Income Tax 2 Marks Questions with Answers
2 Marks (IMP)
1. What is Profession?
“Profession” may be defined as a vacation, or a job requiring some thought, skill and special knowledge like that of C.A., Lawyer, Doctor, Engineer, Architect etc. So, profession refers to those activities where the livelihood is earned by the persons through their intellectual or manual skill.
2. Mention any four admissible expenses while calculating income from business.
• Audit fees
• Bad debts
• Allowed depreciation
• Printing and stationery
3. What is Long term capital gain?
Any profit or gain arising from the sale or transfer of long-term capital asset (Financial asset more than one year & other assets more than three years) is known as capital asset.
4. State the provisions US 80GGA.
Section 80GGA allows deductions for donations made towards scientific research or rural development. This deduction is allowed to all assesses. except those who have an income (or loss) from a business and/or a profession.
Mode of payment: Donations can be made in the form of a cheque or by a draft or in cash; however, cash donations in excess of Rs 10,000 are not allowed as deductions. 100% of the amount that is donated or contributed is considered eligible for deductions.
5. What is Tax Free Government securities?
Tax free government securities are those securities which are exempted from tax under section 10(15)
6. Mention any two-no limit 100% deductible donations U/S 80G.
- National Children Fund
- National Defence Fund
- ecrease: Reduce the problem to a smaller instance of the same problem.
- Conquer: Solve the smaller problem, either iteratively or recursively.
7. If Net Income from horse race is 210000, find the gross amount.
Gross winnings = Net winnings X 100/100 - Tax rate
210000X100/70= 3,00,000
8. Define Business.
Section 2(13) Income Tax: Business means As per Section 2(13) of the Income Tax Act, 1961, the term ‘business’ includes any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture.
9. Mention any four disallowed expenses, in calculation of profit from business.
- Interest on capital
- Speculation losses
- Deference in trial balance
- Fines and penalties
10. What is short term capital asset?
STCA means a capital asset held by an assesses for less than 36 months, (12 months in the case of specified assets), immediately preceding the date of its transfer.
11. What do you mean by less tax securities?
Less tax securities can be issued either by government of non-government institutions. They are taxable securities but no tax is deducted at source and interest on these will not be grossed. If the interest payable during the financial year exceeds 10,000 tax will be deducted at source.
12.Explain the provisions U/S 80U.
The Income Tax Act, 1961 provides deduction u/s. 80U in pursuance of which an individual (Indian citizen and foreign national) who is resident of India, and who suffers from not less than 40 per cent of any disability is eligible for deduction to the extent of Rs. 75,000/- and in case of severe disability to the extent of Rs. 125,000/-
13. Name any two 50% deductible donations U/S 80G.
- Jawaharlal Nehru Memorial Fund
- Indera Gandhi Memorial Trust
14. How do you set off the long term capital loss?
It is set off against long term capital gain only and any unabsorbed loss can be carry forward for 8 years and such carry forwarded loss can be set off against long term capital loss only.
15. What is Vocation?
Vocation means activities which are performed in order to earn livelihood. It comes out from practice and as gods gift. Example: Dancing and singing etc. for tax purpose profession includes vocation.
16. What is Casual Income?
Casual income is a non-recurring income that is not likely to occur again in a year. It is an income which is earned by chance. Such income is neither anticipated nor provided for in any agreement. Such incomes are received at uncertain times. Income received from winning lotteries, crosswords, puzzles, card games, horse race, gambling, betting or any other games is known as casual income.
17. State the Provisions of section 80 D.
Individual and HUF (Hindu Undivided Family) can claim deduction from taxable income under section 80D. A person can claim deduction for health insurance premium & expense incurred towards preventive health check-up for self, spouse, dependent children and parents
18. What is carry forward and set off of losses?
Set off of losses means adjusting the losses against the profit of a particular financial year. If the profits are insufficient to set off the losses, they can be carried forward to the next assessment year
19. What is meant by cost of improvement?
Cost of improvement means expenditure of capital nature in making any additions or alterations to the capital asset. Cost of improvement incurred by the assessee before 1.4.2001 shall be fully ignored.
20. State any four transactions incurred under the term transfer.
• Sale
• Exchange
• Relinquishment
• Extinguishment
• Compulsory acquisition
21. What is meant by cash system of accounting?
Cash system of accounting where income received or expenditure paid during the previous year is taxable whether it relates to the previous year of a year preceding or following the previous year.
22. How do you treat bad debt recovered but disallowed earlier?
bad debt recovered but disallowed earlier is fully exempted from tax hence should be deducted from net profit.
23. What is grossing up and why it should be done?
“Grossing up” is calculating the before-tax income amount from the after-tax amount. calculating the taxable value of the income it is necessary to gross it up and take the grossed-up value as taxable income. The net amount is divided by 70 and multiplied by 100 to gross up the casual income.
24. What are the listed and unlisted securities?
Listed Securities are shares, debentures or any other securities that is traded through an exchange such as BSE, NSE, etc. When a private company decides to go public and issue shares, it will need to choose an exchange on which to be listed.
Unlisted Securities are shares, debentures or any other securities that are not traded on an exchange but through the over-the-counter (OTC) market. Unlisted securities are also called OTC securities. Market makers facilitate the buying and selling of unlisted securities in the OTC market.