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Direct Tax Laws and International Taxation MCQs for CA Final
Chapter-wise Direct Tax Laws and International Taxation MCQs with answers and explanations. Try the sample questions below, then practise a set of 10 with instant right/wrong.
Practise 10 DT MCQsSample Direct Tax Laws and International Taxation MCQs with answers
Q1 · Capital Gains
Mr. Ravi earned a long-term capital gain of ₹12 crore on the sale of a residential house in P.Y. 2024-25. He bought a new residential house in India for ₹15 crore within the specified time. What is the exemption available u/s 54?
- (a) ₹12 crore
- (b) ₹15 crore
- (c) ₹2 crore
- (d) ₹10 crore
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Answer: (d) ₹10 crore
(d) is correct: since A.Y. 2024-25, the cost of the new asset taken into account for section 54 is capped at ₹10 crore, so the exemption is ₹10 crore. Option (a) ignores this cap.
Q2 · Income of Other Persons included in Assessee's Total Income
Mrs. Meena's minor son (not suffering from any disability) earned ₹40,000 from a singing performance and ₹20,000 as interest on a fixed deposit gifted by her. Mrs. Meena's income is higher than her husband's. How much is included in Mrs. Meena's income?
- (a) ₹18,500
- (b) ₹60,000
- (c) ₹58,500
- (d) ₹20,000
Show answer ↓
Answer: (a) ₹18,500
(a) is correct: income from the minor's own skill is not clubbed u/s 64(1A), and the interest of ₹20,000 less the ₹1,500 exemption u/s 10(32) gives ₹18,500. Option (d) misses the section 10(32) exemption.
Q3 · Aggregation of Income, Set Off or Carry Forward of Losses
Mr. Sen, who pays tax under the optional (old) regime, has a loss of ₹3.5 lakh under 'Income from house property' and salary income of ₹10 lakh. How much of the loss can be set off against salary in the same year?
- (a) ₹3.5 lakh
- (b) ₹2 lakh, with ₹1.5 lakh carried forward
- (c) Nil, as house property loss can only be carried forward
- (d) ₹1.5 lakh
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Answer: (b) ₹2 lakh, with ₹1.5 lakh carried forward
(b) is correct: section 71(3A) limits the inter-head set off of house property loss to ₹2 lakh, and the balance is carried forward for 8 years u/s 71B. Option (a) ignores this limit.
Q4 · Transfer Pricing
Under section 92A(2), A Ltd. (India) and B Inc. (USA) are deemed associated enterprises if B Inc. holds, directly or indirectly, shares carrying voting power in A Ltd. of at least:
- (a) 26%
- (b) 51%
- (c) 20%
- (d) 10%
Show answer ↓
Answer: (a) 26%
(a) is correct: section 92A(2)(a) treats a direct or indirect holding of 26% or more of the voting power as creating an associated enterprise relationship. 51% indicates control, but it is not the threshold, so (b) is wrong.
Q5 · Non Resident Taxation
F Inc., a non-resident, operates in India only to purchase goods for export. Is any income deemed to accrue in India under section 9(1)(i)?
- (a) Yes, as it has a business connection in India
- (b) Yes, to the extent of 10% of the export value
- (c) No, as there is no business connection at all
- (d) No, as no income is deemed to accrue from operations confined to purchase of goods in India for export
Show answer ↓
Answer: (d) No, as no income is deemed to accrue from operations confined to purchase of goods in India for export
(d) is correct: Explanation 1(b) to section 9(1)(i) specifically excludes operations confined to purchase of goods for export. The exclusion applies even though a business connection may exist, so (c) is wrong.
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