This notes will cover MCQS OF DIRECT TAXATION. MCQS are designed for MBA Students.

1. MULTIPLE CHOICE QUESTIONS
Subject- Direct Taxation
1. Income tax is levied on – Yearly Basis
2. Income tax is payable on- Taxable income
3. Income tax is- Direct Tax
4. The authority on whose recommendation the amount
collected as income tax is distributed to state Govt.-
Finance Commission
5. Income tax was first levied in the year- 1860
6. In case of delay payments of income tax penalty shall be
charged as- 1% per month
7. Number of digits in a PAN are- 10
8. Income tax department works under – CBDT
9. Agricultural income is considered when calculating tax if it
is- More than
10. Some of Various heads is called- Gross total income
11. Previous year is- Income earning year
12. Minor income is exempt to the extent of- Rs.1500
13. In which section of the income tax act exempted incomes
have been mentioned- Sec.10
14. Types of assessee are from residential point of view- 3
15. Which section is related to residential status- 6
16. Company may be- Resident or Non-resident
17. Section related to computation of income from salary is-
Sec 15 to 17

2. MULTIPLE CHOICE QUESTIONS
Subject- Direct Taxation
18. Non-monetary allowance includes- Perquisites
19. In HRA, Salary includes- Basic Salary + Commission
20. Entertainment allowance will be deducted from gross
salary in case of- Govt. Employee
21. Deduction from salary is allowed under- sec 16
22. Interest credited to RPF is taxable if it is more than- 9.5%
23. Education allowance is exempt for children-2
24. Medical bill reimbursement regarding private hospitals are
exempt- up to-15000
25. Deduction allowed against gross salary- professional tax
26. In which section gratuity has been mentioned- sec 10(10)
27. Maximum limit for gratuity is –Rs. 10,00,000
28. Exemption is available for govt. employee at retirement-
Gratuity, Statutory P.F, Leave encashment
29. Gratuity received by a govt. employee is fully exempted
30. Property income is exempt for- local authority, Political
party, Trade union
31. Annual value is determined under which section of income
tax act- Sec 23
32. In case of rental house property only such municipal tax is
deducted which is – paid by owner
33. Deduction from annual value is allowed under section- sec
24

3. MULTIPLE CHOICE QUESTIONS
Subject- Direct Taxation
34. Standard deduction from annual value is allowed as -30%
of AV
35. Interest on loan for self- occupied house taken before 1st
1999 will be allowed up to- Rs 30000
36. Income from house for self- business is Nil
37. An individual assessee can show maximum loss from a
self-occupied residential house property – Rs. 150000
38. Give the full name of STT- Security Transaction Tax
39. The rate of Depreciation allowed on machinery is- 15%
40. Section 45 is related to- Capital Gain
41. Capital assets includes-Shares
42. Types of capital gains are-2
43. Indexation will be done on- shares
44. Index no. before31st march,1981 is-100
45. The maximum limit amount of deduction on family
pension is- 15000
46. T.D.S is not deducted on lottery income up to – Rs.10000
47. Maximum deduction allowed u/s 80 c- Rs.150000
48. Dedcution in respect of medical insurance premium is
allowed under which section- 80 D
49. Maximum deduction allowed for senior citizen under sec
80 D is- 20000

4. MULTIPLE CHOICE QUESTIONS
Subject- Direct Taxation
50. Person with disability is allowed a fixed deduction of-
50000.
51. Sale of agricultural land on 1st April, 1970 is an example of
transfer of capital asset – True
52. The TDS Certificate issued by an employer to his employees in
case of salary income is - Form 16
53. YoungStars, a club, lets out its furnished rooms solely to its
members on regular basis. The income earned by the club from
such letting-out will be chargeable under the head- Income from
Other Sources
54. The rates of Income Tax are specified in- Finance Act
55. The amount of taxable income is to be rounded off to the nearest
multiple of Re.1 for income tax calculations.- False
56. Uncommuted pension received by a Government employee is fully
exempt from tax – False
57. Interest on capital, borrowed on 10.10.2000, for self-occupied
property is deductible upto a maximum amount of – 150000
58. Tax' is imposed on a person by - State Govt. and Central Govt.
59. The first income tax act was introduced in the year – 1860
60. The apex body of Income Tax Department. Is – CBDT
61. The Income Tax Act 1961 came into force on - 13th Sept 1961
62. The rates of income tax are specified in - Finance Act
63. The CBDT consists of- One Chairman & Six Members

5. MULTIPLE CHOICE QUESTIONS
Subject- Direct Taxation
64. Assessment year 2006-07 commenced on - 1st April '06
65. The term "Person" includes- A Registered Firm and An
Unregistered Firm
66. The taxable Income computed should be rounded off to the nearest
multiple of Rs.10.- True
67. House Rent Allowance is exempt from tax – False
68. Expected Rent can be determined in the following way - Higher of
Municipal Value & Fair Rent subject to maximum of Standard
Rent
69. The amount of interest on borrowed capital allowable as deduction
in case of a let out property is - The actual amount of interest
70. The aggregate amount of deductions under chapter VI-A cannot
exceed - Gross Total Income
71. For a senior citizen the amount of deduction U/s 80D available is-
The actual amount of premium paid or Rs.15,000 whichever is
lower
72. If a self-occupied property is converted into HUF property without
adequate consideration then- Entire income from such property
will be clubbed with the income of the transferor
73. TDS, in case of salary should be deposited within - Within 7 days
from the end of the month in which such tax is deducted
74. Income tax is a tax on –Income
75. The Income Tax Act, 1961 has 298 – Sections

6. MULTIPLE CHOICE QUESTIONS
Subject- Direct Taxation
76. The ______________ makes the amendment in the form of
omissions, insertions and substitutions in the Income Tax Act. –
Finance Act
77. The Income Tax Act extends to ______________ of India – Whole
India
78. Gross tax liability is calculated on _____________. – Income
79. The term HUF stands for __________. – Hindu Undivided Family
80. Residential has nothing to do with __________. –Nationality
81. AOP is the abbreviation used for __________. Association of
Person
82. AOP should consist of __________. – Persons other than
individuals also
83. Body of individual should consist of __________. – Individuals
only
84. Residential status of an individual depends on the stay of the
assesses in India during the – Previous year
85. A person by whom any tax is payable under Income Tax Act 1961
is called __________. – Assessee
86. The financial year in which the income is earned is called as the
__________. Previous Year
87. Income Tax Act has _________ schedules. – 14
88. __________ is chargeable u/s 45. - Capital gains

7. MULTIPLE CHOICE QUESTIONS
Subject- Direct Taxation
1 Salary Under Section17(1)does not includes :
A. Wages
B. Pension
C. Interest
D. Gratuity
2 Taxable Allowance from Salary:
A. Conveyance allowance
B. Dearness Allowances
C. Children education allowance
D. Entertainment allowance
3
Sec 22 of Income Tax Act, 1961 does not includes incomeunder the head
house property from :
A. houses
B. buildings
C. bungalows
D. party plot
4 Capital Gain tax liability arises when following condition getsatisfied:
A. There should be a Capital Asset
B. There should be a Transfer
C. Transfer should be in previous year
D. All of the above
5
__________Income is not chargable under Profit/Gainfrom
Business/Profession
A.
Any interest, salary, Bonus, commission or remuneration received by partner
of a firm
B. Dividend on share
C. Income derived by trade/profession
D. Income from speculative transaction
6 There are _________types of Capital Assets
A. 2
B. 3
C. 1

8. MULTIPLE CHOICE QUESTIONS
Subject- Direct Taxation
D. None of the above
7 Long Term Capital Assets (Shares)is held for :
A. More than 36 months
B. More than 12 months
C. More than 24 months
D. Not more than 36 months
8 Income from Other Sources includes :
A. Dividend
B. Duty drawback
C. Income from speculative transaction
D. All of the above
9 Share of _________ frompartnership firm is exempt u/s 10(2A)
A. Interest
B. Profit
C. Remunaration
D. All of the above
10 Interest on Public Provident Fund Investment is _________
A. Taxable under the Head : Income from Other Sources
B. Taxable under the Head : Income from Business and Profession
C. Allowed as Deduction
D. Exempt from Income
11
_________is the Maximum amount of gratuity exempted for Non- Govt.
employee not coveredby the payment of Gratuity Act 1972
A. Rs. 5,00,000
B. Rs. 10,00,000
C. Rs. 20,00,000
D. Rs. 25,00,000
12 What is MAT?
A. Maximum Alternate Tax
B. Maximum Advance Tax
C. Minimum Advance Tax
D. Minimum Alternate Tax

9. MULTIPLE CHOICE QUESTIONS
Subject- Direct Taxation
13
Any sum receivedunder life insurance policy on maturity, including the sum
allocatedby wayof bonus on such policy shall be ________from tax.
A. Chargable
B. Partially Chargable
C. Exempt
D. None of the Above
14 Transport Allowance is exempt upto :
A. Rs. 800 Per Month
B. Rs. 1600 Per Month
C. Rs. 800 Per Year
D. Rs. 1600 Per Year
15
Children Education Allowance is exempt upto Rupees 100 per month per
child up to a maximum of ____ children
A. 4
B. 3
C. 2
D. 1
16 PAN contains ______Alphabets.
A. 5
B. 10
C. 4
D. 6
17
HostelExpenditure Allowance is exempt upto Rs. ____/-per month per child
up to a maximum of two children
A. 100
B. 1000
C. 500
D. 300
18
Income by way of interest, premium, etc from certain ___________ as
specified/ notified in the officialgazette are exempted from tax.
A. Securities
B. Certificates
C. Bonds
D. All of the Above

10. MULTIPLE CHOICE QUESTIONS
Subject- Direct Taxation
19 What is the Full Form of ITR
A. Income Tax Rules
B. Income Tax Return
C. Income Tax Rectification
D. None of the Above
20
In case the income of an individual includes the income of his minor child in
terms of sectionof64(1A), such individual shall be entitled to exemption of
Rs 1500 in respectof maximum _______ number of minor child
A. 1
B. 2
C. No limit
D. None of the above
21
Under Sec 80GG, maximum of ________ deductionis allowedto an
individual assessee in respectof rent paid by him for an accommodation
used for his residential purposes
A. Rs. 1600 per month
B. Rs. 2000 per month
C. Rs. 800 per month
D. Rs. 24000 per month
22 The ________ payments/investments qualify for deduction under section80C.
A. Donation to Political Party
B.
Donation to notified temple, mosque, gurudwara, church or other place for
renovation and repairs
C. Subscription to National Savings Certificates
D. All of the Above
23 In which case Deductionu/s. 80 G will be disallowed, If
A. Rs. 9999 Paid in Cash
B. Rs. 19999 Paid Through Cheque
C. Rs. 10001 Paid Through Cheque
D. Rs. 10001 Paid Through Cash
24 What is allowable u/s 80 E, in case ofHigher Education Loan
A. Principle Amount Only
B. Interest Amount Only

11. MULTIPLE CHOICE QUESTIONS
Subject- Direct Taxation
C. Interest and Principle Amount
D. All of the Above
25
The maximum deduction under sections 80C, 80CCC and80CCD is
___________.
A. Rs. 1,00,000
B. Rs. 1,50,000
C. Rs. 2,00,000
D. Rs. 2,50,000
26 Directors Sitting Fees will be Chargeable Under which Head?
A. Income From House Property
B. Income From Business & Profession
C. Income From Capital Gain
D. Income From Other Sources
27
Deduction In RespectofMedicalInsurance Premia Sec 80D is not allowedin
respectof payment made for
A. Own/spouse
B. Parents of the assessee(dependent)
C. Parents of the assessee(independent)
D. None of the above
28
Deduction In RespectofDependent Relative Section80 DD is available to
__________.
A. Individuals and HUF, who is resident in India
B. Individuals , who is resident in India
C. Individuals and HUF, who is resident or non resident in India
D. Individuals , who is resident or non resident in India
29
Donations made to following are eligible for 100% deduction without any
qualifying limit
A. Prime Minister’s National Relief Fund
B. National Defense Fund
C. Prime Minister’s Armenia Earthquake Relief Fund
D. All of the above
30
Donations to the following are eligible for 100%deduction subject to
qualifying limit (i.e. 10% of adjusted gross totalincome).

12. MULTIPLE CHOICE QUESTIONS
Subject- Direct Taxation
A.
Donations to the Government or a local authority for the purposeof
promoting family planning
B.
Donation to the Government or any local authority to be utilized by them for
any charitable purposes other than the purposeof promoting family planning
C.
Any authority set up for providing housing accommodation or for town
planning
D. All of the above
31 Legally valid Digital Signature Certificates are issuedthrough
A. NSDl / CDSL
B. State Govt.
C. licensed Certifying Authorities (CA), such as eMudhra
D. All of the above
32 Where canI use DigitalSignature Certificates?
A. For sending and receiving digitally signed and encrypted emails
B. In e-Tendering or e-Procurement
C. For signing documents like MSWord, MS Excel and PDFs
D. All of the above
33 Expand the Term 'CA' with reference to the DigitalSignature :
A. Chartered Accountant
B. CostAccountant
C. Certificate of Approval
D. Certification Authority
34 What are the different classes ofDigitalSignature Certificates ?
A. Class 0 Certificate
B. Class 1 Certificate
C. Class 2 Certificate
D. All of the above
35
An Individual should have a valid _______for registering with the e-Filing
application
A. TAN
B. PAN
C. Aadhar
D. None of the above

13. MULTIPLE CHOICE QUESTIONS
Subject- Direct Taxation
36 For Registering with e-Filling application ___________is mandatory.
A. First Name
B. Middle Name
C. Surname
D. All of the above
37
For Registering with e-Filling application their are ___________no of Secret
Questions.
A. 1
B. 2
C. 3
D. No limit
38
While Registering with e-Filling application, for Non-ResidentIndian,
__________is exempted.
A. PAN
B. Mobile PIN
C. Current Address
D. None of the Above
39
e-Filing of Returns/Forms is mandatory if the Totalincome
exceeds__________ rupees
A. 1 lakh
B. 5 lakh
C. Basic Exemption Limit
D. None of the Above
40
A company and an assesseebeing individual or HUF who is liable to audit
u/s 44AB are required to furnish Form BB (Return of NetWealth)
_______________.
A. Electronically under digital signature
B. Electronically without digital signature
C. Manually
D. None of the Above
41 For e-Filling of ITR, _______file is uploaded.
A. .xls
B. .xml
C. .pdf

14. MULTIPLE CHOICE QUESTIONS
Subject- Direct Taxation
D. .doc