MCQs on Basic Concepts of Income Tax, Salary Income and House Property

1. The basis of charge under the head income from house property under income tax act, 1961.
A) Rent Received
B)Fair Market Value of the Property
C) Annual Value
D) None of the above
Ans: C) Annual Value

2. Annual value is defined u/s

 A) 23(1)
 B) 22(1)
 C) 21(1)
 D) None of the above
Ans A) 23(1)

3. Mr. A owns a house property. He lent it to Mr.B at 20,000 p.m. Mr.B sublet it to Mr. C on
monthly rent of ` 30,000 p.m. Rental income of A is taxable under the head ....
 A) Income from Other Sources
 B) Income from House Property
 C) Income from Salary
 D) None of this
Ans: B) Income from House Property

4. What % is allowed as deduction from the annual value.

 A) 20%
 B) 25%
 C) 30%
 D) None of Above

Ans: C) 30%

5. Which purposes are deductible from annual value for Interest on loan taken?
 A) Construction
 B) Purchase
 C) Repair
 D) All of the Above

Ans: D) All of the Above

6. Annual value of self-occupied house is....
 A) Nil
 B) Equal to Municipal Value
 C) Equal to Fair rent
 D) None of the above

Ans: A) Nil

7. Which of the following conditions must be satisfied to charge the rental income under the
head Income of House Property:
 A) The asssessee should be one of the property
 B) The property should consist of any buildings or lands
 C) The property should not be used by the owner for the purpose of business or professional
purpose
 D) All of the above

Ans: D) All of the above

8. Mr. A owns a house property. He lent it to Mr. B at ` 10,000 p.m. Mr. B sublet it to Mr. C on
monthly rent of ` 20,000 p.m. Rental income of Mr. B is taxable under the head
 A) Income from Other Sources
 B) Income from House Property
 C) Income from Salary
 D) None of the Above
Ans: A) Income from Other Sources

9. In income from House Property, A sum equal to 30% is allowed as deduction from the annual
value as
 A) Basic Deduction
 B) Standard Deduction
 C) Deduction
 D) All of the above
Ans: B) Standard Deduction

10. Interest for pre-acquisition period is deductible in ……………….equal instalments

 A) 7
 B) 6
 C) 5
 D) 4

Ans: C) 5
11.  which is the charging section under income from house property section  ?
 A) sec 20
 B) sec 21
 C) sec 22
 D) None of the above

Ans: C) Sec 22

12. income from sub-letting of house property is Taxable as under........head in income tax
 A) income from house property
 B) income from other sources
 C) income from capital gain
 D) None of the above

Ans: B)

13. Pre-construction interest means

A. interest paid after the completion of the house
B. interest paid prior to the completion of the house
C. Same Period
D. None of the above

Ans: B

14. Standard deduction is allowed 30% of the ....

A.  Net profit
B. gross profit
C. Net Annual Value
D. None of the above

Ans: C

15. maximum deduction allowable on purchase , acquisition or construction of the house before
01.04.1999

A. 30000
B. 40000
C. 50000
D. None of the above

Ans: A

16. Income tax is a………………….

A) Professional tax
B) Direct tax
C) Indirect tax
D) Service tax

Ans: B)

17. Income tax rates are fixed in……………..

A) Income tax Act
B) Finance Act
C) Income tax rules
D) Finance rules

Ans: B)

18. Rebate of Income tax is defined as per section ……………..

A) 81A
B) 87A
C) 81C
D) 87C

Ans: B) 87A

19. Assessment year is the period of 12 months commencing from …………Every year.
A) 1st March
B) 31st March
C) 1st April
D) 30 th April

Ans: C) 1st April

20. Health & Educational Cess is charged at the rate of ……..

A) 2%
B) 1%
C) 3%
D) 4%

Ans: D)

21. Income from Salary is explained in the section ……………………

A) 12 to 14
B) 15 to 17
C) 18 to 22
D) 24 to 26

Ans: B)
22. Bonus paid by the employer to the employee is …………
A) Fully Taxable
B) Partly Taxable
C) Fully Exempted
D) None of these

Ans: A)

23. If the assessee is living in own house HRA is …………..

A) Fully Taxable
B) Partly Taxable
C) Fully Exempted
D) None of these
Ans: A)

24. Previous year means the financial year immediately preceding the…………………...
A) Accounting Year
B) Assessment Year
C) All of the above
D) None of the above

Ans: B)

25. Annual value of self-occupied house is ……………………..

A) Equal to Municipal Value
B) Equal to Fair rent
C) Nil
D) None of the above
Ans: C)

26. Rent from vacant plot of land is assessible under the head …………………
A) Income from HP
B) Income from Other Source
C) Income from Capital Gain
D) None of the above

Ans: B)

27. What is expected rent?

A) Municipal value or Fair value whichever is lower
B) Municipal value or Fair value whichever is higher
C) Municipal value or Fair value whichever is higher subject to standard rent
D) None of these

Ans: C)
28. The Gross annual value of the property is depends upon the ……………….
A) Standard rent
B) Municipal Valuation
C) Fair rent
D) All of the above

Ans: D)

29. Mr. Shushant is the owner of a house, the details of which are given below the gross annual
value would be ……………... Municipal value Rs. 36,000, Actual rent Rs. 32,000, Fair Rent Rs
36,000 Standard Rent Rs.40,000
A) 36,000
B) 35,000
C) 30,000
D) 40,000

Ans: A)

30. Interest on capital, borrowed on 10.10.2020, for self-occupied property is deductible up to a

maximum amount of ………………...

A) 50,000
B) 1,50,000
C) 2,00,000
D) None of the above
Ans: C)

31. Interest on loan for self-occupied house taken before 1st April, 1999 will be allowed up to
……………………...
A) 30,000
B) 1,50,000
C) 10,000
D) 50,000

Ans: A)
32. The assesses can claim relief under which section for arrears or advance salary.
 A) Section89(2)
 B) Section 89(1)
 C) Section89(4)
 D) None of the Above
Ans: B)

33. Any benefits attached to an office or position in addition to salary or wages is ......
  A) Allowances
 B) Perquisites
 C) Benefits
 D) None of the Above
Ans: B)

34. Rebate u/s 87A is allowed to an Individual who is resident in India and whose total income
does not exceed ________.
(a) Rs. 2,50,000
(b) Rs. 3,00,000
(c) Rs. 5,00,000
(d) None of the above

Ans: c)

(35) The time limit for acquisition or construction of self-occupied house property for claiming
deduction of interest is:
(a) 3 years
(b) 5 years
(c) 8 years
(d) 10 years

Ans: 5 years

(36) Income tax is a:

(a) Indirect Tax
(b) Entertainment Tax
(c) Direct Tax
(d) None of the Above
Ans: c)

(37)Deduction u/s 24(a) is

(a) 30% of net annual value of the house property
(b) 30% of gross annual value of house property
(c) 30% of actual rent received
(d) None of the Above
Ans: a)

(38) When the total income of an individual exceeds Rs.5 crore, the surcharge is payable @
(a) 5%
(b) 7%
(c) 37%
(d) 12%
Ans: c)

39) The return of income is to be furnished in                

(a) ITNS 281                                       (b) Form 26AS
(c) Form 26Q                                      (d) ITR 1 – to 7 (as the case may be)
Correct answer : (d)

40) ……. is the acknowledgement of filing the return of income.

(a) ITR – 4                                           (b) ITR – V
(c) Form 26AS                                    (d) Form 26QB
Correct answer : (b)

41) Permanent Account Number (PAN) is a _____ digit unique alphanumeric number
issued by the Income Tax Department.

(a) Twenty                                                                                          (b) Fifteen

(c) Ten                                                                                                  (d) Five

Correct answer: (c)

42) What is the amount of Standard Deduction from salary

A) 40,000
B) 50,000
C) 100,000
D) No deduction
Ans: B

43) It is mandatory for employee to report PAN of the landlord to the employer if rent paid
per annum is more than Rs.
A) 50,000
B) 75,000
C) 100,000
D) None of the above
Ans: C
44) Children education allowance received by an employee from his employer is ₹ 80 per
month per child for 3 children. Taxable education allowance will be
(A) ₹ 960
(B) ₹ 480
(C) Nil
(D) ₹ 1,200
Hint:
Children’s education allowance is the amount received per month per child or ₹
100 whichever is less than too only for two children. Thus, out of three children
for one child it is taxable 80 × 12 = 960.
Answer:
(A) ₹ 960

45) During the previous year 2020-21, Barun received a watch worth ₹ 20,000 from his
employer. The taxable value of the watch will be
(A) ₹ 20,000
(B) ₹ 15,000
(C) Nil
(D) None of the above
Hint:
A gift in excess of ₹ 5,000 is fully taxable.
Answer:
(B) ₹ 15,000

46). Govt, of India paid a salary of ₹ 5 lakh and allowances and perquisites valued at ₹
2.20 lakh to a person who is a citizen of India for the services rendered by him
outside India for 5 months during the previous year. His total income chargeable
to tax would be:
(A) ₹ 6,80,000
(B) ₹ 4,50,000
(C) ₹ 5,70,000
(D) Nil
Hint:
As per Section 10(17), in the case Indian citizen who is a Government employee
and working outside India all allowance and perquisites are exempt. Hence, as per
the data given in the problem, only basic salary is taxable.
₹ 5,00,000 – ₹ 50,000 (standard deduction u/s 16(ia)) = 4,50,000
Answer:
(B) ₹ 4,50,000

47) Ms. Janhvi is provided with an interest loan by her employer for the purchase of a
house. The value of the perquisite shall be:
(A) Simple interest computed at the rate charged by the Central Government to its
 employees on 1st April of the previous year
(B) Simple interest computed at the rate charged by State Bank of India on 1st
April of the previous year
(C) Simple interest computed at the rate charged by National Housing Bank on 1st
April of the previous year
(D) Simple interest computed at the rate determined by the employer on 1 st April
of the previous year
Answer:
(B) Simple interest computed at the rate charged by State Bank of India on
1st April of the previous year

48) Allowances and perquisites allowed to an employee for services rendered outside
India are tax-free in case of –
(A) All types of employees
(B) Government employees only
(C) Non-government employees only
(D) None of the above
Answer:
(B) Government employees only

49) The maximum amount eligible for exemption in respect of encashment of earned
leave on retirement is:
(A) ₹ 3,00,000
(B) ₹ 10,00,000
(C) ₹ 50,000
(D) ₹ 5,00,000
Answer:
(A) ₹ 3,00,000

50) When interest on employee’s own contribution from the unrecognized provident fund
is received, it is:
(A) taxable as income from other sources
(B) taxable as income from salary
(C) exempt from tax
(D) taxable if the interest exceeds ₹ 10,000
Answer:
(A) taxable as income from other sources

51) Employer’s contribution to Recognized Provident Fund (RPF) in excess of 12% of

salary income of an employee shall be treated as:
(A) Taxable income from salaries
(B) Deemed income from salaries
(C) Exempted income
 (D) Income of other sources
Answer:
(A) Taxable income from salaries

52) Interest free loan will not be regarded as perquisite given by employer to employee if
loan given is upto Rupees
(A) 10,000
(B) 5,000
(C) 20,000
(D) 15,000

Answer is (C):- Rs.20,000

53) On retirement, receipt of accumulated balance of Recognized Provident Fund will be

exempt only if employee has rendered continuous service of _____ years
A) 3
B) 5
C) 8
D) 10

Answer is B)- 5 years

54) Pension is ……………under the salary head.

A. fully taxable
B. partially taxable
C. not taxable
D. none of the above
Answer:- A. fully taxable

55) The children education allowance, the amount exempted from taxableincome is limited to

A. ` 100 per month per child upto 3 children

B. ` 1,000 per year per child upto 2 children
C. ` 100 per year per child upto 2 children
D. none of the above

ANSWER: C. ` 100 per year per child upto 2 children

56) Income accrued outside India and received outside India is taxable in case of.

A. resident and ordinary resident (ror) only

B. resident but not ordinary resident (rnor) only
C. non-resident only
D. ror, rnor and non-resident

ANSWER:- A. resident and ordinary resident (ror) only

57) The house rent allowance (HRA) under the salary head of Income Tax Act is given by

A. section 10
B. sec 10(13a)
C. section 11(13b)
D. section 11
Answer:- B. Sec 10(13a)

58) ……………….of Income Tax Act defines the perquisites and their valuation.

A. section 18
B. section17
C. section 18(c)
D. section 17(c)
Answer: D. section 17(c)

59) Arrears of salary are taxable in the year of ……………….

a) payment
b) Receipt
c) Accrual
d) None of the above
Answer:- Receipt

60) Telephone provided at the residence of an employee by employer is …………..

perquisite.
a) Non-taxable
b) Taxable
c) Partly Exempt
d) None of the above
Answer:- Non- Taxable

 61) ………… relationship is necessary for taxing the remuneration under the head income
from salary.
a) employer-employee
b) employee-employee
c) None of the above
Answer:- a) employer-employee

62) Compensation on termination of employment will be taxable under the head …………..
a) Income from other sources
b) Income from salary
c) Not taxable as it is capital receipt
d) Fully Exempt
Answer:- b) Income from salary

63) Deductions in respect of salary are covered u/s ………….

a) 17
b) 16
c) 15
d) None of the above
Answer:- b) 16

64) Income Tax is imposed by .

(a) State Government
(b) Central Government
(c) Both of the above
(d) Constitution of India
Answer: (b) Central Government

65) Highest Administrative Authority for Income Tax in India is .

(a) Finance Minister
(b) CBDT
(c) President of India
(d) Director of Income Tax
Answer (b) CBDT

66) Finance Bill becomes the Finance Act when it is passed by .

(a) Lok Sabha
(b) Both Lok Sabha & Rajya Sabha
(c) Both House of Parliament & signed by President.
(d) Both House of Parliament & signed by Prime Minister.

Answer:- (c)

67) As per Section 2(7),“Assesses” means a person

(a) By whom any tax or other sum of money is payable
(b) Against whom proceeding has been taken under the act
(c) A person deemed to be assessee in default
(d) All of the above

Answer: (d)

68) ‘Income’ includes the following types .

(a) Legal
(b) Illegal
(c) Both
(d) None

Answer (c) both

69) Year in which income is taxable is known as ___ & year in which income is earned is known as
____ .
(a) Previous Year, Assessment Year
(b) Assessment Year, Previous Year
(c) Assessment Year, Assessment Year
(d) Previous Year, Previous Year

Answer:- (b)

70) In which of the following cases, income of PY is assessable in the previous year itself.
(a) A persons leaving India
(b) Salaried Employee
(c)Illegal business
(d) Charitable institution

Answer:- (a)

71) Paid by Government of India to a Citizen of India for rendering services outside India is Exempt u/s
10(7).
(a) Salary
(b) Allowance& perquisites
(c) Both (a) & (b)
(d) None of the above.

Answer (b)

72) Incomes which are not included in total income of the assessee are called .
(a) Exempt Incomes
(c) Taxable Incomes
(b) Incomes deductible under chapter VI-A.
(d) None of the above

Answer (a) Exempt Incomes

73) Section __ of the Income tax Act, 1961 defines the term ‘Person’
a) 4
b) 2(31)
c) 5
d) 2(32)

Answer:- b) Section 2(31)

74) Section ___ of the Income Tax Act, 1961 defines the term ‘Previous year’
a) 2(41)
b) 3
c) 4
d) 5
Answer:- b) Section 3

75) Income is divided in ___ heads of income

a) 4
b) 5
c) 6
d) 3
Answer:- b) 5 heads of income

76) section ____ classifies income under five heads

a) 3
b) 14
c) 2(31)
d) 5
Answer:- Section 14

77) Additional surcharge ( health & education cess) of 4% is payable on

a) Income tax
b) Income Tax plus Surcharge
c) Surcharge
d) None of the above

Answer:- b) Income tax plus Surcharge

78) Which of the following is not a Head of Income

a) Salaries
b) Income from House Property
c) Capital Gains
d) Income from exports

Answer;- d) Income from exports