Direct Taxation Quiz Questions And Answers

Agricultural income is not taxable. In many countries, including India, agricultural income is exempt from income tax. This is done to support and encourage the agricultural sector, which plays a vital role in the economy. The rationale behind this exemption is to ensure that farmers have the necessary resources to invest in their agricultural activities and promote agricultural growth. Therefore, agricultural income is not subject to taxation, making the correct answer "Not taxable".

The salary acquired from the partner of the firm is referred to as business income because it is directly related to the profits and operations of the business partnership. As a partner, the individual receives a share of the profits generated by the partnership, which is considered part of their business income. This income is separate from other sources of income such as annual salary or taxable income, as it specifically relates to the partner's involvement in the business.

The correct answer is an employee-assessee of a University who worked during 1.4.09 to 30.03.2010. This is because the assessment year for an individual is the year following the previous year in which their income is assessed for taxation purposes. In this case, the individual worked from 1.4.09 to 30.03.2010, so the assessment year for their income tax would be the following year.

The share of profits from PFAF that is called "exempted income" refers to the portion of profits earned by a partner that is exempt from taxation. This means that the partner does not have to pay taxes on this specific income. It is important to note that exempted income is different from taxable income, which is subject to taxation. Capital income and capital gain are not applicable in this context as they do not specifically refer to the share of profits from PFAF.

The given answer states that entertainment allowance is fully taxable to private employees. This means that private employees are required to pay taxes on the entertainment allowance they receive as part of their compensation. This is in contrast to foreign employees and government employees, who may have different tax regulations or exemptions for their entertainment allowance. Therefore, private employees are the only group mentioned for whom the entertainment allowance is fully taxable.

Travel concession to employee is considered exempt income because it is a benefit provided by the employer to the employee for the purpose of travel. This benefit is not considered as part of the employee's salary or wages and is therefore exempt from income tax.

A firm can have residential status because in some cases, a firm may have a physical location or office space where its employees work and live. This can be especially true for firms that provide accommodation or housing services. Additionally, a firm may also be considered a legal entity and can have a registered address, which can be used to determine its residential status for legal and tax purposes. Therefore, a firm can have residential status just like an individual, a company, or the government.

The correct answer is "Actual cost less depreciation @ 20% for every completed year under WDV method." This means that when an employer transfers a second-hand motor car to an employee, the value of the perquisite is determined by subtracting the depreciation (calculated at a rate of 20% for each completed year) from the actual cost of the car. The WDV method refers to the Written Down Value method, which calculates depreciation based on the diminishing value of the asset over time.

The compensation received for compulsory evacuation of a place of business is considered a capital receipt because it involves a one-time payment that is not part of the regular income or revenue of the business. It is a non-recurring source of funds that is received due to a specific event or circumstance, in this case, the compulsory evacuation of the business location. This type of receipt is typically treated as a capital gain rather than ordinary income for accounting and tax purposes.

If an assessee earns rent from a sub-tenant in respect to tenanted property let out as a residence, the said rent is taxable as income from other sources, unless the assessee is in the business of subletting properties on a regular basis. This means that if the assessee is not regularly engaged in subletting properties, the rent earned from the sub-tenant will be considered as income from other sources and will be subject to taxation. However, if the assessee is in the business of subletting properties on a regular basis, then the rent will be taxed under the head income from house property.