GK Quiz on Income Tax Return

Quiz on Income Tax Return: Various changes in the income tax rules will be effective from April 1, 2022. These are income tax on crypto assets, the filing of updated returns, new tax rules on EPF interest, and tax relief on COVID-19 treatment. Here, you will come to know about these changes for the next financial year, about income tax returns, tax audits, etc., in the form of questions and answers. Take the quiz below!

1. On which of the following dates will crypto assets be taxed?

A. 31 March 2022
B. 1 April 2022
C. 5 April 2022
D. None of the above

Ans. B

Explanation: Crypto assets will be taxed from the next financial year from 1 April 2022.

2. Consider the following statements.

1. Union Finance Minister Nirmala Sitharaman in her Budget 2022 speech announced a 20 percent tax on income from virtual digital assets such as cryptocurrencies and non-fungible tokens (NFTs).

2. 1 percent TDS and gift tax under certain conditions to be paid by the receiver of such digital asset as a gift.

Which of the following statement(s) is/are correct?

A. Only 1
B. Only 2
C. Both A and B
D. Neither A nor B

Ans. B

Explanation: Union Finance Minister Nirmala Sitharaman in her Budget 2022 speech announced a 30 percent tax on income from virtual digital assets such as cryptocurrencies and non-fungible tokens (NFTs). Also, there will be a 1 percent TDS and gift tax under certain conditions to be paid by the receiver of such digital asset as a gift.

3. What is the threshold limit for TDS for a year for specified persons, including individuals or HUFs, who are required to get their accounts audited under the I-T Act?

A. ₹20,000
B. ₹30,000
C. ₹50,000
D. ₹60,000

Ans. C

Explanation: The Budget of 2022-23 has brought in clarity about the levy of income tax on crypto assets. The Threshold limit would be ₹50,000 a year for specified persons, which includes individuals/HUFs who are required to get their accounts audited under the I-T Act.

4. Which of the following are the objectives of a Tax audit?

1. Reporting observations or discrepancies noted by the tax auditor after a methodical examination of the books of account.
2. To ensure proper maintenance and correctness of books of accounts and certification of same by a tax auditor.
3. To report prescribed information like tax depreciation, etc.

Choose the correct answer

A. 1 and 2
B. 2 and 3
C. 1 and 3
D. 1, 2 and 3

Ans. D

Explanation: The objective of a tax audit is to report observations or discrepancies that are noted by the tax auditor after a methodical examination of the books of account. Also, to ensure proper maintenance and correctness of books of accounts and certification of same by a tax auditor. And to inform prescribed information like a tax depreciation, etc.

5. Which of the following statement(s) is/are correct about a tax audit?

1. Tax audit is the same as a statutory audit.

2. It makes the process of income computation for filing of return of income easier.

Choose the correct answer
A. Only 1
B. Only 2
C. Both A and B
D. Neither A nor B

Ans. B

Explanation: Statutory audit is an audit carried out under the Companies Act and on the other hand tax audit is conducted under the Income Tax Act. Tax audit makes the process of income computation for filing of return of income easier.

6. When will the Central Board of Direct Taxes (CBDT) implement the Income-tax (25th Amendment) Rule 2021?

A. 31 March
B.  1 April
C. 7 April
D. None of the above

Ans C

Explanation: The Central Board of Direct Taxes (CBDT) will implement Income-tax (25th Amendment) Rule 2021 from 1 April which means that interest accrued in the PF account on contributions over Rs 2.5 lakh a year will be taxable.

7. Consider the following statements.

1. The government will stop the benefit of extra tax exemption under section 80EEA to first-time homebuyers from FY23.

2. Homebuyers could claim a maximum deduction of Rs 3.5 lakh using Section 24(b) and Section 80EEa of the Income Tax Act. 

Which of the following statement(s) is/are correct?
A. Only 1
B. Only 2
C. Both 1 and 2
D. Neither 1 nor 2

Ans. C

Explanation: There will be no extra tax incentive for affordable homebuyers. The government will stop the benefit of extra tax exemption under section 80EEA to first-time homebuyers from FY23. 
In the budget of the financial year 2018-19, it was announced by the government that an additional Rs. 1.50 lakh income tax relief over and above the Rs 2 lakh Section 24(b) on home .loans to first home buyers who own house of up to Rs 45 lakh. It was later extended in the budgets of FY20 and FY21. Therefore, such homebuyers could claim a maximum deduction of Rs 3.5 lakh using Section 24(b) and Section 80EEa of the Income Tax Act.

8. Name the section under which the tax audit is compulsory?

A. Section 40AB
B. Section 42AB
C. Section 44AB
D. None of the above

Ans. C

Explanation: A Tax Audit is an audit of the accounts of the taxpayer by a chartered accountant for the requirements of Section 44 AB. In this, the auditor has to express his views and observations by way of the audit report. 

9. Under which section is an employer's contribution towards NPS Tier-I eligible for a tax deduction?

A. Section 70CCD (2) 
B. Section 72CCD 
C. Section 80CCD (2) 
D. None of the above

Ans. C

Explanation: Employer’s contribution towards NPS Tier-I is eligible for tax deduction under Section 80CCD (2) of the Income Tax Act (14% of salary for central government employees and 10% for others).

10. Consider the following statements regarding the filing of an updated IT Return.

1. As per the new provision, taxpayers can now file an updated return within three years from the end of the relevant assessment year.
2. This cannot be done to report additional loss or fall in the tax liability.

Choose the correct answer

A. Only 1
B. Only 2
C. Both 1 and 2
D. Neither 1 nor 2

Ans. B

Explanation: As per the new provisions, income taxpayers are allowed to file an updated return within two years from the end of the relevant assessment year. This however cannot be done to report additional loss or fall in the tax liability.

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