UPSC Prelims Practice Questions — Parliamentary panel flags ‘punitive’ tax regime, seeks data on new I-T Act’s impact

Question 1

Under the Income-tax Act, 2025, in the case of a business or profession newly set up during a financial year, the expression 'tax year' means which one of the following?

Accepted Answer

The period beginning on the date of setting up of the business or profession and ending on the last day of that financial year

Answer

The twelve-month period beginning on the 1st April immediately following the setting up of the business or profession

Answer

The period beginning on the date of setting up of the business or profession and ending twelve months thereafter

Answer

The period beginning on the 1st April preceding the setting up of the business or profession and ending on the following 31st March

Question 2

Consider the following statements comparing the Income-tax Act, 2025 with the Income-tax Act, 1961:
1. The number of chapters has been brought down from 47 in the 1961 Act to 23 in the 2025 Act.
2. The number of Schedules has been brought down from 16 in the 1961 Act to 14 in the 2025 Act.
3. The 2025 Act contains 536 sections as against 819 sections in the 1961 Act.
Which of the statements given above is/are correct?

Accepted Answer

1 and 3 only

Answer

1 and 2 only

Answer

2 and 3 only

Answer

1, 2 and 3

Question 3

With reference to the Income-tax Rules, 2026, consider the following:
1. They have been made in exercise of the powers conferred by section 533 of the Income-tax Act, 2025.
2. They came into force on 1 April 2026, the same date on which the Income-tax Act, 2025 came into force.
3. They contain 333 rules, as against 511 rules in the Income-tax Rules, 1962.
4. They prescribe 399 forms, as against 190 forms prescribed under the Income-tax Rules, 1962.
Which of the statements given above is/are correct?

Accepted Answer

1, 2 and 3

Answer

1 and 4

Answer

2, 3 and 4

Answer

3 and 4 only

Question 4

How many forms are prescribed under the Income-tax Rules, 2026 notified by the Central Board of Direct Taxes?

Accepted Answer

190

Answer

333

Answer

399

Answer

511

Question 5

Consider the following statements regarding parliamentary scrutiny of the legislation that replaced the Income-tax Act, 1961:
1. The Income-tax Bill, 2025 was referred to a Select Committee of the Lok Sabha rather than to the Department-related Standing Committee on Finance.
2. Unlike a Select Committee, which is constituted to examine a particular Bill, a Department-related Standing Committee is a permanent committee that is reconstituted every year.
3. Every Bill introduced in Parliament must necessarily be referred to the concerned Department-related Standing Committee before it can be passed.
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

Question 6

Which of the following Ministries/Departments fall within the jurisdiction of the Department-related Parliamentary Standing Committee on Finance?
1. Ministry of Corporate Affairs
2. Ministry of Statistics and Programme Implementation
3. Ministry of Commerce and Industry
4. Department of Investment and Public Asset Management
Which of the above is/are correctly identified?

Accepted Answer

1, 2 and 4

Answer

1 and 3

Answer

2 and 4 only

Answer

1, 3 and 4

Question 7

The Central Board of Direct Taxes came into existence as a separate Board with effect from 1 January 1964 by virtue of which one of the following provisions?

Accepted Answer

Section 3 of the Central Board of Revenue Act, 1963

Answer

Section 116 of the Income-tax Act, 1961

Answer

Section 2 of the Central Board of Revenue Act, 1924

Answer

Section 119 of the Income-tax Act, 1961

Question 8

With reference to the Central Board of Direct Taxes, consider the following:
1. It functions under the Department of Revenue in the Ministry of Finance.
2. Its Chairman is an ex officio Special Secretary to the Government of India.
3. Apart from the Chairman, it has six Members who are ex officio Additional Secretaries to the Government of India.
4. It was carved out of the Central Board of Revenue simultaneously with a second Board that was created at that time under the name Central Board of Indirect Taxes and Customs.
Which of the statements given above is/are correct?

Accepted Answer

1, 2 and 3

Answer

1 and 4

Answer

2, 3 and 4

Answer

1 and 3 only

Question 9

The comprehensive review of the Income-tax Act, 1961, announced by the Government and culminating in the new direct tax statute, was carried out in the first instance by which one of the following bodies?

Accepted Answer

An internal committee constituted by the Central Board of Direct Taxes

Answer

A task force constituted by the Department of Economic Affairs

Answer

An expert group constituted by NITI Aayog

Answer

A standing group constituted by the Department of Revenue

Question 10

Which one of the following was the principal stated objective of the exercise that produced the Income-tax Act, 2025?

Accepted Answer

Consolidating and simplifying the statute while leaving tax rates and slabs unchanged

Answer

Prescribing a uniform flat rate of tax on all classes of assessees from the tax year 2026-27

Answer

Replacing all penalty and prosecution provisions with a permanent civil compounding mechanism

Answer

Abolishing entirely the distinction between residents and non-residents for purposes of taxation

Question 11

Consider the following statements regarding the Union Government's net direct tax collections in the financial year 2026-27, as reported up to 10 August 2026:
1. Net direct tax collections stood at about Rs 8.11 lakh crore, a year-on-year growth of over 23 per cent.
2. Securities Transaction Tax collections rose by over 50 per cent year-on-year to about Rs 33,824 crore.
3. The rise in collections was driven mainly by corporate tax, while non-corporate tax collections declined year-on-year.
4. The pace of growth in collections was slower than the growth rate required to meet the full-year direct tax target.
Which of the statements given above is/are NOT correct?

Accepted Answer

3 and 4

Answer

1 and 2

Answer

2 and 3

Answer

1 and 4

Question 12

Consider the following statements regarding the official estimates of Gross Domestic Product released for the first quarter (April-June) of 2026-27:
1. Real GDP growth for the quarter was estimated at 7.8 per cent.
2. Nominal GDP growth for the quarter was estimated at 10.3 per cent.
3. The estimates were released under the new series of national accounts having 2011-12 as the base year.
4. The complete back series of the new GDP series, extending to 1950-51, was released along with these quarterly estimates.
Which of the statements given above is/are NOT correct?

Accepted Answer

3 and 4

Answer

1 and 2

Answer

2 and 3

Answer

1 and 4

UPSC Prelims Practice Questions — Parliamentary panel flags ‘punitive’ tax regime, seeks data on new I-T Act’s impact

Q1. Under the Income-tax Act, 2025, in the case of a business or profession newly set up during a financial year, the expression 'tax year' means which one of the following?

Q4. How many forms are prescribed under the Income-tax Rules, 2026 notified by the Central Board of Direct Taxes?

Q7. The Central Board of Direct Taxes came into existence as a separate Board with effect from 1 January 1964 by virtue of which one of the following provisions?

Q9. The comprehensive review of the Income-tax Act, 1961, announced by the Government and culminating in the new direct tax statute, was carried out in the first instance by which one of the following bodies?

Q10. Which one of the following was the principal stated objective of the exercise that produced the Income-tax Act, 2025?