MCQ for CA Intermediate TAXATION - Chapter 4 - HEADS OF INCOME

Sample Multiple Choice Questions (MCQ's) for CA Intermediate - Paper 4 - TAXATION Chapter 4: HEADS OF INCOME - For Practice relevant for May/November 23 Examinations

UNIT A.  Income from House Property

Q:1 If the property constitutes Stock-in-Trade of a business or the business of the Assessee is to let-out house properties, the Income is to be charged only under the head-

  1. Income from House Property
  2. Income from Other Sources
  3. Profits and Gains of Business or Profession
  4. Capital Gains

Answer: 1

Q:2 The value that the Municipal Authorities deem as the value of the property for the purpose of assessment of Property Taxes

  1. Municipal Value
  2. Fair Market Value
  3. Fair Rent
  4. Standard Rent

Answer: 1

Q:3 X transferred his house property to his wife under an agreement to live apart. Income from such House Property shall be taxable in the hands of -

  1. X as Deemed Owner
  2. However, it will be first computed as Mrs. X income & thereafter clubbed in the hands of X
  3. X
  4. None of these

Answer: 3

Q:4 U is a member of a House Building Co-operative Society who is the owner of flats constructed by it. One of the flats is allotted to U. The Income from such House Property shall be taxable in the hands of

  1. Co-Operative Society
  2. U as Deemed Owner

Answer: 2

Q: 5 An Assessee was allowed deduction of Unrealized Rent to the extent of ₹ 40,000 in the past although the total Unrealized Rent was ₹ 60,000. He is able to recover from the tenant ₹ 45,000 during the previous year on account of such Unrealized Rent. He shall be liable to tax to the extent of-
  1. ₹ 45,000
  2. Nil
  3. ₹ 25,000
  4. ₹ 40.000

Answer: 1

Q:6 If the property is owned by Co-Owners & it is Self-Occupied by all Co-Owners, the annual value of-

  1. Such House Property shall be Nil
  2. For each Co-Owner shall be Nil

Answer: 2

UNIT B. Income from Salaries

Q:1 RS, a Chartered Accountant is employed with GK Ltd, as an Internal Auditor and requests the Employer to call the remuneration as Internal Audit Fee. RS shall be chargeable to tax for such fee under the head-

  1. Income from Salaries
  2. Profit and Gains from Business and Profession
  3. Income from Other Sources

Answer: 1

Q:2 KS, who is entitled to a Salary of ₹ 20,000 p.m, took an advance of ₹ 50,000 against the salary in the month of March 2022. The Gross Salary of KS for A.Y. 2022-2023 shall be-

  1. ₹ 2,90,000
  2. ₹ 2.40,000
  3. None of the above

Answer: 2

Q:3 Raju is working for a Private Firm. He borrowed a loan of ₹ 3 Lakhs for his sister's wedding as an advance against salary. This amount will be taxed under the head

  1. Salaries
  2. Business Income
  3. Other Sources
  4. not taxable

Answer: 4

Q:4 Leave Travel Concession is a tax free perquisite for -

  1. once in a block of 4 Previous years
  2. Twice in a block of 4 Calendar years
  3. Once in a block of 4 Calendar Year
  4. None of the above

Answer: 2

Q:5 Commission received by a Director of the Company is charged under the head

  1. Salaries
  2. Business Income
  3. Other Sources
  4. Its exempt from tax

Answer: 1

Q:6 Which of the following is not true about charging Income under the head Salaries?

  1. Salary comprises only of monetary benefits T
  2. here should be Employer and Employee Relationship.
  3. Employment should be full time.
  4. Both (a) and (c)

Answer: 4

UNIT C. Profits and Gains of Business or Profession

Q:1 Perquisite received by the assessee during the course of carrying on his business or profession is taxable under the head-
  1. Salaries
  2. Income from Other Sources
  3. Profits and Gains of Business or Profession

Answer: 3

Q:2 For computation of Business Income, the assessee has to follow-

  1. Accounting Standards prescribed by I.C.A.I.
  2. Standards notified by the Central Government under the Income Tax Act
  3. No Accounting Standards

Answer: 2

Q:3 A Firm's business income is nil/negative. It shall still be allowed a deduction on account of remuneration to working partner to the maximum extent of-

  1. Actual Remuneration paid as per Partnership Deed
  2. ₹ 1,50,000
  3. Nil

Answer: 2

Q:4 A person, who has been carrying on business, is required to maintain books of account of the current previous year if-

  1. his total income of any of 3 preceding previous years exceeded ₹ 1,20,000
  2. his Gross Turnover or Sales of any of 3 preceding previous year exceeded ₹ 10 Lakhs
  3. condition mentioned either in (a) or (b) is satisfied.

Answer: 3


Q:5 A person, who sets up a non-specified profession or commences a business, during the current previous year is required to maintain books of account if his -

  1. Total Income of the current year exceeds or is likely to exceed ₹ 1,20,000
  2. Gross Receipts/Turnover of the current year exceeds or likely to exceed ₹ 10,00,000
  3. condition mentioned in either (a) or (b) is satisfied

Answer: 3

Q:6 Motor car is the only Asset in a block. Cost ₹ 2,00,000. Depreciation rate is 15%, 20% is disallowed for estimated personal use. WDV of block is

  1. ₹ 1,70,000
  2. ₹ 1,76,000.
  3. ₹ 2,00,000
  4. NIL

Answer: 2

UNIT D. Capital Gains

Q:1 Capital Gain arises from the transfer of -

  1. any Asset
  2. any Capital Asset
  3. Land and Buildings and Shares only

Answer: 2

Q:2 Exemption under Section 54F shall not be allowed if the assessee, on the date of transfer, owns-

  1. any Residential House
  2. a Residential House which is let out
  3. a House which is self-occupied
  4. more than one Residential House.

Answer: 4

Q:3 If the new agricultural land purchased (for which exemption was claimed u/s 54B) is transferred, then -

  1. CG exempt u/s 54B earlier shall be taxable
  2. Entire CG on new transfer shall be taxable
  3. for the purpose of computation of Capital Gain, the cost of acquisition shall be reduced by the amount Capital Gain exempt u/s 54B earlier

Answer: 3

Q:4 For claiming exemption u/s 54, the assessee should construct the Residential Property within-

  1. 1 year before or 2 years after the date of transfer
  2. 1 year before or 3 years after the date of transfer
  3. within 3 years after the date of transfer

Answer: 3

Q:5 In case of compulsory acquisition, if enhanced compensation is received, then, for the purpose of computation of Capital Gain, the cost of acquisition and cost of improvement shall be taken as -

  1. Nil
  2. Cost of Acquisition or Cost of Improvement which was in excess of initial compensation earlier received
  3. None of these

Answer: 1

Q:6 Where the entire block of the depreciable asset is transferred after 36 months, there will be-

  1. Short-Term Capital Gain
  2. Long-Term Capital Gain
  3. Short-Term Capital Gain or Loss
  4. Long-Term Capital Gain or Loss

Answer: C

Q:7 Conversion of Capital Asset into Stock in Trade will result into Capital Gain of the previous year-

  1. in which such conversion took place
  2. in which such converted asset is sold or otherwise transferred
  3. any of the above
  4. none of the above.

Answer: A

UNIT E. Income from Other Sources

Q:1 Where a closely held Company gives an loan/advance to a shareholder who has 10% voting power in the Company or to concern in which such shareholder has 20% share of profits, in case such concern is a non-Company assessee or has substantial interest (20% voting power) in case it is a Company then loan/advance so paid shall be deemed divided to the extent of –

  1. Accumulated Profits whether capitalized or not
  2. Accumulated Profits excluding capitalized profits
  3. Loan or Advance so paid
  4. None of the above

Answer: B

Q:2 Income from Lottery, Crossword Puzzle, Races, Card Games etc. are taxable at:

  1. Normal Slab Rate of Income Tax like any other income
  2. Flat Rate of 20%
  3. Flat Rate of 30% plus Surcharge, if applicable,
  4. Flat Rate of 30% plus Surcharge of 10%

Answer: C

Q:3 Rakesh received ` 70,000 from his friend on the occasion of his birthday.

  1. Entire amount of 70,000 is taxable `
  2. 25,000 is taxable
  3. The entire amount is exempt
  4. None of the above

Answer: A

Q:4 Pension received by recipient of Gallantry Awards are exempt from Income Tax.

  1. True
  2. False

Answer: 1

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