Here are 50+ important multiple-choice questions (MCQs) related to the heads of income

and various aspects of taxation. These cover concepts like income from salaries, house
property, business or profession, capital gains, and the computation of tax.

MCQs on Heads of Income and Tax Computation

1. Which of the following is included under the head “Income from Salaries”?

a) Income from letting out property

b) Income from business

c) Bonus received from employer

d) Dividend income

Answer: c) Bonus received from employer

2. The standard deduction for a salaried employee under Income from Salaries is:

a) ₹10,000

b) ₹50,000

c) ₹1,50,000

d) ₹2,00,000

Answer: b) ₹50,000
3. Which of the following is allowed as a deduction under the head “Income from House
Property”?

a) 20% standard deduction

b) 30% standard deduction

c) Interest on personal loan

d) Car maintenance

Answer: b) 30% standard deduction

4. Income from house property is taxable if the property is:

a) Let out

b) Self-occupied

c) Vacant

d) Both a and b

Answer: d) Both a and b

5. What is the maximum deduction available for interest on a housing loan for a self-
occupied house?

a) ₹1,00,000

b) ₹2,00,000
c) ₹2,50,000

d) ₹3,00,000

Answer: b) ₹2,00,000

6. Profits earned by a lawyer from practicing law will be taxed under which head of income?

a) Income from Salaries

b) Income from House Property

c) Profits and Gains of Business or Profession

d) Capital Gains

Answer: c) Profits and Gains of Business or Profession

7. Which of the following is NOT included under Profits and Gains of Business or
Profession?

a) Fees received by a doctor

b) Income from rent

c) Commission earned by a broker

d) Income from sale of goods

Answer: b) Income from rent

8. Which of the following is considered a long-term capital asset?

a) Shares held for more than 12 months

b) Property held for less than 36 months

c) Jewelry held for 10 months

d) House property held for 24 months

Answer: a) Shares held for more than 12 months

9. Short-term capital gains on the sale of equity shares are taxed at:

a) 5%

b) 10%

c) 15%

d) 20%

Answer: c) 15%

10. What is the time period for carrying forward business losses?

a) 5 years

b) 8 years

c) 10 years
d) 15 years

Answer: b) 8 years

11. Interest income from fixed deposits is taxed under which head?

a) Income from House Property

b) Income from Other Sources

c) Income from Salaries

d) Capital Gains

Answer: b) Income from Other Sources

12. Income from lottery winnings is taxed at a flat rate of:

a) 10%

b) 15%

c) 20%

d) 30%

Answer: d) 30%
13. Aggregation of income means:

a) Combining all heads of income to compute gross total income

b) Applying tax rates on each income separately

c) Deducting expenses from income

d) None of the above

Answer: a) Combining all heads of income to compute gross total income

14. What is the maximum deduction allowed under Section 80C?

a) ₹50,000

b) ₹1,00,000

c) ₹1,50,000

d) ₹2,00,000

Answer: c) ₹1,50,000

15. Under which section can deductions be claimed for donations made to charitable
institutions?

a) Section 80C

b) Section 80G

c) Section 80D

d) Section 80E
Answer: b) Section 80G

16. Income from winning horse races is classified under:

a) Income from Salaries

b) Income from Other Sources

c) Capital Gains

d) Income from House Property

Answer: b) Income from Other Sources

17. For capital gains, indexation benefits are available for:

a) Short-term capital gains

b) Long-term capital gains

c) Both short-term and long-term capital gains

d) Neither

Answer: b) Long-term capital gains

18. The deduction under Section 80D for health insurance premium paid for family is:
a) ₹25,000

b) ₹50,000

c) ₹75,000

d) ₹1,00,000

Answer: a) ₹25,000

19. The due date for filing an income tax return for individuals (without audit) is usually:

a) March 31

b) December 31

c) July 31

d) September 30

Answer: c) July 31

20. Income tax rates in India follow which structure?

a) Proportional tax rate

b) Regressive tax rate

c) Progressive tax rate

d) Flat tax rate

Answer: c) Progressive tax rate

21. The net income after applying deductions is called:

a) Total income

b) Gross income

c) Taxable income

d) None of the above

Answer: c) Taxable income

22. Which section provides for the deduction of interest paid on a home loan?

a) Section 80C

b) Section 80D

c) Section 24(b)

d) Section 80G

Answer: c) Section 24(b)

23. What is the limit for tax-free gratuity under the Income Tax Act?

a) ₹10 lakhs

b) ₹15 lakhs
c) ₹20 lakhs

d) ₹25 lakhs

Answer: c) ₹20 lakhs

24. A set-off of losses can be done:

a) Only against income from the same head

b) Against any head of income

c) Only for capital gains

d) None of the above

Answer: b) Against any head of income

25. What is the last date for filing a belated return for a financial year?

a) December 31 of the next year

b) July 31 of the next year

c) March 31 of the next year

d) September 30 of the next year

Answer: c) March 31 of the next year

26. Income earned from the sale of agricultural land in rural areas is:

a) Fully taxable

b) Exempt from tax

c) Partially taxable

d) None of the above

Answer: b) Exempt from tax

27. What is the maximum period for carrying forward losses under the head Capital Gains?

a) 5 years

b) 8 years

c) 10 years

d) Indefinite

Answer: b) 8 years

28. Which of the following incomes is NOT eligible for set-off of losses?

a) Salary income

b) Business income

c) Capital gains

d) Income from lotteries

Answer: d) Income from lotteries

29. Deduction under Section 80TTA is available for which type of income?

a) Interest on fixed deposits

b) Interest on savings account

c) Interest on recurring deposits

d) None of the above

Answer: b) Interest on savings account

30. The surcharge on income tax is applicable if the income exceeds:

a) ₹20 lakh

b) ₹50 lakh

c) ₹1 crore

d) ₹10 crore

Answer: b) ₹50 lakh

31. Deduction under Section 80E is allowed for:

a) Repayment of principal on a home loan

b) Interest on education loan

c) Medical insurance premium

d) Life insurance premium

Answer: b) Interest on education loan

32. Which of the following is an example of an exempt income?

a) Dividend from a foreign company

b) Agricultural income

c) Salary

d) Rental income

Answer: b) Agricultural income

33. Capital gains arising from the sale of personal jewelry is taxable under the head:

a) Income from Salaries

b) Income from Other Sources

c) Capital Gains

d) Income from Business or Profession

Answer: c) Capital Gains

34. The losses from speculation business can be carried forward for a period of:

a) 4 years

b) 8 years

c) 5 years

d) 10 years

Answer: b) 8 years

35. Under which section of the Income Tax Act is the deduction for medical insurance
premium available?

A) Section 80C

b) Section 80D

c) Section 80E

d) Section 80G

Answer: b) Section 80D

36. Which of the following is NOT considered while calculating the “Gross Total Income”?

a) Salary

b) Capital Gains
c) Agricultural Income

d) Income from House Property

Answer: c) Agricultural Income

37. Under Section 80C, investment in which of the following is eligible for deduction?

a) Public Provident Fund (PPF)

b) Fixed Deposit

c) Recurring Deposit

d) All of the above

Answer: a) Public Provident Fund (PPF)

38. Income from the transfer of shares of a listed company after holding for more than 12
months is considered as:

A) Short-term capital gains

b) Long-term capital gains

c) Business income

d) Salary income

Answer: b) Long-term capital gains

39. Which of the following income is taxable under the head “Income from Other Sources”?

a) Salary

b) Dividend income

c) Profit from business

d) Rent from house property

Answer: b) Dividend income

40. Losses from the head “Income from House Property” can be carried forward for:

a) 8 years

b) 5 years

c) 10 years

d) Indefinite period

Answer: a) 8 years

41. A belated return can be revised until:

a) 1 year from the end of the financial year

b) 3 months from the filing date

c) End of the assessment year

d) 2 years from the filing date

Answer: c) End of the assessment year

42. Income from letting out of agricultural land is taxable under the head:

a) Income from Business

b) Income from Salaries

c) Income from Other Sources

d) Exempt from tax

Answer: d) Exempt from tax

43. Which of the following incomes is NOT exempt from tax?

a) Scholarships

b) Income from sale of a rural agricultural land

c) Income from a charitable trust

d) Winnings from lottery

Answer: d) Winnings from lottery

44. Which of the following is a tax-free perquisite?

a) Rent-free accommodation

b) Medical allowance

c) Employer’s contribution to a recognized provident fund

d) Entertainment allowance

Answer: c) Employer’s contribution to a recognized provident fund

45. Income of a minor child is clubbed with the income of the parent under which section?

a) Section 80C

b) Section 10(10)

c) Section 64

d) Section 50C

Answer: c) Section 64

46. Deduction for interest on a loan taken for higher education is available under which
section?

a) Section 80C

b) Section 80D

c) Section 80E

d) Section 80G
Answer: c) Section 80E

47. A self-occupied house is eligible for how much standard deduction under Income from
House Property?

a) 10%

b) 20%

c) Nil

d) 30%

Answer: c) Nil

48. Set-off of business losses can be done against which of the following?

a) Salary income

b) Capital gains

c) Income from other businesses

d) Income from house property

Answer: c) Income from other businesses

49. Loss under the head capital gains can be set off against:

a) Salary income

b) Business income

c) Capital gains only

d) Any income

Answer: c) Capital gains only

50. Which of the following is a deduction under Chapter VI-A of the Income Tax Act?

a) Dividend income

b) Capital gains

c) Payment of life insurance premium

d) Rent income

Answer: c) Payment of life insurance premium

51. Which of the following is taxed under the head “Income from Other Sources”?

a) Salary income

b) Business income

c) Interest on bank savings

d) House rent
Answer: c) Interest on bank savings

52. Under which head is the income from subletting of a property taxable?

a) Income from House Property

b) Income from Business

c) Income from Other Sources

d) Capital Gains

Answer: c) Income from Other Sources