1. Tax is a:
A) Voluntary payment to government
B) Compulsory payment without direct benefit
C) Fee for services rendered
D) Donation to government
Answer: B
Explanation: Tax is a compulsory payment imposed by govt with no direct quid pro quo.
2. The main purpose of taxation is:
A) Social welfare
B) Raising revenue for govt
C) Reducing inequality
D) All of the above
Answer: D
Explanation: Taxes serve fiscal, social and redistributive functions.
3. Direct tax is imposed on:
A) Income and wealth of individuals/firms
B) Goods and services
C) Imports only
D) Exports only
Answer: A
Explanation: Direct taxes → income tax, corporate tax, wealth tax.
4. Indirect tax is imposed on:
A) Salaries
B) Profits
C) Goods and services
D) Property
Answer: C
Explanation: Indirect tax (GST, excise, customs) → levied on goods/services.
5. A progressive tax system means:
A) Tax rate increases as income increases
B) Same tax rate for all
C) Tax rate decreases with higher income
D) Indirect taxes only
Answer: A
Explanation: Progressive tax → higher income, higher rate.
6. A regressive tax system means:
A) Tax rate rises with income
B) Tax rate falls with higher income
C) Equal tax rate for all
D) Indirect tax on services
Answer: B
Explanation: In regressive tax, burden is heavier on poor.
7. Proportional tax means:
A) Same percentage of income taxed for all levels
B) Higher rate for higher income
C) Lower rate for higher income
D) Zero tax rate
Answer: A
Explanation: In proportional tax → fixed rate for all (e.g., 10% flat tax).
8. Which tax is considered more equitable?
A) Direct tax
B) Indirect tax
C) Regressive tax
D) Proportional tax
Answer: A
Explanation: Direct taxes depend on ability to pay → more equitable.
9. Which tax is easier to collect?
A) Direct tax
B) Indirect tax
C) Wealth tax
D) Capital gains tax
Answer: B
Explanation: Indirect taxes (GST) are collected at point of sale.
10. Which tax has higher chances of evasion?
A) Direct tax
B) Indirect tax
C) GST
D) Excise duty
Answer: A
Explanation: Income taxes are more prone to evasion than GST.
11. The main drawback of indirect tax is:
A) Regressive nature
B) Encourages black money
C) Difficult to administer
D) Not linked to consumption
Answer: A
Explanation: Indirect taxes fall equally on rich & poor → regressive.
12. Corporate tax is a:
A) Direct tax
B) Indirect tax
C) Regressive tax
D) Wealth tax
Answer: A
Explanation: Corporate tax = direct tax on company profits.
13. GST in India is a:
A) Direct tax
B) Indirect tax
C) Progressive tax
D) Wealth tax
Answer: B
Explanation: GST is an indirect tax on goods and services.
14. The principle of taxation given by Adam Smith is:
A) Ability to pay principle
B) Benefit principle
C) Equal sacrifice principle
D) All of the above
Answer: A
Explanation: Adam Smith’s canons of taxation stress ability to pay.
15. Benefit principle of taxation means:
A) Rich should pay more
B) Tax paid in proportion to benefit received from govt services
C) Same tax for all
D) Tax only on poor
Answer: B
Explanation: People should pay according to benefits enjoyed.
16. Which tax reduces inequality most effectively?
A) Indirect taxes
B) Progressive direct taxes
C) Proportional taxes
D) Customs duty
Answer: B
Explanation: Progressive direct taxes reduce income disparity.
17. Customs duty is a type of:
A) Direct tax
B) Indirect tax
C) Progressive tax
D) Local tax
Answer: B
Explanation: Customs duty = indirect tax on imports/exports.
18. Excise duty is imposed on:
A) Imports
B) Exports
C) Domestic production of goods
D) Services only
Answer: C
Explanation: Excise duty = indirect tax on manufacture of goods.
19. Service tax (before GST) was a type of:
A) Direct tax
B) Indirect tax
C) Wealth tax
D) Capital tax
Answer: B
Explanation: Service tax was an indirect tax, merged into GST.
20. The burden of direct tax falls on:
A) Producer and shifted to consumer
B) Person on whom it is imposed
C) Middleman
D) Government
Answer: B
Explanation: Direct tax cannot be shifted → borne by payer.
21. The burden of indirect tax falls on:
A) Person who earns income
B) Producer only
C) Consumer (final buyer)
D) Tax department
Answer: C
Explanation: Indirect tax is passed to final consumer.
22. VAT (Value Added Tax) was replaced in India by:
A) Service tax
B) GST
C) Corporate tax
D) Income tax
Answer: B
Explanation: VAT subsumed into Goods and Services Tax (GST).
23. Double taxation means:
A) Same income taxed twice by same govt
B) Same income taxed twice by different govts
C) Both A and B
D) None
Answer: C
Explanation: Double taxation can occur within country or internationally.
24. Which body in India recommends sharing of tax revenue between Centre and States?
A) NITI Aayog
B) RBI
C) Finance Commission
D) Planning Commission
Answer: C
Explanation: Finance Commission recommends Centre–State revenue sharing.
25. Tax buoyancy means:
A) Govt revenue increases faster than GDP
B) Govt revenue decreases with GDP
C) Govt revenue is stable irrespective of GDP
D) Govt revenue is negative
Answer: A
Explanation: Tax buoyancy shows elasticity of tax revenue w.r.t GDP growth.
26. Which of the following is a direct tax in India?
A) Excise duty
B) GST
C) Income tax
D) Customs duty
Answer: C
Explanation: Income tax is imposed directly on individuals, cannot be shifted.
27. Which of the following is an indirect tax in India?
A) Corporate tax
B) Income tax
C) GST
D) Wealth tax
Answer: C
Explanation: GST is levied on goods/services → passed to consumer.
28. Corporate tax is levied on:
A) Income of individuals
B) Profits of companies
C) Importers and exporters
D) Agriculture income
Answer: B
Explanation: Corporate tax is a direct tax on company profits.
29. Securities Transaction Tax (STT) in India is:
A) Direct tax
B) Indirect tax
C) Wealth tax
D) Import duty
Answer: A
Explanation: STT is a direct tax on financial transactions.
30. Which tax was abolished in India in 2015?
A) Wealth tax
B) Income tax
C) Excise duty
D) Corporate tax
Answer: A
Explanation: Wealth tax abolished in 2015–16.
31. Minimum Alternate Tax (MAT) is applicable to:
A) Salaried individuals
B) Farmers
C) Companies showing zero profit
D) Importers
Answer: C
Explanation: MAT ensures companies with book profits pay minimum tax.
32. Which of the following taxes is levied on capital gains?
A) Income tax
B) Excise duty
C) Customs duty
D) Wealth tax
Answer: A
Explanation: Capital gains are taxed under Income Tax Act.
33. Customs duty in India is levied on:
A) Production
B) Income
C) Imports and exports
D) Services
Answer: C
Explanation: Customs duty = indirect tax on imports/exports.
34. Excise duty is levied on:
A) Imports
B) Exports
C) Domestic production of goods
D) Agricultural income
Answer: C
Explanation: Excise duty = tax on manufacture within country (mostly merged into GST).
35. Which of the following taxes is NOT subsumed under GST?
A) Excise duty on petroleum
B) VAT
C) Service tax
D) Octroi
Answer: A
Explanation: GST excludes alcohol, petroleum excise duties.
36. The GST Council in India is chaired by:
A) Prime Minister
B) Finance Minister
C) RBI Governor
D) President
Answer: B
Explanation: The Union Finance Minister chairs GST Council.
37. GST was introduced in India in:
A) 2015
B) 2017
C) 2019
D) 2020
Answer: B
Explanation: GST launched on 1 July 2017.
38. Which Constitutional Amendment introduced GST?
A) 98th Amendment
B) 99th Amendment
C) 100th Amendment
D) 101st Amendment
Answer: D
Explanation: GST introduced via 101st Amendment, 2016.
39. GST is levied as a:
A) Single-stage tax
B) Multi-stage value-added tax
C) Only on imports
D) Only on exports
Answer: B
Explanation: GST = multi-stage, destination-based tax on value addition.
40. GST in India follows which model?
A) Dual model (Centre + States)
B) Central model only
C) State model only
D) Cooperative model without Centre
Answer: A
Explanation: India follows dual GST model (CGST + SGST/UTGST + IGST).
41. IGST in India is levied on:
A) Intra-state supply
B) Inter-state supply and imports
C) Exports only
D) Agricultural products only
Answer: B
Explanation: IGST = inter-state transactions & imports.
42. Which of the following is a demerit of indirect taxes?
A) Regressive nature
B) Inflationary effect
C) Burden on poor
D) All of the above
Answer: D
Explanation: Indirect taxes can hurt poor & fuel inflation.
43. Which tax is levied on inheritance?
A) Gift tax
B) Estate duty (abolished in India)
C) Capital gains tax
D) Wealth tax
Answer: B
Explanation: Estate duty existed earlier but was abolished in 1985.
44. Professional tax is levied by:
A) Central government
B) State governments
C) Local bodies only
D) Finance Commission
Answer: B
Explanation: States levy professional tax on employment, trade, professions.
45. Which tax is called “Goods and Services Tax 2.0” due to digital economy?
A) Corporate tax
B) Equalisation levy (digital tax)
C) Capital gains tax
D) Income tax
Answer: B
Explanation: Equalisation levy = tax on digital transactions (e.g., online ads).
46. Which of the following is NOT a feature of a good tax system?
A) Equity
B) Simplicity
C) Arbitrary collection
D) Elasticity
Answer: C
Explanation: Tax system should be fair, simple, and elastic, not arbitrary.
47. The principle of equity in taxation means:
A) Tax should be uniform for all
B) Tax burden should be according to ability to pay
C) Poor and rich pay same rate
D) Govt collects maximum revenue
Answer: B
Explanation: Equity = based on ability to pay.
48. Which tax principle states that those who benefit more should pay more?
A) Benefit principle
B) Equity principle
C) Efficiency principle
D) Sacrifice principle
Answer: A
Explanation: Benefit principle = pay in proportion to benefit received.
49. Which type of tax system is best for reducing inequality?
A) Proportional
B) Regressive
C) Progressive
D) Indirect
Answer: C
Explanation: Progressive taxation helps reduce income inequality.
50. Laffer Curve in taxation shows relationship between:
A) GDP and tax evasion
B) Tax rate and tax revenue
C) Direct tax and indirect tax
D) Government spending and tax
Answer: B
Explanation: Laffer Curve shows optimum tax rate that maximizes revenue.
51. GDP stands for:
A) Gross Domestic Price
B) Gross Domestic Product
C) General Development Plan
D) Government Development Policy
Answer: B
Explanation: GDP = Gross Domestic Product, the value of all final goods & services produced within a country.
52. GDP measures:
A) Only income of government
B) Market value of all final goods and services within domestic territory
C) Money supply
D) Only exports
Answer: B
Explanation: GDP = final goods & services produced domestically in a year.
53. GDP at market price includes:
A) Factor cost only
B) Indirect taxes – subsidies
C) Net factor income from abroad
D) Exports only
Answer: B
Explanation: GDP at MP = GDP at FC + Indirect taxes – Subsidies.
54. GDP at factor cost =
A) GDP at MP + Indirect taxes – Subsidies
B) GDP at MP – Indirect taxes + Subsidies
C) GNP at MP – Depreciation
D) NNP at FC – Depreciation
Answer: B
Explanation: GDP (FC) = GDP (MP) – Indirect taxes + Subsidies.
55. GNP (Gross National Product) =
A) GDP + Depreciation
B) GDP + Net factor income from abroad (NFIA)
C) GDP – Indirect taxes
D) NNP – Depreciation
Answer: B
Explanation: GNP = GDP + NFIA.
56. NNP (Net National Product) =
A) GNP – Depreciation
B) GDP – Subsidies
C) NDP + NFIA
D) GNP + Depreciation
Answer: A
Explanation: NNP = GNP – Depreciation.
57. NDP (Net Domestic Product) =
A) GDP + Depreciation
B) GDP – Depreciation
C) GNP – Subsidies
D) NNP – NFIA
Answer: B
Explanation: NDP = GDP – Depreciation.
58. National Income at factor cost is also called:
A) GDP
B) NNP at factor cost
C) GNP at market price
D) Disposable income
Answer: B
Explanation: NNP at FC = National Income.
59. Personal income =
A) NNP at FC – Corporate tax – Retained earnings + Transfer payments
B) GDP – Depreciation
C) NNP + Subsidies – Indirect taxes
D) Disposable income – Taxes
Answer: A
Explanation: Personal Income = NI – undistributed profits – corporate tax + transfer payments.
60. Disposable income =
A) Personal income – Direct taxes
B) National income – Indirect taxes
C) GDP – Net exports
D) Private income – Corporate tax
Answer: A
Explanation: Disposable income = PI – personal taxes.
61. Which method of GDP calculates using output of goods/services?
A) Income method
B) Expenditure method
C) Production method (Value Added Method)
D) Nominal method
Answer: C
Explanation: Value added/production method = total output of goods/services.
62. Which method of GDP calculates using wages, rent, interest, profit?
A) Expenditure method
B) Income method
C) Value-added method
D) Capital method
Answer: B
Explanation: Income method adds factor incomes.
63. Expenditure method of GDP includes:
A) C + I + G + (X – M)
B) Wages + Rent + Interest + Profit
C) Consumption – Depreciation
D) Govt expenditure only
Answer: A
Explanation: GDP (Expenditure) = Consumption + Investment + Govt spending + Net exports.
64. Real GDP is:
A) GDP at current prices
B) GDP at constant prices (adjusted for inflation)
C) GNP – Depreciation
D) GDP at factor cost
Answer: B
Explanation: Real GDP = GDP at base year prices.
65. Nominal GDP is:
A) GDP at constant prices
B) GDP at current market prices
C) GDP at factor cost
D) GDP at PPP
Answer: B
Explanation: Nominal GDP = GDP at current year prices.
66. GDP deflator =
A) (Real GDP ÷ Nominal GDP) × 100
B) (Nominal GDP ÷ Real GDP) × 100
C) Real GDP – Nominal GDP
D) GNP – Depreciation
Answer: B
Explanation: GDP deflator = (Nominal ÷ Real GDP) × 100.
67. Per capita income =
A) GDP ÷ National income
B) NI ÷ Population
C) GNP ÷ Population
D) Disposable income ÷ Population
Answer: B
Explanation: PCI = National Income / Population.
68. Which GDP concept is best for comparing living standards across countries?
A) Nominal GDP
B) GDP at PPP
C) GDP at current prices
D) GDP at market price
Answer: B
Explanation: Purchasing Power Parity (PPP) adjusts for price levels.
69. If GDP grows but per capita income falls, it implies:
A) Population is growing faster than GDP
B) Exports are increasing
C) Government expenditure is falling
D) Inflation is zero
Answer: A
Explanation: PCI falls when population > GDP growth.
70. Green GDP adjusts GDP for:
A) Inflation
B) Environmental costs
C) Population growth
D) Trade deficit
Answer: B
Explanation: Green GDP = GDP – environmental degradation costs.
71. Human Development Index (HDI) uses:
A) GDP only
B) GDP + Literacy + Life expectancy
C) GDP at PPP only
D) Population growth rate only
Answer: B
Explanation: HDI = income (PPP), literacy, life expectancy.
72. GDP excludes:
A) Market value of goods
B) Services of housewives
C) Services of doctors
D) Construction activity
Answer: B
Explanation: Non-market activities (household work) excluded from GDP.
73. GDP at constant prices is also called:
A) Real GDP
B) Nominal GDP
C) NNP at MP
D) Disposable income
Answer: A
Explanation: GDP at constant prices = Real GDP.
74. Which of the following will increase GDP?
A) Govt expenditure on building roads
B) Household cooking at home
C) Transfer payments
D) Gifts received
Answer: A
Explanation: Only marketed production adds to GDP.
75. India calculates GDP mainly using:
A) Production method
B) Income method
C) Expenditure method
D) Combination of methods
Answer: D
Explanation: India uses a combination of production, income, and expenditure methods.
76. In India, who publishes GDP estimates?
A) RBI
B) Ministry of Finance
C) NSO (National Statistical Office)
D) NITI Aayog
Answer: C
Explanation: GDP estimates are compiled by NSO under MoSPI.
77. Which base year is currently used for GDP calculation in India (as of 2023)?
A) 2004–05
B) 2011–12
C) 2015–16
D) 2017–18
Answer: B
Explanation: GDP series is calculated at 2011–12 prices.
78. India’s GDP growth rate in 2022–23 was approximately:
A) 5%
B) 6.5%
C) 7%
D) 8.5%
Answer: C
Explanation: India recorded ~7% growth in FY 2022–23.
79. Which sector contributes the largest share of India’s GDP?
A) Agriculture
B) Industry
C) Services
D) Mining
Answer: C
Explanation: Services sector contributes over 50% of GDP.
80. Which sector employs the largest share of population in India?
A) Services
B) Industry
C) Agriculture
D) IT
Answer: C
Explanation: Agriculture employs the majority though its GDP share is smaller.
81. Which tax reform introduced the concept of “One Nation, One Tax”?
A) VAT
B) GST
C) Service tax
D) Income tax
Answer: B
Explanation: GST unified indirect taxes under One Nation, One Tax.
82. GST is described as a:
A) Direct tax
B) Destination-based consumption tax
C) Origin-based tax
D) Proportional direct tax
Answer: B
Explanation: GST is levied where goods/services are consumed (destination-based).
83. Which Indian body decides GST rates?
A) RBI
B) GST Council
C) Finance Commission
D) Ministry of Finance alone
Answer: B
Explanation: GST Council chaired by Union Finance Minister decides rates.
84. Which of the following is NOT included in GST in India?
A) Petroleum products
B) Automobiles
C) Electronics
D) Textiles
Answer: A
Explanation: Petroleum, alcohol, electricity are currently outside GST.
85. Income from agriculture in India is taxed by:
A) Union Government
B) State Governments
C) Both Union & States
D) Not taxed at all
Answer: B
Explanation: Agriculture income is state subject for taxation.
86. The “Tax-to-GDP ratio” measures:
A) Govt revenue from exports
B) Share of tax revenue in GDP
C) Per capita income growth
D) Fiscal deficit as % of GDP
Answer: B
Explanation: Tax-to-GDP ratio = tax revenue ÷ GDP × 100.
87. India’s tax-to-GDP ratio (combined Centre & States) is around:
A) 5%
B) 10–12%
C) 15–18%
D) 25%
Answer: C
Explanation: India’s ratio is ~17% (lower than advanced economies).
88. Which is the single largest source of tax revenue for the Indian government?
A) Personal income tax
B) Corporate tax
C) GST
D) Customs duty
Answer: C
Explanation: GST is the largest contributor to tax revenues.
89. Which tax is most effective in reducing inequality?
A) GST
B) Corporate tax
C) Progressive income tax
D) Customs duty
Answer: C
Explanation: Progressive income tax targets higher earners.
90. In India, “Fiscal federalism” in taxation is managed by:
A) RBI
B) Finance Commission
C) GST Council
D) Both B and C
Answer: D
Explanation: Finance Commission + GST Council handle centre–state revenue sharing.
91. The term “Fiscal drag” refers to:
A) Fall in exports due to taxation
B) Increase in tax burden due to inflation without change in tax rate
C) Reduction in subsidies
D) Delayed fiscal deficit correction
Answer: B
Explanation: Inflation pushes people into higher tax slabs → fiscal drag.
92. Which country first introduced GDP as a measure of national output?
A) UK
B) USA
C) Germany
D) France
Answer: B
Explanation: USA economist Simon Kuznets pioneered GDP in 1934.
93. The concept of “Gross Value Added (GVA)” is related to:
A) Banking
B) GDP measurement
C) Taxation
D) Exports
Answer: B
Explanation: GVA measures contribution of each sector to GDP.
94. In India, GVA is measured at:
A) Basic prices
B) Market prices
C) Factor cost
D) Constant prices only
Answer: A
Explanation: India reports GVA at basic prices.
95. Which is broader, GDP or GNP?
A) GDP
B) GNP
C) Both equal
D) None
Answer: B
Explanation: GNP = GDP + NFIA → broader than GDP.
96. If GDP = ₹200 lakh crore and population = 140 crore, per capita income =
A) ₹20,000
B) ₹1,42,857
C) ₹1,50,000
D) ₹2,00,000
Answer: B
Explanation: PCI = 200 lakh crore ÷ 140 crore = ₹1.43 lakh approx.
97. Which of the following is excluded from GDP?
A) Sale of new car
B) Purchase of shares in stock market
C) Govt spending on defence
D) Exports of IT services
Answer: B
Explanation: Financial transactions like share trading do not add to GDP.
98. If Nominal GDP grows by 10% and inflation is 6%, Real GDP growth is:
A) 4%
B) 6%
C) 10%
D) 16%
Answer: A
Explanation: Real GDP = Nominal GDP growth – Inflation = 10 – 6 = 4%.
99. Which institution releases India’s Economic Survey annually?
A) RBI
B) Ministry of Finance
C) NITI Aayog
D) NSO
Answer: B
Explanation: Finance Ministry presents Economic Survey before Budget.
100. India became the world’s ____ largest economy in nominal GDP terms (2023).
A) 2nd
B) 3rd
C) 5th
D) 7th
Answer: C
Explanation: India is the 5th largest economy (Nominal GDP), after US, China, Japan, Germany.