The Ultimate Taxation MCQ

Reimbursement of travelling expenses is not considered as income because it is a reimbursement for the expenses incurred by an individual while traveling for work purposes. It is not an additional source of income, but rather a reimbursement of the expenses already paid by the individual. Therefore, it is not included in the term 'income'.

The given answer "All of the above" is correct because it includes all the categories mentioned in the question: Individual & HUF, AOP/BOI, LA, Every AJP, Firm, and Company. This means that all these types of entities are included in the person category.

The objective of taxation by the Government includes raising revenue for the state, maintaining economic stability, and removing disparities in the distribution of income. By collecting taxes, the government is able to generate funds that are necessary for various public services and infrastructure development. Taxation also plays a crucial role in maintaining economic stability by regulating the flow of money in the economy. Additionally, taxes can be used as a tool to address income inequalities and promote a more equitable distribution of wealth. Therefore, all of the given options are correct objectives of taxation by the Government.

The correct answer is "Legal" because income refers to the money or earnings that an individual or entity receives through legal means, such as employment, investments, or business activities that comply with the law. It does not include income obtained through illegal activities, such as theft, fraud, or smuggling. Therefore, the correct answer is "Legal" as it excludes illegal sources of income.

The proviso provides clarification to the main provision. It helps to explain or define certain terms or conditions within the main provision, ensuring that there is no ambiguity or confusion regarding its interpretation. By adding a proviso, any doubts or uncertainties regarding the main provision can be addressed and clarified, making it easier to understand and apply in practice.

The factor that is not a feature of indirect taxes is "Fair to the poor". Indirect taxes are not inherently fair to the poor as they tend to be regressive, meaning that they impose a greater burden on lower-income individuals compared to higher-income individuals. Indirect taxes, such as sales taxes or value-added taxes, are typically levied on goods and services, which means that everyone pays the same rate regardless of their income level. This can disproportionately affect those with lower incomes, making indirect taxes less fair to the poor.

The correct answer is "Individuals (only)". This means that the Body of Individuals consists only of individuals and does not include any other entities such as companies or any other kind of person.

The shifting of a tax refers to the transfer of the burden of the tax from one party to another. Factors such as change in prices, elasticity of demand and supply, and nature of demand can all influence the shifting of a tax. However, the income of the consumer does not play a role in the shifting of a tax. The burden of the tax is typically borne by either the producer or the consumer, depending on the elasticity of demand and supply and the nature of the market. The income of the consumer does not directly impact this process.

The correct answer is "In the short period, shifting of a tax is easy." This statement is incorrect because in the short period, it is generally more difficult to shift the burden of a tax to another party. In the short period, both demand and supply are relatively inelastic, meaning that changes in price will have a limited impact on the quantity demanded or supplied. Therefore, the burden of a tax is more likely to be borne by the party initially taxed, rather than being shifted to another party.

The term "impact of a tax" refers to the immediate money burden that is imposed on individuals or businesses when a tax is implemented. This refers to the initial financial impact that taxpayers experience when they are required to pay the tax. It does not refer to the final or long-term burden, nor does it refer to any indirect or real burden.