UPSC Prelims Practice Questions — Before new taxes, making every rupee count

Question 1

The CAG's State Finances Audit Report faults State departments for failing to reconcile their expenditure and receipt figures. With whose records is such reconciliation of a State's departmental figures required to be carried out?

Accepted Answer

The Accountant General (Accounts and Entitlement) of the State, functioning under the Comptroller and Auditor General of India

Answer

The Controller General of Accounts in the Department of Expenditure, Ministry of Finance, Government of India

Answer

The Directorate of Treasuries and Accounts of the State Finance Department

Answer

The Public Accounts Committee Secretariat of the State Legislative Assembly

Question 2

The CAG's duty to audit all receipts payable into the Consolidated Fund of a State, and to satisfy himself that the rules and procedures secure an effective check on assessment, collection and proper allocation of revenue, is laid down in which provision?

Accepted Answer

Section 16 of the CAG (Duties, Powers and Conditions of Service) Act, 1971

Answer

Section 13 of the CAG (Duties, Powers and Conditions of Service) Act, 1971

Answer

Section 14 of the CAG (Duties, Powers and Conditions of Service) Act, 1971

Answer

Section 19 of the CAG (Duties, Powers and Conditions of Service) Act, 1971

Question 3

In a CAG State Finances Audit Report, the year's actual revenue and fiscal deficits are compared with the projections in the Medium-Term Fiscal Plan. Who prepares that Medium-Term Fiscal Plan?

Accepted Answer

The State Government's Finance Department, which lays it before the State Legislature with the annual Budget

Answer

The office of the Principal Accountant General (Audit) of the State, under the CAG of India

Answer

The Finance Commission constituted by the President under Article 280 of the Constitution

Answer

The Reserve Bank of India, as debt manager to the State Governments

Question 4

As noted in the CAG's State Finances Audit Report on Tamil Nadu for 2023-24, the State's fiscal responsibility legislation required the revenue deficit to be eliminated by which year?

Accepted Answer

2025-26

Answer

2023-24

Answer

2024-25

Answer

2027-28

Question 5

Which of the following has been entrusted by the Tamil Nadu government with preparing a roadmap to lift the State's own tax revenue from about 5.5 per cent of GSDP to around 8 per cent, by improving compliance, plugging leakages and rationalising rates, fees and exemptions?

Accepted Answer

A six-member committee chaired by Montek Singh Ahluwalia, a former Deputy Chairman of the Planning Commission

Answer

The State Finance Commission constituted by the Governor under Article 243-I of the Constitution

Answer

The State Level Bankers' Committee, convened by the lead bank for Tamil Nadu

Answer

The Commercial Taxes Department's State GST Advisory Council for Tamil Nadu

Question 6

Consider the following statements regarding the Tamil Nadu Budget for 2026-27 as compared with earlier reference points:
1. Capital expenditure for 2026-27 has been pegged at about Rs 56,985 crore, roughly 10 per cent higher than the Revised Estimate for 2025-26.
2. The revenue deficit estimated for 2026-27 is larger than the revenue deficit of Rs 45,121 crore reported by the CAG for 2023-24.
3. The borrowings provided for in 2026-27 are smaller than the amount to be repaid on existing loans during that year.
Which of the statements given above is/are correct?

Accepted Answer

1 and 2 only

Answer

2 and 3 only

Answer

1 and 3 only

Answer

1, 2 and 3

Question 7

With reference to the CAG's State Finances Audit Report on Tamil Nadu for the year ended 31 March 2024, consider the following:
1. Capital expenditure amounted to 31 per cent of the State's total borrowings during the year.
2. Capital expenditure was 11.28 per cent of the State's total expenditure during the year.
3. The debt-GSDP ratio declined from 28.00 per cent in 2019-20 to 24.35 per cent in 2023-24.
4. The revenue deficit registered an increase of 24.59 per cent over the previous year.
Which of the above is/are correctly identified as findings of that report?

Accepted Answer

1, 2 and 4

Answer

1 and 3

Answer

2 and 4 only

Answer

3 and 4 only

Question 8

The CAG's audit for 2023-24 flagged unnecessary supplementary provisions of about Rs 1,078 crore, obtained across 81 cases even though the original allocations had not been exhausted. Across how many grants were these cases spread?

Accepted Answer

26 grants

Answer

33 grants

Answer

48 grants

Answer

81 grants

Question 9

With reference to the recommendations of the Sixteenth Finance Commission for the award period 2026-31, consider the following:
1. The share of States in the net proceeds of Union taxes has been retained at 41 per cent.
2. Post-devolution revenue deficit grants are to continue for eligible States.
3. Grants for disaster management carry a Centre-State cost-sharing ratio of 90:10 for the North-Eastern and Himalayan States.
4. In the horizontal devolution formula, the 'contribution to GDP' criterion has been replaced by 'tax and fiscal efforts'.
Which of the above is/are NOT correct?

Accepted Answer

2 and 4

Answer

1 and 3

Answer

3 only

Answer

1, 2 and 4

Question 10

The Finance Commission recommends the States' share as a percentage of the 'divisible pool'. Which one of the following correctly describes that pool?

Accepted Answer

Gross tax revenue of the Centre, reduced by the cost of collection and by cesses and surcharges levied for specified purposes

Answer

Gross tax revenue of the Centre, reduced by grants-in-aid released to the States under Article 275 of the Constitution

Answer

Total receipts of the Centre, reduced by non-tax revenue, disinvestment proceeds and the cost of collection

Answer

Net tax revenue of the Centre, reduced by the compensation payable to States for revenue loss on account of GST

Question 11

The Government Accounting Standards Advisory Board, which frames the Indian Government Accounting Standards governing accounting and classification in Union and State accounts, was set up by the CAG under which Article of the Constitution?

Accepted Answer

Article 150

Answer

Article 148

Answer

Article 149

Answer

Article 151

Question 12

Consider the following statements about supplementary and excess grants:
1. A supplementary demand for grant is presented during the financial year in which the additional expenditure is required, whereas an excess demand for grant is presented after the close of the year in which spending exceeded the amount granted.
2. Article 115 covers supplementary, additional and excess grants, while Article 116 covers votes on account, votes of credit and exceptional grants.
3. Every supplementary demand for grant must invariably be examined and recommended by the Public Accounts Committee before the House can vote on it.
Which of the statements given above is/are correct?

Accepted Answer

1 and 2 only

Answer

1 only

Answer

2 and 3 only

Answer

1, 2 and 3

UPSC Prelims Practice Questions — Before new taxes, making every rupee count

Q1. The CAG's State Finances Audit Report faults State departments for failing to reconcile their expenditure and receipt figures. With whose records is such reconciliation of a State's departmental figures required to be carried out?

Q2. The CAG's duty to audit all receipts payable into the Consolidated Fund of a State, and to satisfy himself that the rules and procedures secure an effective check on assessment, collection and proper allocation of revenue, is laid down in which provision?

Q3. In a CAG State Finances Audit Report, the year's actual revenue and fiscal deficits are compared with the projections in the Medium-Term Fiscal Plan. Who prepares that Medium-Term Fiscal Plan?

Q4. As noted in the CAG's State Finances Audit Report on Tamil Nadu for 2023-24, the State's fiscal responsibility legislation required the revenue deficit to be eliminated by which year?

Q5. Which of the following has been entrusted by the Tamil Nadu government with preparing a roadmap to lift the State's own tax revenue from about 5.5 per cent of GSDP to around 8 per cent, by improving compliance, plugging leakages and rationalising rates, fees and exemptions?

Q8. The CAG's audit for 2023-24 flagged unnecessary supplementary provisions of about Rs 1,078 crore, obtained across 81 cases even though the original allocations had not been exhausted. Across how many grants were these cases spread?

Q10. The Finance Commission recommends the States' share as a percentage of the 'divisible pool'. Which one of the following correctly describes that pool?

Q11. The Government Accounting Standards Advisory Board, which frames the Indian Government Accounting Standards governing accounting and classification in Union and State accounts, was set up by the CAG under which Article of the Constitution?