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Take this tax quiz to find out how much you know about basic tax laws

Filing tax returns is very easy. Yet, a lot of taxpayers are not aware of basic rules. Take this quiz to test your knowledge of tax regulations.

ET Bureau|
Aug 13, 2018, 06.30 AM IST
Take this short quiz to test your knowledge of tax regulations and see how much are you aware of basic rules.
1. There is no need to file your income tax return if...

a. TDS has been deducted and all taxes have been duly paid.
b. Tax-saving investments have reduced your tax to zero.
c. Your taxable income is below the basic exemption of Rs 2.5 lakh a year.

Correct answer: c. Even if all taxes are paid or if deductions have reduced your tax liability to nil, you have to file your tax return. Only if your total income is below the basic exemption limit, you are exempt from filing your tax return.

2. If Rs 1.5 lakh limit under Sec 80C is exhausted, save more tax by…

a. Investing in the National Pension Scheme.
b. Contributing to the Voluntary Provident Fund.
c. Buying a pension plan from an insurance company

Correct answer: a. Under Sec 80CCD(1b), a taxpayer can claim deduction for investment of up to Rs 50,000 in the NPS. This deduction will be over and above the Rs 1.5 lakh under Sec 80C. More tax can be saved by investing up to 10% of the basic salary in NPS under Sec 80CCD(2d).

3. You didn’t submit proof so your employer cut tax. Now you can…

a. No longer claim the deduction if it does not figure in your Form 16.
b. Claim the deduction later but won’t be eligible for tax refund
c. Claim the deduction at the time of fi ling your return and get a refund

Correct answer: c. A taxpayer can claim deduction at the time of filing return even if it does not figure in his Form 16. He will be eligible to claim a refund of the excess tax paid. Though there is no need to submit proof at the time of filing return, the taxpayer may be asked to furnish it later.

4. You invested in FDs but no TDS was deducted. Should you...

a. Ignore reporting the income because bank didn’t deduct TDS.
b. Add the amount to your annual income and pay tax on it.
c. Mention income in tax return but claim exemption for bank interest

Correct answer: b. Income from fixed deposits is fully taxable and has to be mentioned as income from other sources. The taxpayer has to pay tax at the marginal rate applicable to him. The exemption under Sec 80TTA is for interest earned on savings bank balance, not for interest from fixed deposits.

5. TDS was deducted on interest from tax-saving FDs. The taxpayer...

a. Will not have to report the income because tax has already been paid.
b. Has to add the income to his annual income and pay additional tax if necessary.
c. Can claim a refund of the TDS because these were tax-saving fixed deposits

Correct answer: b. Interest income is fully taxable at the rate applicable to investor. TDS is only 10%. If the taxpayer is in the higher tax bracket he will have to pay additional tax. This can’t be ignored because income and TDS details will figure in the Form 26AS of the taxpayer and alert the tax authorities.

6. The FD in your minor child’s name earned Rs 1,400. This income is...

a. To be mentioned in the tax form of the parent.
b. Eligible for tax exemption and need not be mentioned in tax form.
c. Fully taxable as your income as per the clubbing provisions

Correct answer: b. Though income of minor child is to be clubbed with that of the parent, there is a small Rs 1,500 exemption per child. Income beyond Rs 1,500 will be clubbed with that of the parent and taxed at the marginal rate. One can claim this exemption for a maximum of two children.

7. If you live in your parent’s home you can pay them rent, but…

a. You can’t claim exemption of house rent allowance against such payments.
b. The rent received by the parent will be fully taxable.
c. The parent will have to pay tax on the rent after 30% standard deduction

Correct answer: c. It is perfectly legal to pay rent to a parent and claim exemption for HRA. Only 70% of the rent received by the parent will be taxed as income. The rules are different in case of spouse. One cannot pay rent to a spouse and claim HRA exemption.

8. Which of these can’t be claimed as deduction by individual taxpayers?

a. Accidental death and disability insurance.
b. Health insurance of self and family.
c. Preventive health check-ups of self and family.

Correct answer: a. Though accidental death and disability insurance is very important, the premium paid for this cover cannot be claimed as a deduction by an individual. However, a company can show the premium it pays for group accidental cover as a legitimate business expense.


6-8 Correct
Congratulations: You have a good grasp of tax rules. Keep yourself abreast with changes in tax laws and regulations.

4-6 Correct
Fair : You are familiar with tax rules but need to read up on the fi ner points to brush up your knowledge

0-3 Correct
Poor: You are not familiar with tax rules. Take help from a qualifi ed tax professional to manage your taxes.

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