1. The term “Cess” in Panchayat finance refers to —
A) A special tax levied for a specific purpose
B) General administrative tax
C) A fine imposed by court
D) Annual donation from citizens
Answer: A
Explanation: Cess is a special-purpose tax earmarked for a defined public service like education, health, or sanitation.
2. The power to levy cess by Panchayats is derived from —
A) The Karnataka Panchayat Raj Act, 1993
B) The Constitution directly
C) The Finance Ministry
D) The Urban Development Act
Answer: A
Explanation: Section 206–210 of the Karnataka Panchayat Raj Act authorizes levy of local cesses.
3. The main difference between tax and cess is —
A) Cess is for a specific purpose, tax is for general revenue
B) Cess is voluntary
C) Cess is collected by NGOs
D) Tax is optional
Answer: A
Explanation: Cess revenue is earmarked for a defined activity (e.g., rural health cess).
4. A common example of a cess levied by Panchayats is —
A) Education cess
B) Urban property cess
C) Judicial cess
D) Defence cess
Answer: A
Explanation: Education cess supports schools and literacy programmes.
5. Cesses are imposed under the authority of —
A) State Government
B) Zilla Panchayat
C) Central Government
D) District Collector
Answer: A
Explanation: The State Government authorizes local bodies to levy cesses under specific notifications.
6. Which article of the Constitution empowers States to assign taxes and cesses to Panchayats?
A) Article 243H(c)
B) Article 280
C) Article 243I
D) Article 275
Answer: A
Explanation: Article 243H(c) enables States to assign a share of taxes and cesses to Panchayats.
7. Cesses collected for rural development projects are called —
A) Development cess
B) Trade cess
C) Road cess
D) Urban cess
Answer: A
Explanation: Development cess funds rural public works and basic infrastructure.
8. Cess collection is accounted under —
A) Panchayat Fund
B) MLA Fund
C) Central Treasury
D) Private Trust
Answer: A
Explanation: All receipts, including cesses, form part of the Panchayat Fund.
9. Land Revenue Cess is levied as a percentage of —
A) Basic land revenue payable
B) Urban property value
C) Water tax
D) Education tax
Answer: A
Explanation: Cess is added to the land revenue rate for rural development purposes.
10. The Karnataka Panchayat Raj Act allows levy of cess for —
A) Rural health, sanitation, water supply and education
B) Election campaign
C) Industrial promotion
D) Judicial expenses
Answer: A
Explanation: Cesses are imposed only for developmental or welfare objectives.
11. The cess amount collected by Panchayat is utilized for —
A) The specific purpose for which it is levied
B) General office maintenance
C) MLA constituency
D) Administrative salaries only
Answer: A
Explanation: Cess proceeds cannot be diverted for other uses.
12. Cess rates are notified by —
A) State Government through Gazette notification
B) Zilla Panchayat
C) Chief Minister directly
D) Taluk Magistrate
Answer: A
Explanation: The State Government sets the maximum and minimum rates.
13. Rural Employment Cess supports —
A) Job creation and skill training in villages
B) Political funding
C) Urban employment
D) Court staff
Answer: A
Explanation: It helps generate funds for MGNREGA-type activities.
14. Sanitation cess is collected for —
A) Maintenance of drains, waste management, and hygiene
B) Office building maintenance
C) Election materials
D) Judicial proceedings
Answer: A
Explanation: It’s a special tax dedicated to cleanliness and waste disposal.
15. If a Panchayat misuses cess funds —
A) State Government may suspend its taxation powers
B) Gram Sabha takes over directly
C) MLA collects funds
D) Nothing happens
Answer: A
Explanation: Misappropriation invites disciplinary and legal action.
16. Education cess funds are used for —
A) Maintenance of primary and middle schools
B) Urban housing
C) Police stations
D) Religious events
Answer: A
Explanation: Education cess enhances local school infrastructure and mid-day meal schemes.
17. The collection of cesses is supervised by —
A) Chief Executive Officer (Zilla Panchayat)
B) Election Commission
C) Lokayukta
D) Judiciary
Answer: A
Explanation: The CEO ensures lawful levy and utilization of local cesses.
18. The rate of cess cannot exceed —
A) The limit prescribed by the State Government
B) 10% of revenue arbitrarily
C) Local demand
D) Panchayat discretion
Answer: A
Explanation: The State sets ceilings to prevent over-taxation.
19. The Gram Sabha can review cess utilization to ensure —
A) Transparency and accountability in local expenditure
B) Increase in political campaign funds
C) Reduction in State grants
D) Judicial enforcement of laws
Answer: A
Explanation: Gram Sabha acts as a watchdog over Panchayat finances, including use of tax and cess revenues.
20. Cess on land revenue is usually collected by —
A) Revenue Department through Panchayats
B) Police Department
C) Judiciary
D) Urban Development Ministry
Answer: A
Explanation: Cess is often collected along with land revenue and credited to the Panchayat fund.
21. The Panchayat Fund includes proceeds from —
A) Taxes, fees, cesses, grants, and all other receipts
B) Political donations only
C) Judicial fines
D) Private property sales
Answer: A
Explanation: All financial inflows, including cess and grants, are merged into the Panchayat Fund under Section 205 of the Act.
22. The main difference between cess and surcharge is —
A) Cess is for a specific purpose; surcharge increases general tax revenue
B) Both are same
C) Cess is voluntary; surcharge is compulsory
D) Cess is for the rich; surcharge for poor
Answer: A
Explanation: Surcharge is an additional tax for general revenue, while cess is earmarked for a targeted purpose.
23. “Health cess” in rural areas can be utilized for —
A) Maintenance of primary health centres and sanitation
B) Police stations
C) Urban hospitals
D) Construction of stadiums
Answer: A
Explanation: Health cess supports local healthcare and disease prevention initiatives.
24. “Road cess” or “infrastructure cess” funds are meant for —
A) Building and maintaining rural roads
B) Paying Panchayat staff
C) Political advertisements
D) Agricultural marketing
Answer: A
Explanation: Such cesses strengthen connectivity and rural transport networks.
25. If cess collections exceed required expenditure, the surplus —
A) Must be credited to Panchayat Fund for the same purpose
B) Can be used for any other purpose
C) Must be refunded to taxpayers
D) Is transferred to private trust
Answer: A
Explanation: Surplus must remain earmarked for the same objective; diversion is not permitted.
26. The collection of cesses is supervised by —
A) Chief Executive Officer (CEO), Zilla Panchayat
B) Gram Sabha directly
C) Member of Parliament
D) Rural Police Department
Answer: A
Explanation: The CEO ensures that collection and utilization of all Panchayat taxes and cesses are done according to law.
27. Cess is generally collected along with —
A) Land revenue or other local taxes
B) Urban taxes
C) Railway surcharge
D) Court fees
Answer: A
Explanation: For administrative convenience, cess is collected together with land or property taxes.
28. The officer responsible for maintaining cess records at Gram Panchayat level is —
A) Panchayat Secretary
B) MLA
C) Block Education Officer
D) Sub-Registrar
Answer: A
Explanation: The Secretary maintains assessment and collection registers for all local revenues, including cesses.
29. The rate of cess to be levied by Panchayats is fixed by —
A) State Government
B) Adhyaksha
C) Gram Sabha
D) District Judge
Answer: A
Explanation: The State prescribes minimum and maximum rates through official notifications.
30. Cess collected for education must be used —
A) Only for educational purposes within the Panchayat area
B) For Panchayat office expenses
C) For MLA constituency development
D) For district-level administration
Answer: A
Explanation: Cess utilization must strictly follow the purpose for which it is levied.
31. If a Panchayat fails to collect cess properly, the State Government may —
A) Recover the amount through Taluk Panchayat or issue directions
B) Dissolve Gram Sabha
C) File criminal case immediately
D) Transfer funds from MLA grant
Answer: A
Explanation: The State ensures accountability and can act through higher Panchayat tiers.
32. The funds collected through cesses are credited to —
A) Panchayat Fund account
B) State Treasury directly
C) MLA Development Fund
D) Urban municipal account
Answer: A
Explanation: Cess proceeds form part of Panchayat’s own fund for specific purposes.
33. Distribution of cess revenue between various Panchayats is done by —
A) State Government
B) Zilla Panchayat Adhyaksha
C) Deputy Commissioner
D) Finance Commission of India
Answer: A
Explanation: The State decides distribution formulas based on local requirements.
34. The levy and collection of cess are authorized by —
A) Notification in the Official Gazette
B) Circular from MLA
C) Panchayat Resolution alone
D) Oral orders of Adhyaksha
Answer: A
Explanation: Legal authority for taxation and cess collection must be published in the Gazette.
35. Cess revenue is shared among Panchayats to —
A) Ensure balanced rural development
B) Support urban projects
C) Finance political parties
D) Replace State revenue
Answer: A
Explanation: The objective is equitable financial assistance for all rural local bodies.
36. When a cess is abolished by the State, Panchayats —
A) Lose the power to collect it immediately
B) Continue collecting till elections
C) Retain all collections indefinitely
D) Use it for personal allowances
Answer: A
Explanation: Only the State can authorize or abolish the collection of a cess.
37. The role of Taluk Panchayat in cess management is —
A) Supervisory and coordinating
B) Direct tax imposition
C) Judicial enforcement
D) Political direction
Answer: A
Explanation: Taluk Panchayats oversee the performance of Gram Panchayats in revenue collection.
38. The role of Zilla Panchayat in cess collection is —
A) Review and monitoring of utilization at district level
B) Collecting directly from citizens
C) Levying State taxes
D) Managing central grants
Answer: A
Explanation: Zilla Panchayat ensures that collected funds are properly spent for their intended purpose.
39. In Karnataka, cess for rural development is often added to —
A) Land revenue or irrigation water charges
B) Urban property tax
C) Income tax
D) Professional tax
Answer: A
Explanation: Cess piggybacks on existing land-based taxes for ease of collection.
40. The State Government grants a portion of cess proceeds to Panchayats under —
A) Devolution and assignment system
B) Urban share system
C) Judicial recovery scheme
D) Police fund
Answer: A
Explanation: Part of the cess collected is assigned to Panchayats for local use.
41. The amount of cess assigned to Panchayats is credited to —
A) Panchayat Fund of the concerned body
B) Personal bank account of Adhyaksha
C) Zilla Treasury
D) MLA fund
Answer: A
Explanation: The Panchayat Fund is the only lawful repository of such receipts.
42. A Panchayat must maintain separate accounts for —
A) Each type of cess and its utilization
B) Only taxes
C) Only grants
D) MLA contributions
Answer: A
Explanation: This ensures financial clarity and easy audit verification.
43. The audit of cess accounts is done by —
A) Local Fund Audit Department
B) State Police
C) High Court
D) Private consultants
Answer: A
Explanation: LFA Department audits all Panchayat accounts, including cesses.
44. In case of misuse of cess funds, disciplinary action is initiated by —
A) State Government / RDPR Department
B) Gram Sabha
C) Zilla Adhyaksha
D) MP
Answer: A
Explanation: Misuse of public funds invites government action under service rules.
45. The cess collected by one Gram Panchayat cannot be used by another because —
A) Each cess is earmarked for its own jurisdiction
B) Funds are centrally pooled
C) Gram Sabha shares it
D) MLA decides
Answer: A
Explanation: Cess proceeds belong to the area from which they are collected.
46. The State Government may release cess proceeds to Panchayats —
A) Monthly or quarterly, as per rules
B) Randomly
C) Every five years
D) Only before elections
Answer: A
Explanation: Periodic remittance ensures continuity in developmental spending.
47. Rural road cess is mainly spent by —
A) Zilla Panchayat Engineering Division
B) Urban local bodies
C) District Magistrate
D) Private contractors only
Answer: A
Explanation: Engineering wings under Zilla Panchayats implement rural infrastructure works.
48. Education cess is primarily managed by —
A) Department of Education and Gram Panchayats
B) Home Department
C) Urban Development
D) Judiciary
Answer: A
Explanation: These departments jointly utilize funds for school maintenance and literacy drives.
49. The collection of health cess supports —
A) Local health centres, sanitation and disease control
B) Industrial pollution
C) Urban sewerage
D) Highways
Answer: A
Explanation: It funds preventive and curative rural health programmes.
50. The main purpose of distributing cesses to Panchayats is —
A) To strengthen fiscal decentralization and local governance
B) To centralize administration
C) To replace State revenue
D) To fund political parties
Answer: A
Explanation: Sharing cess proceeds enhances Panchayat autonomy and ensures local accountability.
51. Financial assistance given by the State Government to Panchayats is known as —
A) Grants-in-aid
B) Local cess
C) Voluntary contribution
D) Judicial fund
Answer: A
Explanation: The State provides financial support to local bodies in the form of grants-in-aid under Article 243H(b).
52. The purpose of grants-in-aid is to —
A) Supplement Panchayat funds and strengthen local administration
B) Replace State taxation
C) Provide MLA salaries
D) Finance private institutions
Answer: A
Explanation: Grants help Panchayats undertake welfare and development programmes effectively.
53. Financial assistance by Government is classified into —
A) General and Specific (Tied) grants
B) Personal and Political grants
C) Judicial and Administrative grants
D) Voluntary and Private grants
Answer: A
Explanation: General grants are for overall functions, while specific grants are earmarked for a particular scheme.
54. Article 243I of the Constitution mandates the constitution of —
A) State Finance Commission (SFC)
B) Central Finance Commission
C) Planning Board
D) Zilla Audit Committee
Answer: A
Explanation: Every State must set up a Finance Commission every five years to recommend devolution of funds to Panchayats.
55. The first State Finance Commission in Karnataka was set up in —
A) 1994
B) 1991
C) 1997
D) 2000
Answer: A
Explanation: Karnataka constituted its first SFC in 1994 following the 73rd Amendment.
56. The main function of the State Finance Commission is to —
A) Recommend financial devolution between State and Panchayats
B) Conduct elections
C) Prepare development plans
D) Collect taxes directly
Answer: A
Explanation: The SFC ensures financial sharing and fiscal balance between the State and local bodies.
57. Reports of the State Finance Commission are submitted to —
A) Governor of the State
B) Chief Minister
C) Lokayukta
D) Prime Minister
Answer: A
Explanation: The Governor lays the report before the State Legislature with an explanatory memorandum.
58. Matching grants are given to Panchayats —
A) In proportion to local tax collection
B) Based on population
C) Equally among all Panchayats
D) Through central schemes
Answer: A
Explanation: Efficient Panchayats that collect more taxes receive higher matching grants.
59. Grants for centrally sponsored schemes like MGNREGA are called —
A) Scheme-specific grants
B) General grants
C) Private donations
D) Judicial assistance
Answer: A
Explanation: Such grants are released for the implementation of specific rural development programmes.
60. The objective of providing grants is to —
A) Empower Panchayats to discharge devolved functions
B) Centralize financial control
C) Replace taxation
D) Finance urban industries
Answer: A
Explanation: Grants make Panchayats financially capable of implementing schemes effectively.
61. The SFC must review financial position of —
A) Panchayats and Municipalities
B) State Government
C) Central Government
D) Judiciary
Answer: A
Explanation: The Commission studies the fiscal health of local bodies to recommend revenue sharing.
62. SFC is constituted every —
A) Five years
B) Three years
C) Ten years
D) As decided by Government
Answer: A
Explanation: Constitution mandates a quinquennial (five-year) review cycle.
63. The Karnataka Panchayat Raj Act empowers the State Government to —
A) Provide financial assistance to Panchayats through grants or assignments
B) Control judiciary
C) Appoint private collectors
D) Issue political directives
Answer: A
Explanation: Section 208 of the Act deals with grant of financial assistance to Panchayats.
64. Specific grants are also known as —
A) Tied grants
B) Unconditional grants
C) Political funds
D) Urban grants
Answer: A
Explanation: Tied grants can be used only for pre-defined projects such as sanitation or education.
65. General grants are —
A) Untied funds that Panchayats can use for any lawful purpose
B) Funds for elections
C) MLA development funds
D) Private donations
Answer: A
Explanation: Untied grants provide flexibility to Panchayats in meeting diverse needs.
66. Panchayat must utilize grants —
A) Only for the purpose specified in sanction orders
B) For any purpose
C) For festival expenses
D) For political campaigns
Answer: A
Explanation: Diversion of funds leads to disciplinary and criminal proceedings.
67. State Government’s grants to Panchayats are budgeted under —
A) Rural Development and Panchayat Raj Department
B) Police Department
C) Health Department only
D) Judiciary
Answer: A
Explanation: The RDPR Department allocates funds to Panchayats through its annual budget.
68. Utilization Certificates (UCs) are submitted to —
A) RDPR Department or Zilla Panchayat CEO
B) MLA
C) Lokayukta
D) Central Bureau of Investigation
Answer: A
Explanation: UCs prove that grants have been spent as per approved norms.
69. SFC recommendations are implemented by —
A) State Government after legislative approval
B) Governor alone
C) Central Government
D) Election Commission
Answer: A
Explanation: The Legislature approves recommendations and ensures follow-up action.
70. Financial assistance for Panchayats under centrally sponsored schemes is released through —
A) State Government agencies
B) Local NGOs
C) Private sector
D) District courts
Answer: A
Explanation: Central grants flow to Panchayats via State-level implementing departments.
71. Article 243Y of the Constitution relates to —
A) Finance Commission for Urban Local Bodies
B) Judiciary
C) Rural Education
D) Police Powers
Answer: A
Explanation: 243Y parallels 243I but applies to Municipalities.
72. The funds released to Panchayats are kept in —
A) Panchayat Fund under the control of Adhyaksha and Secretary
B) Private account of CEO
C) State Treasury only
D) MLA account
Answer: A
Explanation: Panchayat Fund ensures proper record and utilization of all receipts.
73. Performance-based grants are given to —
A) Panchayats with efficient financial management and service delivery
B) Newly elected Panchayats
C) Panchayats with low collection rate
D) All Panchayats equally
Answer: A
Explanation: Such incentives encourage accountability and fiscal discipline.
74. Grants under Article 275 of the Constitution are known as —
A) Central Assistance to States for specific purposes
B) State Development Loans
C) Political allocations
D) Rural fines
Answer: A
Explanation: Article 275 empowers the Union to give specific-purpose grants to States.
75. Proper utilization of government grants ensures —
A) Better rural infrastructure and improved governance
B) Political dependency
C) Central control over Panchayats
D) Reduction in accountability
Answer: A
Explanation: Responsible use of funds enhances development and citizen confidence.
76. Financial devolution to Panchayats is based on the recommendations of —
A) State Finance Commission
B) Central Planning Board
C) Rural Audit Council
D) Lokayukta
Answer: A
Explanation: Article 243I mandates the constitution of a State Finance Commission to recommend devolution of taxes and grants.
77. The Fifth State Finance Commission of Karnataka was constituted in —
A) 2018
B) 2014
C) 2020
D) 2012
Answer: A
Explanation: The Fifth SFC was set up in 2018 to review and recommend resource sharing for 2020–25.
78. The SFC recommendations include —
A) Sharing of State taxes and duties with Panchayats
B) Election procedures
C) Reservation policy
D) Police deployment
Answer: A
Explanation: SFC determines the formula for revenue distribution between the State and local bodies.
79. The term “devolution” in fiscal context refers to —
A) Transfer of financial powers and resources to local governments
B) Withdrawal of funds from Panchayats
C) Judicial transfer
D) Police empowerment
Answer: A
Explanation: Devolution means giving Panchayats control over funds, functions, and functionaries.
80. The purpose of Finance Commissions (Central and State) is —
A) To strengthen fiscal federalism and local governance
B) To centralize funds
C) To manage elections
D) To increase bureaucracy
Answer: A
Explanation: Finance Commissions promote equitable and efficient allocation of financial resources.
81. The 14th Central Finance Commission emphasized —
A) Higher grants to Gram Panchayats directly from the Centre
B) Reduction in Panchayat funds
C) Removal of local bodies
D) Centralized urban control
Answer: A
Explanation: The 14th CFC increased direct transfers to rural local bodies for basic services.
82. Cess collection helps Panchayats achieve —
A) Fiscal autonomy and local resource mobilization
B) Political control
C) Judicial power
D) Reduced accountability
Answer: A
Explanation: Locally raised revenues improve self-reliance and reduce grant dependency.
83. The main advantage of assigning cesses to Panchayats is —
A) Ensuring stable, predictable revenue flow
B) Increasing central control
C) Decreasing local responsibility
D) Replacing local bodies
Answer: A
Explanation: Assignment gives Panchayats assured funds for service delivery.
84. Financial accountability of Panchayats is ensured through —
A) Audit by Local Fund Audit Department
B) MLA inspection
C) Public campaign
D) Judiciary
Answer: A
Explanation: Annual audits of receipts, including taxes and grants, ensure transparency.
85. Grants provided for rural sanitation programmes are examples of —
A) Tied or specific-purpose grants
B) General grants
C) Political contributions
D) Judicial aid
Answer: A
Explanation: Tied grants must be spent only for specific projects like sanitation or education.
86. General (untied) grants enable Panchayats to —
A) Spend flexibly on local priorities
B) Ignore accountability
C) Create personal allowances
D) Conduct elections
Answer: A
Explanation: Untied funds support freedom in meeting locally identified needs.
87. Article 280 of the Constitution pertains to —
A) Central Finance Commission
B) State Finance Commission
C) Panchayat Planning Committee
D) Judicial Commission
Answer: A
Explanation: Article 280 establishes the Central Finance Commission for distribution of central revenues.
88. The role of the 15th Central Finance Commission (CFC) included —
A) Recommending grants to rural and urban local bodies
B) Conducting elections
C) Judicial reform
D) Setting police budgets
Answer: A
Explanation: The 15th CFC proposed performance-based grants for local bodies (2021–26).
89. Financial assistance from State to Panchayats is given under —
A) Section 208 of the Karnataka Panchayat Raj Act
B) Section 100 of IPC
C) Article 356
D) Labour Act
Answer: A
Explanation: Section 208 empowers the Government to provide grants-in-aid or assistance.
90. Panchayats are required to submit a Utilization Certificate (UC) after —
A) Spending government grants
B) Conducting elections
C) Passing resolutions
D) Organizing Gram Sabha
Answer: A
Explanation: UCs confirm proper and lawful use of government funds.
91. Failure to submit utilization certificates may lead to —
A) Withholding of future grants
B) Dismissal of Adhyaksha
C) Award of new grants
D) Waiver of accounts
Answer: A
Explanation: Future funds are suspended until previous grants are properly accounted for.
92. Grants released for specific schemes but not utilized must be —
A) Refunded to the Government or revalidated
B) Spent elsewhere
C) Deposited privately
D) Used for salaries
Answer: A
Explanation: Unspent balances cannot be diverted; they must be revalidated or refunded.
93. The role of Gram Sabha in financial matters includes —
A) Reviewing accounts and approving annual budget
B) Preparing audit reports
C) Collecting taxes
D) Distributing grants
Answer: A
Explanation: Gram Sabha ensures democratic supervision over Panchayat finances.
94. The Chief Executive Officer (CEO) of Zilla Panchayat monitors —
A) Utilization of State and Central grants by lower Panchayats
B) Judicial appointments
C) Police deployment
D) MLA expenditure
Answer: A
Explanation: CEO oversees coordination, utilization, and reporting of financial aid.
95. The objective of assigning State taxes or cesses to Panchayats is —
A) To enhance decentralized planning and execution
B) To reduce local autonomy
C) To centralize functions
D) To privatize public services
Answer: A
Explanation: Revenue sharing strengthens local governance and participatory planning.
96. Panchayats must prepare annual budgets and submit them —
A) To higher Panchayats and Gram Sabha for approval
B) To Parliament
C) To Police Headquarters
D) To Election Commission
Answer: A
Explanation: Financial accountability flows through administrative and democratic levels.
97. A major problem in Panchayat finance is —
A) Low revenue generation capacity
B) Over-taxation
C) Excessive funds
D) No audit
Answer: A
Explanation: Limited tax base and weak collection reduce Panchayat self-sufficiency.
98. The best solution to improve Panchayat financial strength is —
A) Strengthening local tax collection and efficient use of grants
B) Political loans
C) Increasing bureaucracy
D) Abolishing State Finance Commissions
Answer: A
Explanation: Self-reliant and accountable revenue systems ensure sustainable governance.
99. The ultimate purpose of financial assistance and cess collection is —
A) Balanced rural development and empowerment of local self-government
B) Urbanization
C) Privatization of services
D) Political patronage
Answer: A
Explanation: Local financial autonomy leads to true decentralization and rural progress.
100. The guiding principle of Panchayat finance and cess utilization is —
A) Transparency, Accountability, and Efficiency
B) Political control
C) Central dominance
D) Judicial secrecy
Answer: A
Explanation: Good financial governance ensures public trust and effective service delivery.