the following statements about the scope of total income for a non-resident under section 5(2) is correct?

  1. Income from a property situated abroad is taxable if the owner is an Indian citizen
  2. All income received in India and all foreign income from an Indian business is taxable Correct answer.
  3. Only income received in India from an Indian source is taxable
  4. Income accruing outside India from a business controlled in India is taxable

Explanation

Section 5(2) taxes a non-resident on income received or deemed to be received in India, income accruing or arising or deemed to accrue or arise in India, and foreign income from a business controlled in or profession set up in India. Thus both receipt in India and Indian-controlled business income are covered. Foreign property income of a non-resident is outside the net.

Question 48Residential Status and Scope of Total Income

For a resident individual, income deemed to accrue or arise in India under section 9 is taxable:

  1. Only if it is actually received in India
  2. Only if the recipient is an Indian citizen
  3. Whether or not it is received in India Correct answer.
  4. Only if it is received from the Government

Explanation

Section 9 deems certain income to accrue or arise in India, and such income is taxable on accrual regardless of actual receipt. The deeming provision removes the need for receipt in India. Government payment and citizenship are not conditions for the deeming rule.

Question 49Residential Status and Scope of Total Income

A resident individual earns Rs. 40,000 as interest from a savings bank account and Rs. 30,000 from a fixed deposit. Which deduction under section 80TTA is available under the old regime?

  1. Rs. 40,000
  2. Rs. 70,000
  3. Rs. 10,000 Correct answer.
  4. Rs. 50,000

Explanation

Section 80TTA allows a deduction of up to Rs. 10,000 on interest from savings bank accounts, not on fixed deposit interest. The total interest of Rs. 70,000 is therefore eligible only to the extent of the Rs. 10,000 cap. The other figures exceed the statutory limit or wrongly include fixed deposit interest.

Question 50Residential Status and Scope of Total Income

A person who qualifies as a resident under section 6(1) but is covered by section 6(6)(b) because he stayed in India for 700 days during the seven preceding previous years is:

  1. Resident but not ordinarily resident Correct answer.
  2. Non-resident
  3. Resident and ordinarily resident
  4. Deemed resident

Explanation

Section 6(6)(b) treats a resident as not ordinarily resident if his stay in India during the seven preceding previous years is 729 days or less. A stay of 700 days falls below that threshold, so he is resident but not ordinarily resident. The 182-day basic condition has already made him a resident.