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InterviewSolution
This section includes InterviewSolutions, each offering curated multiple-choice questions to sharpen your knowledge and support exam preparation. Choose a topic below to get started.
| 101. |
Classify the following as direct and indirect taxes : (i) Income tax `" " ` (ii) Entertainment tax `" "` (iii) Profit tax `" " ` (iv) Wealth tax . |
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Answer» Direct taxes : (i) , (iii) , (iv) . They are direct taxes as their burden cannot be shifted .i.e., their impact and incidence are on the same person or firm. Indirect taxes : (ii) This is an indirect tax as its burden can be shifted , i.e., impact and incidence are on different persons. |
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| 102. |
Distinguish between direct tax and indirect tax . Give an example of each . |
| Answer» Direct tax are those whose final burden falls on that person who makes the payment to the government.Indirect taxes are those taxes which are paid to the government by one person but their burden is borne by another person.In direct tax, impact and incidence of tax lie on same person.In indirect tax, impact and incidence of tax lie on different persons.The impact of direct taxation cannot be shifted whereas the impact of indirect taxation can be shifted to others. | |
| 103. |
What do you mean by direct tax ? |
| Answer» Direct tax is a tax whose incidence and impact lies on same person i.e impact of tax cant be shifted. | |
| 104. |
Explain any one objective of government budget . |
| Answer» A)Redistribution of income and wealth: It is one of the most important objective of the government budget. The government imposes heavy taxation on a high income groups redistribute it among the people of weaker section in the society. The government can provide subsidies and other amenities to people whose income levels are low. These increase their disposable income and this reduces the inequalities. | |
| 105. |
Distinguish between : (i) Direct tax and indirect tax (ii) Revenue deficit and fiscal deficit . |
| Answer» Direct tax is levied and paid for by individuals, Hindu undivided Families (HUF), firms, companies etc. whereas indirect tax is ultimately paid for by the end-consumer of goods and services.The burden of tax cannot be shifted in case of direct taxes while burden can be shifted for indirect taxes.Lack of administration in collection of direct taxes can make tax evasion possible, while indirect taxes cannot be evaded as the taxes are charged on goods and services.Direct tax can help in reducing inflation, whereas indirect tax may enhance inflation.Revenue deficit is the excess of revenue expenditure over revenue receipts, whereas fiscal deficit is the excess of total expenditure over total receipts. | |
| 106. |
Discuss the meaning and significance of primary deficit for an economy. |
| Answer» Primary deficit refers to difference between fiscal deficit of the current year and interest payments on the previous borrowings. Primary Deficit = Fiscal Deficit – InterestSignificance of Primary deficitPrimary deficit indicates how much government borrowing is going to meet expenses other than interest payments. The difference between fiscal deficit and primary deficit reflects the amount of interest payments on public debt. | |
| 107. |
What is meant by revenue deficit ? What are its implications ? |
| Answer» Revenue deficit refers to excess of revenue expenditure over revenue receipts during the given fiscal year.Implications-1. Revenue deficit indicates the inability of the government to meet the expenditure on routine functioning of the economy.2. It implies dissavings on government account.3.It implies that government has to make up this deficit by disturbing its capital budget.4. Use of capital receipts may lead to inflationary situation in the economy.5. Higher borrowings would increase the future burden to repay the loan amount and interest payment. | |
| 108. |
Giving reasons , categorise the following into revenue receipts and capital receipts : (i) Recovery of loans , (ii) Corporation tax , (iii) Dividends on investments made by government , (iv) Sale of a public sector undertaking. |
| Answer» Refer items categorised as Revenue and Capital Receipts. | |
| 109. |
The following figures are based on the budget estimates of Govt. of India for the year 2012 - 13. Calculate 1. Fiscal deficit 2. Revenue deficit and 3. Primary deficit. `{:(,,(Rs. "in crores")),((a) " Revenue receipts",, 9","35","685),(" "(i) " Tax revenue", 7","71","071,),(" "(ii) " Non - tax revenue", 1","64","614,),((b) " Capital receipts",, 5","55","240),(" "(i) " Recovery of loans", 11","650,),(" "(ii) " Other receipts (mainly disinvestment)", 30","000,),(" "(iii) " Borrowing and other liabilities", 5","13","590,),((c) " Revenue expenditure", , 12","86","109),(" ""of which interest payments", 3","19","759,),((d) " Capital expenditure",, 2","04","816),((e) " Total expenditure",, 14","90","925):}` |
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Answer» 1. Fiscal deficit = Total expenditure - total receipts net of borrowing = 14, 90, 925 - (9,35,685 + 11, 650 + 30,000) 5,13,590 crore 2. Revenue deficit = (c) - (a) = 12,86,109 - 9,35,685 = 3,50,424 crore 3. Primary deficit = Fiscal deficit - Interest payment = 5,13,590 - 3,19,759 = 19,38,831 crore |
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| 110. |
Explain how government budget can be helpful in bringing economic stabilisation in the economy. |
| Answer» Government can bring in economic stability, i.e. control fluctuation in general price level, through taxes, subsidies and expenditure. When there is inflation, government can reduce its own expenditure. When there is deflation, government can reduce taxes and give subsidies to encourage spending by the people. | |
| 111. |
Write short notes on : (i) Budgetary deficit (ii) Revenue deficit (iii) Fiscal deficit (iv) Primary deficit . |
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Answer» (i) Budgetary deficit is the excess of all expenditure on both revenue and capital accounts , over all receipts on revenue and capital accounts including borrowings by the central government . Budgetary deficit = TE - TR where TE `gt` TR , TR = Total receipts , TE = Total expenditure . (ii) Revenue deficit is the excess of revenue expenditure over revenue receipts Revenue deficit = RE - RR where `RE gt R R` , where RE = Revenue expenditure and RR = Revenue receipts . (iii) Fiscal deficit is the excess of total expenditure (both on revenue and capital accounts ) over revenue receipts and capital receipts excluding borrowings. Fiscal deficit = Total Expenditure - Total Receipts excluding borrowings (iv) Primary deficit is the difference between fiscal deficit and interest payments . Primary deficit = Fiscal deficit = Interest payments . |
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| 112. |
From the following data calculate Fiscal Deficit |
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Answer» Since data on capital expenditure is not given in the question . Hence Fiscal deficit = Borrowing = ₹ 32 billions . |
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| 113. |
Borrowing in government budget is ___________ deficit. (primary/fiscal/revenue) |
| Answer» Correct Answer - fiscal | |
| 114. |
From the following data about a government budget, find out (a) Revenue deficit, (b) Fiscal deficit, and (c) Primary deficit. `{:(, (Rs. " in arab")),((i) " Plan capital expenditure", " "120),((ii) " Revenue expenditure", " "100),((iii) " Non - plan capital expenditure", " "80),((iv) " Revenue expenditure", " "70),((v) " Capital receipts net of borrowing", " "140),((vi) " Interest payments", " "30):}` |
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Answer» (a) Revenue deficit = Revenue expenditure - Revenue receipts = 100 - 70 = Rs. 30 arab (b) Fiscal deficit = Plan Capital exp. + Non - plan Capital exp. + Revenue Capital exp. - Revenue receipts - Capital receipts net of borrowing = 120 + 80 + 100 - 70 - 140 = Rs. 90 arab (c) Primary deficit = Fiscal deficit - interest payment = 90 - 30 = Rs. 60 arab |
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| 115. |
Borrowing in government budget is :A. Revenue deficitB. Fiscal deficitC. Primary deficitD. Deficit in taxes |
| Answer» Correct Answer - B | |
| 116. |
Spot the revenue receipt :A. Recovery of loansB. BorrowingsC. External grantsD. Disinvestment |
| Answer» Correct Answer - C | |
| 117. |
Amount of fiscal deficit is equal toA. disinvestmentB. borrowingsC. recovery of loansD. all of these. |
| Answer» Correct Answer - B | |
| 118. |
Direct tax is called direct because it is collected directly from________ :A. The producer on goods producedB. The sellers on goods soldC. The buyers of goodsD. The income earners |
| Answer» Correct Answer - D | |
| 119. |
Explain the implications of (i) Revenue deficit (ii) Fiscal deficit . |
| Answer» Implications of Fiscal deficit1.Fiscal deficit indicates the total borrowing requirements of the government. Borrowings not only involve repayment of principal amount, but also require payment of interest.Interest payments increase the revenue expenditure, which leads to revenue deficit. It creates a vicious circle of fiscal deficit and revenue deficit, wherein government takes more loans to repay the earlier loans. As a result, country is caught in a debt trap.2.Government mainly borrows from Reserve Bank of India (RBI) to meet its fiscal deficit. RBI prints new currency to meet the deficit requirements. It increases the money supply in the economy and creates inflationary pressure.3.Government also borrows from rest of the world, which raises its dependence on other countries.Implications of revenue deficit1. It indicates the inability of the government to meet its regular and recurring expenditure in the proposed budget.2. It implies that government is dissaving, i.e. government is using up savings of other sectors of the economy to finance its consumption expenditure3. It also implies that the government has to make up this deficit from capital receipts, i.e. through borrowings or disinvestments. It means, revenue deficit either leads to an increase in liability in the form of borrowings or reduces the assets through disinvestment. | |
| 120. |
Distinguish between revenue deficit and fiscal deficit . |
| Answer» Fiscal deficit refers to the excess of total expenditure over total receipts excluding borrowings during the gives fiscal year.Revenue deficit refers to excess of revenue expenditure over revenue receipts. | |
| 121. |
Can there be a fiscal deficit in government budget without a revenue deficit ? Explain . |
| Answer» Yes, fiscal deficit can happen without Revenue deficitSuppose the government earns a lot of revenue and minimises its routine expenditure. So, we have a revenue surplus and not a deficit.But the government got less receipts from capital sources, but made huge spending on infrastructure projects, now the excess of capital expenditure over capital receipts is greater than revenue surplus. | |
| 122. |
What is a government budget ? Give the meaning of (i) Revenue deficit (ii) Fiscal deficit . |
| Answer» A government budget is a document prepared by the government presenting its anticipated revenues and proposed spending for the coming financial yearRevenue deficit refers to excess of revenue expenditure over revenue receipts during the given fiscal year.Fiscal deficit refers to the excess of total expenditure over total receipts excluding borrowings during the given fiscal year. | |
| 123. |
Identify the correct statement.A. Indirect taxes are imposed on production, sale of goods and servicesB. A government budget is an annual statement of actual receipts and actual paymentsC. Revenue deficit is related to only revenue expenditureD. Primary deficit shows total borrowing requirements of the government. |
| Answer» Correct Answer - A | |
| 124. |
Primary deficit in a government budget is __________:A. Revenue expenditure - Revenue receiptsB. Total Expenditure - Total ReceiptsC. Revenue deficit - Interest paymentD. Fiscal deficit - Interest payment |
| Answer» Correct Answer - D | |
| 125. |
From the budget estimates of government of India , calculate (i) Revenue deficit (ii) Fiscal deficit (iii) Primary deficit . |
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Answer» 1. Revenue deficit = Revenue expenditure - Revenue receipts = 2811 - 2037 = ₹ 774 crore 2. Fiscal deficit = Total expenditure - Total receipts excluding borrowings = (Revenue exp. + Capital exp.) - (Revenue receipts + Recoveries of loans and other receipts ) = (2811 + 550) - (2037 + 240) = 3361 - 2277 = ₹ 1084 crore 3. Primary deficit = Fiscal deficit - Interest payment = 1084 - 1020 = ₹ 64 crore |
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| 126. |
Which of the following statement is not true for fiscal deficit ? A fiscal deficit :A. represents the borrowing of the government.B. is the difference between total expenditure and total receipts of the governmentC. is the difference between total expenditure and total receipts other than borrowingD. increases the future liability of the government |
| Answer» Correct Answer - B | |
| 127. |
Fiscal deficit in a governn1ent budget refers to :A. Shortfall in taxesB. Short fall in disinvestmentC. Disinvestment requirementD. Borrowing requirements |
| Answer» Correct Answer - D | |
| 128. |
Using budget estimates of government of India for the year 2008-09 calculate : Revenue deficit , Fiscal deficit , Primary deficit : |
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Answer» Revenue deficit = Revenue expenditure = Revenue receipts = 658119 - 602935 = ₹ 55184 crore Fiscal deficit = Total estimated expenditure - Total estimated receipts = (Revenue expenditure + Capital expenditure ) - (Revenue receipts + Capital receipts excluding borrowings) = (658119 + 92765) - (602935 + 4497 + 10165) = 750884 - 617597 = ₹ 133287 crore `" "` ( It is equal to borrowings and other liabilities ) Primary deficit = Fiscal deficit - Interest payment = 133287 - 190807 `(-) 57520` crore |
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| 129. |
Steps taken through the government budget can influence :A. InequalitiesB. Allocation of resourcesC. InflationD. All the above |
| Answer» Correct Answer - D | |
| 130. |
Fiscal deficit equals ______:A. Indirect paymentB. BorrowingsC. Interest payment less borrowingD. Borrowings less interest payments |
| Answer» Correct Answer - B | |
| 131. |
How is primary deficit calculated ? What is Primary deficit ? |
| Answer» Primary deficit refers to the difference between fiscal deficit of the current year and interest payment on the previous borrowing.It is calculated by following formulaPrimary deficit= Fiscal deficit-interest payment | |
| 132. |
Revenue deficit is equal to :A. Total expenditure - Capital expenditureB. Fiscal deficit - Interest paymentC. Revenue expenditure - Revenue receiptsD. Total expenditure - Revenue expenditure |
| Answer» Correct Answer - C | |
| 133. |
What will be the effect of a deficit budget on aggregate demand ?A. AD decreasesB. AD increasesC. AD remains constantD. None of these |
| Answer» Correct Answer - B | |
| 134. |
The interest payments as per the government budget during a year are ₹ 13, 500 crores , which is `30 %` of primary deficit . Calculate fiscal deficit ? |
| Answer» {Fiscal Deficit = ₹ 58 , 500 crores } | |
| 135. |
Primary deficit in a government budget refers to :A. Borrowing requirementsB. Interest payments requirementsC. (a) less (b)D. (a)+ (b) |
| Answer» Correct Answer - C | |
| 136. |
Primary deficit equals :A. borrowingsB. interest paymentsC. borrowings less interest paymentsD. borrowings and interest payment both |
| Answer» Correct Answer - C | |
| 137. |
Which of the following is a correct measure of primary deficit ?A. fiscal deficit minus revenue deficitB. revenue deficit minus interest paymentsC. fiscal deficit minus interest paymentsD. Capital expenditure minus revenue expenditure |
| Answer» Correct Answer - C | |
| 138. |
The interest payments as per the government budget during a year are ₹ 1, 40 , 000 crores . If total borrowing requirements of the government are estimated at ₹ 2, 70 , 000 crores , then how much is primary deficit. |
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Answer» Total borrowing requirements of the government are estimated at ₹ 2 , 70 ,000 crores . It means , Fiscal Deficit = ₹ 2 , 70 , 000 crores. Primary Deficit = Fiscal Deficit - Interest Payment Primary Deficit = ₹ 2, 70 , 000 crores - ₹ 1 , 40 , 000 crores = ₹ 1 , 30 , 000 crores. |
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| 139. |
Primary deficit equals ________ :A. BorrowingsB. Interest paymentsC. Borrowing less interest paymentsD. Borrowings and interest payments both |
| Answer» Correct Answer - C | |
| 140. |
A government budget shows primary deficit of Rs. 4400 crore. The government expenditure on interest payment is Rs. 400 crore. How much is the fiscal deficit ?A. Rs. 4800B. Rs. 4000C. Rs. 4600D. None of these |
| Answer» Correct Answer - A | |
| 141. |
In a government budget , primary deficit is ₹ 5000 crores and interest payment is ₹ 4 , 000 crores . How much is the fiscal deficit ? |
| Answer» {Fiscal Deficit = ₹ 9 , 000 crores} | |
| 142. |
In a government budget , primary deficit is ₹ 12 , 000 crores and interest payment is ₹ 7 , 000 crores . How much is the fiscal deficit ? |
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Answer» Primary Deficit = Fiscal Deficit - Interest Payment ₹ 12 , 000 crores = Fiscal Deficit - ₹ 7 , 000 crores Fiscal Deficit = ₹ 12 , 000 crores + ₹ 7000 crores = ₹ 19 , 000 crores . |
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| 143. |
A government budget shows a primary deficit of ₹ 4400 crore . The revenue expenditure on interest payment is ₹ 400 crore . How much is the fiscal deficit ? |
| Answer» Fiscal deficit = Primary deficit + Interest Payments = 4 , 400 + 400 = ₹ 4 , 800 crores. | |
| 144. |
What is meant by capital expenditure |
| Answer» Capital expenditure refers to the estimated expenditure of the government in a given fiscal year which affects and liabilities status of the government.This expenditure-(a) creates assets of the government(b) causes a reduction in liabilities of the government. | |
| 145. |
What do you mean by regressive tax ? |
| Answer» Regressive tax is a tax in which tax payer pay higher tax when income is low and pay lower taxes when income is high. | |
| 146. |
What is meant by progressive tax ? |
| Answer» Progressive tax is a tax in which taxpayer pay high taxes if he earns more income and lower tax if he earns less. | |