MCQs
Total Questions : 163
| Page 15 of 17 pages
Answer: Option C. -> Debt creating capital receipts
Answer: (c)Fiscal Deficit is equal to total borrowing and the borrowing is part of capital receipts which create debt. So fiscal deficit is equal to debt creating capital receipts.
Answer: (c)Fiscal Deficit is equal to total borrowing and the borrowing is part of capital receipts which create debt. So fiscal deficit is equal to debt creating capital receipts.
Question 142. Consider the following statements regarding the Fifteenth Finance Commission (FFC) recommendations:
Select the correct answer using the code given below:
- For horizontal devolution, the population of the 2011 Census will be considered
- There are six parameters for horizontal devolution out of which ‘Tax Effort’ is one
Select the correct answer using the code given below:
Answer: Option B. -> Both (i) & (ii)
Answer: (b)
The parameters for the distribution of taxes among the states (horizontal distribution) for FFC are
Income Distance (45%),
Population (2011 Census) (15%),
Demographic Performance (12.5%),
State Area (15%),
Forest Cover (10%),
Tax effort (2.5%).
Answer: (b)
The parameters for the distribution of taxes among the states (horizontal distribution) for FFC are
Income Distance (45%),
Population (2011 Census) (15%),
Demographic Performance (12.5%),
State Area (15%),
Forest Cover (10%),
Tax effort (2.5%).
Answer: Option D. -> 1996-97
Answer: (d)
The Minimum Alternative Tax (MAT) was introduced for the first time in the Budget for the year 1996-97.
Minimum alternate tax or MAT is a tax levied on firms/ companies or limited liability partnerships (LLPs) making abundant profits as well as distributing dividends to its shareholders who leveraging on the features of the Indian Taxation system do not contribute towards the government’s taxation kitty.
Thus, for such corporates, a minimal tax amounting to some fixed percentage of book profits i.e. profits according to accounting records is charged as minimal alternative tax (MAT).
Answer: (d)
The Minimum Alternative Tax (MAT) was introduced for the first time in the Budget for the year 1996-97.
Minimum alternate tax or MAT is a tax levied on firms/ companies or limited liability partnerships (LLPs) making abundant profits as well as distributing dividends to its shareholders who leveraging on the features of the Indian Taxation system do not contribute towards the government’s taxation kitty.
Thus, for such corporates, a minimal tax amounting to some fixed percentage of book profits i.e. profits according to accounting records is charged as minimal alternative tax (MAT).
Answer: Option D. -> Neither (i) nor (ii)
Answer: (d)
The country’s forex reserves as of the end of Feb 2020 stood at $476 billion, but India’s external debt crossed 557 billion USD as of June 2019 (and it is still increasing with time).
So, at any point in time, if we want to pay off the complete external debt, it is not possible as forex reserve is only $476 billion.
(As all external debt is denominated in foreign currencies and hardly $1 billion is in rupee debt (Masala bonds), so it has to be paid only through our Forex reserve).
Since the ratio of Forex to External debt is $476/ 557 = 85%, that means our forex reserves don’t cover the external debt.
If it would have been greater than 100% then we say that our external debt is fully covered (with forex reserves).
The country’s one-year imports are around $630 billion (2018-19). So again, our forex reserves don’t fully cover imports also.
Answer: (d)
The country’s forex reserves as of the end of Feb 2020 stood at $476 billion, but India’s external debt crossed 557 billion USD as of June 2019 (and it is still increasing with time).
So, at any point in time, if we want to pay off the complete external debt, it is not possible as forex reserve is only $476 billion.
(As all external debt is denominated in foreign currencies and hardly $1 billion is in rupee debt (Masala bonds), so it has to be paid only through our Forex reserve).
Since the ratio of Forex to External debt is $476/ 557 = 85%, that means our forex reserves don’t cover the external debt.
If it would have been greater than 100% then we say that our external debt is fully covered (with forex reserves).
The country’s one-year imports are around $630 billion (2018-19). So again, our forex reserves don’t fully cover imports also.
Answer: Option A. -> Consumption
Answer: (a)Fiscal policy is the use of government revenue collection (taxation) and expenditure (spending) to influence the economy. The two main instruments of fiscal policy are changes in the level and composition of taxation and government spending in various sectors.
Answer: (a)Fiscal policy is the use of government revenue collection (taxation) and expenditure (spending) to influence the economy. The two main instruments of fiscal policy are changes in the level and composition of taxation and government spending in various sectors.
Answer: Option C. -> Direct Tax
Answer: (c)
Answer: (c)
Question 147. Consider the following statements regarding the "Composition Scheme" in GST:
Select the correct answer using the code given below:
- It exempts small taxpayers from payment of GST
- It allows small businesses to pay tax at a fixed per cent of their turnover
- It reduces the compliance cost for small businesses
Select the correct answer using the code given below:
Answer: Option D. -> (ii) & (iii) only
Answer: (d)
Composition levy is an alternative method of levy of tax designed for small businesses whose turnover is up to Rs. 1.5 crore (and above 40 lacs). The objective of the composition scheme is to bring simplicity and to reduce the compliance cost for small businesses.
Moreover, it is optional and the eligible person opting to pay tax under this scheme can pay tax at a 1% flat rate, of his turnover, instead of paying tax at the normal GST rate.
Similarly, small service providers with a turnover of Rs. 50 lakhs can opt for a composition scheme and pay GST at 6%. In the case of a composition scheme, the businesses can’t claim an input tax credit.
Answer: (d)
Composition levy is an alternative method of levy of tax designed for small businesses whose turnover is up to Rs. 1.5 crore (and above 40 lacs). The objective of the composition scheme is to bring simplicity and to reduce the compliance cost for small businesses.
Moreover, it is optional and the eligible person opting to pay tax under this scheme can pay tax at a 1% flat rate, of his turnover, instead of paying tax at the normal GST rate.
Similarly, small service providers with a turnover of Rs. 50 lakhs can opt for a composition scheme and pay GST at 6%. In the case of a composition scheme, the businesses can’t claim an input tax credit.
Answer: Option C. -> Only 1 and 2
Answer: (c)
Answer: (c)
Answer: Option A. -> Haryana
Answer: (a)‘Income distance’ is calculated as the difference between the per capita gross state domestic product (GSDP) of the state from that of the state with the highest per capita GSDP. This ensures that states with less income get a higher share in order to allow them to provide services comparable to those provided by the richer ones. The XV FC used the per capita GSDP of Haryana as the reference for calculating the income distance, and has given it a weight of 45%, down from the 50% assigned by the XIV FC.
Answer: (a)‘Income distance’ is calculated as the difference between the per capita gross state domestic product (GSDP) of the state from that of the state with the highest per capita GSDP. This ensures that states with less income get a higher share in order to allow them to provide services comparable to those provided by the richer ones. The XV FC used the per capita GSDP of Haryana as the reference for calculating the income distance, and has given it a weight of 45%, down from the 50% assigned by the XIV FC.
Answer: Option B. -> (ii), (iii) & (iv) only
Answer: (b)
Fiscal Deficit = Total Expenditure - Total Receipts except borrowing
= (Rev Exp. + Cap Exp.) - (Rev Rec. + Cap Rec. except borrowing)
= (Rev Exp. - Rev Rec.) + (Cap Exp. - Cap Rec. except borrowing)
= Revenue Deficit + Cap Exp. - Cap Rec. except borrowing
= Total borrowing
= Net borrowing at home + borrowing from RBI + Borrowing from abroad
Let us understand with an example.
Suppose, government's total expenditure = 17 lakh crore and receipts = 13 lakh crore
Then the government will have to borrow (17 lakh crore -13 lakh crore) 4 lakh crore to meet its expenditure. And this 4 lakh crore is called the fiscal deficit. That is why the fiscal deficit is also equal to the total borrowing i.e. 4 lakh crore.
But this 4 lakh crore which government borrows becomes part of capital receipt for the government and it must be included in capital receipts. So, in the actual sense government's total receipts will become 17 lakh crore (i.e. 13 lakh crore + 4 lakh crore borrowing).
Hence, in the above example:
Fiscal Deficit = Total expenditure - total receipts except borrowing
Otherwise, the difference between total expenditure and total receipts will always be zero.
Answer: (b)
Fiscal Deficit = Total Expenditure - Total Receipts except borrowing
= (Rev Exp. + Cap Exp.) - (Rev Rec. + Cap Rec. except borrowing)
= (Rev Exp. - Rev Rec.) + (Cap Exp. - Cap Rec. except borrowing)
= Revenue Deficit + Cap Exp. - Cap Rec. except borrowing
= Total borrowing
= Net borrowing at home + borrowing from RBI + Borrowing from abroad
Let us understand with an example.
Suppose, government's total expenditure = 17 lakh crore and receipts = 13 lakh crore
Then the government will have to borrow (17 lakh crore -13 lakh crore) 4 lakh crore to meet its expenditure. And this 4 lakh crore is called the fiscal deficit. That is why the fiscal deficit is also equal to the total borrowing i.e. 4 lakh crore.
But this 4 lakh crore which government borrows becomes part of capital receipt for the government and it must be included in capital receipts. So, in the actual sense government's total receipts will become 17 lakh crore (i.e. 13 lakh crore + 4 lakh crore borrowing).
Hence, in the above example:
Fiscal Deficit = Total expenditure - total receipts except borrowing
Otherwise, the difference between total expenditure and total receipts will always be zero.
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