DAY – 34 ( INSTA REVISION TEST)INSTA REVISION PLAN 3.0, 2020

Solution: D

Progressive taxation

This method has increasing rates of tax for increasing value or volume on which the tax is being imposed. Indian income tax is a typical example of it. The idea here is less tax on the people who earn less and higher tax on the people who earn more—classifying income earners into different slabs.

Regressive taxation

This is just opposite to the progressive method having decreasing rates of tax for increasing value or volume on which the tax is being imposed

Proportional taxation

In such a taxation method, there is neither progression nor regression from the point of view rate of taxes point of view. Such taxes have fixed rates for every level of income or production, they are neutral from the poor or rich point view or from the point of view of the levels of production.

Solution: D

State taxes that would be subsumed within the GST are:

• a) State VAT
• b) Central Sates Tax
• c) Purchase Tax
• d) Luxury Tax
• e) Entry Tax (All forms)
• f) Entertainment Tax and Amusement Tax (except those levied by the local bodies)
• g) Taxes on advertisements
• h) Taxes on lotteries, betting and gambling
• i) State cesses and surcharges in so far as they relate to supply of goods and services.

Solution: B

Solution: B

Vivad Se Vishwas scheme

Context: The vivad se vishwas scheme was announced by Union Finance Minister Nirmala Sitharaman during her budget speech on February 1, 2020. The scheme aims to settle the huge number of pending direct tax cases.

About Vivad Se Vishwas Scheme: The Direct Tax Vivad Se Vishwas Bill, 2020:

1. The amnesty scheme, at present, covers disputes pending at the level of commissioner (appeals), Income Tax Appellate Tribunals (ITAT), high courts, the Supreme Court and those in international arbitration.
2. It offers a complete waiver on interest and penalty to the taxpayers who pay their pending taxes by March 31.
3. The scheme aims to benefit those whose tax demands are locked in dispute in multiple forums.
4. If a taxpayer is not able to pay direct taxes by March 31st then, he will get further time till June 30th. However, in that case, he would have to pay 10 percent more on the tax.

How much?

1. In case it is just the interest and the penalty which is in dispute, the taxpayer will have to pay 25% of the disputed amount till March 31, and subsequently, it will be 30%.
2. If a taxpayer is not able to pay within the March 31 deadline, he gets a further time till June 30, but in that case, he would have to pay 10% more on the tax.
3. In case it is just the interest and the penalty which is in dispute, the taxpayer will have to pay 25% of the disputed amount till March 31, and subsequently, it will be 30%.

Significance:

The scheme aims to resolve 483,000 direct tax-related disputes pending in various appellate forums.

Solution: A

GLONASS is an acronym, which stands for Globalnaya Navigazionnaya Sputnikovaya Sistema, or Global Navigation Satellite System. GLONASS is Russia’s version of GPS (Global Positioning System).

List of Global Navigation Satellite Systems:

• GPS of the United States of America.
• Galileo of the European Union.
• IRNSS or NAVIC of India.
• Quasi-Zenith Satellite System (QZSS) of Japan

Solution: D

Revenue expenditure

All expenditures incurred by the government are either of revenue kind or current kind or compulsive kind. The basic identity of such expenditures is that they are of consumptive kind and do not involve creation of productive assets. They are either used in running of a productive process or running a government. A broad category of things that fall under such expenditures in India are:

(i) Interest payment by the government on the internal and external loans;

(ii) Salaries, Pension and Provident Fund paid by the government to government employees;

(iii) Subsidies forwarded to all sectors by the government;

(iv) Defence expenditures by the government;

(v) Postal Deficits of the government;

(vi) Law and order expenditures (i.e., police & paramilitary);

(vii) Expenditures on social services (includes all social sector expenditures as education, health care, social security, poverty alleviation, etc.) and general services (tax collection, etc.);

(viii) Grants given by the government to Indian states and foreign countries.

Solution: D

The capital receipts in India include the following capital kind of accruals to the government:

(i) Loan Recovery

(ii) Borrowings by the Government

(iii) Other Receipts by the Government

This includes many long-term capital accruals to the government through the Provident Fund (PF), Postal Deposits, various small saving schemes (SSSs) and the government bonds sold to the public (as Indira Vikas Patra, Kisan Vikas Patra, Market Stabilisation Bond, etc.).

Solution: A

Nameri National Park, Manas National Park, Kaziranga National Park, Orang National Park and Deepor Beel Bird Sanctuary are located in Assam. 

Gorumara National Park is located in West Bengal.

https://www.thehindu.com/sci-tech/energy-and-environment/assam-floods-why-we-need-to-act-fast-to-save-kaziranga-and-its-wildlife/article28720848.ece

Solution: A

Fiscal Deficit is the difference between the total income of the government (total taxes and non-debt capital receipts) and its total expenditure. A fiscal deficit situation occurs when the government’s expenditure exceeds its income. This difference is calculated both in absolute terms and also as a percentage of the Gross Domestic Product (GDP) of the country. A recurring high fiscal deficit means that the government has been spending beyond its means.

Fiscal Deficit formula: How is Fiscal Deficit calculated?

Fiscal Deficit = Total expenditure of the government (capital and revenue expenditure) – Total income of the government (Revenue receipts + recovery of loans + other receipts)

Solution: D

Guru Gobind Singh

Guru Gobind Singh was the 10th Sikh guru.  He was born at Patna, Bihar, India, on December 22, 1666. His birthday sometimes falls either in December or January or even both months in the Gregorian calendar. The annual celebration of the Guru’s birthday is based on the Nanakshahi calendar.

He became the Sikh guru at the age of nine, following the demise of father, Guru Tegh Bahadur, the ninth Sikh Guru.  He is known for his significant contributions to the Sikh religion, including the introduction of the turban to cover hair.

He also founded the principles of Khalsa or the Five ‘K’s. They are: Kesh (uncut hair), Kangha (a wooden comb for the hair), Kara (an iron bracelet), Kachera (100% cotton tieable undergarment) (not an elastic one) and Kirpan (an iron dagger large enough to defend oneself).

He is also responsible to establish the highest order in the Sikh community.  Followers of the Sikh faith religiously follow the morals and codes of discipline set up by Guru Gobind Singh.

He fought against the Mughals later in battle of Muktsar in 1705.  He was assassinated in 1708.

He named Guru Granth Sahib, the religious text of the Khalsas and the Sikhs, as the next Guru of the two communities.

Solution: C

What exactly is Ways and Means Advances (WMA)?

Simply put, it is a facility for both the Centre and states to borrow from the RBI. These borrowings are meant purely to help them to tide over temporary mismatches in cash flows of their receipts and expenditures. In that sense, they aren’t a source of finance per se. Section 17(5) of the RBI Act, 1934 authorizes the central bank to lend to the Centre and state governments subject to their being repayable “not later than three months from the date of the making of the advance”.

How much does the RBI charge on these advances?

The interest rate on WMA is the RBI’s repo rate, which is basically the rate at which it lends short-term money to banks. That rate is currently 4.4%. The governments are, however, allowed to draw amounts in excess of their WMA limits. The interest on such overdraft is 2 percentage points above the repo rate, which now works out to 6.4%. Further, no state can run an overdraft with the RBI for more than a certain period.

Solution: D

The Fiscal Responsibility and Budget Management Act (FRBM Act), 2003, establishes financial discipline to reduce fiscal deficit.

When was the FRBM Act enacted? Who introduced it in India?

The FRBM Bill was introduced by the then finance minister, Yashwant Sinha, in 2000. The Bill, approved by the Union Cabinet in 2003, became effective from July 5, 2004.

What are the objectives of the FRBM Act?

The FRBM Act aims to introduce transparency in India’s fiscal management systems. The Act’s long-term objective is for India to achieve fiscal stability and to give the Reserve Bank of India (RBI) flexibility to deal with inflation in India. The FRBM Act was enacted to introduce more equitable distribution of India’s debt over the years.

Key features of the FRBM Act

The FRBM Act made it mandatory for the government to place the following along with the Union Budget documents in Parliament annually:

1. Medium Term Fiscal Policy Statement
2. Macroeconomic Framework Statement
3. Fiscal Policy Strategy Statement

The FRBM Act proposed that revenue deficit, fiscal deficit, tax revenue and the total outstanding liabilities be projected as a percentage of gross domestic product (GDP) in the medium-term fiscal policy statement.

Solution: D

Strategic disinvestment is the sale of a substantial portion of the Government shareholding of a central public sector enterprise (CPSE) of 50% or more along with transfer of management control.

• If the government is selling minority shares in a PSE (less than 50%), it will continue to be the owner of the PSE. This is normal disinvestment procedure.
• The Department of Investment and Public Asset Management (DIPAM) under the Ministry of Finance has been made the nodal department for the strategic stake sale in the Public Sector Undertakings (PSUs).
• DIPAM and NITI Ayog will jointly identify PSUs for strategic sale.
• Cabinet Committee of Economic Affairs (CCEA) is mandated to approve strategic disinvestment of CPSEs.

Solution: A

Importance of Public Debt Management in India

As per Reserve Bank of India Act of 1934, the Reserve Bank is both the banker and public debt manager for the Union government. The RBI handles all the money, remittances, foreign exchange and banking transactions on behalf of the Government. The Union government also deposits its cash balance with the RBI. However, of late, there is a demand for creating a specialized agency for managing public debt as exists in some advanced economies. For instance, the Niti Aayog has advocated the creation of a separate public debt management agency (PDMA).

Public Debt versus Private Debt

Public Debt is the money owed by the Union government, while private debt comprises of all the loans raised by private companies, corporate sector and individuals such as home loans, auto loans, personal loans.

Public Debt as a percentage of GDP

The Union government’s liabilities account for a little over 46% of the country’s GDP. However, if the public debt is calculated as general government liabilities, which also includes the liabilities of states then it goes up to 68% of the country’s GDP.

Solution: B

National Data and Analytics Platform:

• • Recently, the NITI Aayog released the National Data and Analytical Platform (NDAP) vision document.
  • It aims to democratize access to publicly available government data.
  • It will host the latest datasets from various government websites, present them
  • Coherently and provide tools for analytics and visualization.
  • It will follow a user-centric approach and will enable data access in a simple and intuitive portal tailored to the needs of a variety of stakeholders.
  • It will spearhead the standardization of formats in which data is presented across sectors
  • It would cater to a wide audience of policy makers, researchers, innovators, data scientists, journalists and citizens.

Solution: C

India recently amended its Double Taxation Avoidance Agreement (DTAA) with Mauritius to plug certain loopholes.

What is it?

A DTAA is a tax treaty signed between two or more countries. Its key objective is that tax-payers in these countries can avoid being taxed twice for the same income. A DTAA applies in cases where a tax-payer resides in one country and earns income in another.

DTAAs can either be comprehensive to cover all sources of income or be limited to certain areas such as taxing of income from shipping, air transport, inheritance, etc. India has DTAAs with more than eighty countries, of which comprehensive agreements include those with Australia, Canada, Germany, Mauritius, Singapore, UAE, the UK and US.

Why is it important?

DTAAs are intended to make a country an attractive investment destination by providing relief on dual taxation. Such relief is provided by exempting income earned abroad from tax in the resident country or providing credit to the extent taxes have already been paid abroad. DTAAs also provide for concessional rates of tax in some cases.

For instance, interest on NRI bank deposits attract 30 per cent TDS (tax deduction at source) here. But under the DTAAs that India has signed with several countries, tax is deducted at only 10 to 15 per cent. Many of India’s DTAAs also have lower tax rates for royalty, fee for technical services, etc.

Favorable tax treatment for capital gains under certain DTAAs such the one with Mauritius have encouraged a lot of foreign investment into India. Mauritius accounted for $93.65 billion or one-third of the total FDI flows into India between April 2000 and December 2015. It has also remained a favored route for foreign portfolio investors. But the problem is DTAAs can become an incentive for even legitimate investors to route investments through low-tax regimes to sidestep taxation. This leads to loss of tax revenue for the country.

Solution: D

Personal Income (PI) ≡ NI – Undistributed profits – Net interest payments made by households – Corporate tax + Transfer payments to the households from the government and firms.

If we deduct the Personal Tax Payments (income tax, for example) and Non-tax Payments (such as fines) from PI, we obtain what is known as the Personal Disposable Income.

Personal Disposable Income (PDI ) ≡ PI – Personal tax payments – Non-tax payments.

Solution: B

Jyotirao Phule:

Born in 1827 in Satara district of Maharashtra. Phule was given the title of Mahatma on May 11, 1888, by Vithalrao Krishnaji Vandekar, a Maharashtrian social activist.

Social reforms and key contributions:

1. His work is related mainly to eradication of untouchability and caste system, emancipation and empowerment of women, reform of Hindu family life.
2. Along with his wife, Savitribai Phule, he is regarded as pioneers of women’s education in India.
3. The couples were the first native Indians to open the first indigenously-run school for girls in India in August 1848 at Pune in Maharashtra.
4. Later, the Phules started schools for children from the then untouchable castes such as Mahar and Mang.
5. In 1863, he opened a home for pregnant Brahmin widows to give birth in a safe and secure place.
6. He opened an orphanage home to avoid infanticide. In this regard, he is believed to be the first Hindu to start an orphanage for the unfortunate children.
7. In 1868, Jyotirao decided to construct a common bathing tank outside his house to exhibit his embracing attitude towards all human beings and wished to dine with everyone, regardless of their caste.
8. In 1873, Phule founded the Satyashodhak Samaj, or the Society of Seekers of Truth, for the rights of depressed classes, to denounce the caste system and to spread rational thinking.

His famous works:

Tritiya Ratna (1855), Gulamgiri (1873), Shetkarayacha Aasud, or Cultivator’s Whipcord (1881), Satyashodhak Samajokt Mangalashtakasah Sarva Puja-vidhi (1887).

Solution: B

Fiscal Consolidation refers to the policies undertaken by Governments to reduce their deficits and accumulation of debt stock.

Agriculture Loan Waiver will increase the fiscal burden on the government.

Stopping the leakages in Subsidies and increasing the tax base will increase the fiscal resource of the government. Thus, help in fiscal consolidation.

Solution: C

Khangchendzonga National Park also Kanchenjunga Biosphere Reserve is a National Park and a Biosphere reserve located in Sikkim, India. It was inscribed to the UNESCO World Heritage Sites list in July 2016, becoming the first “Mixed Heritage” site of India.

Neora Valley National Park is situated in the Kalimpong district, West Bengal, India and was established in 1986. It spreads over an area of 88 km² and is one of the richest biological zones in the entire Eastern India.

Namdapha National Park is a 1,985 km² large protected area in Arunachal Pradesh of Northeast India. With more than 1,000 floral and about 1,400 faunal species, it is a biodiversity hotspot in the Eastern Himalayas. The national park harbours the northernmost lowland evergreen rainforests in the world at 27°N latitude.

Singalila National Park is a national park of India located on the Singalila Ridge at an altitude of more than 7000 feet above sea level, in the Darjeeling district of West Bengal. It is well known for the trekking route to Sandakphu that runs through it.

Solution: C

Capital gain can be defined as any profit that is received through the sale of a capital asset. The profit that is received falls under the income category. Therefore, a tax needs to be paid on the income that is received. The tax that is paid is called capital gains tax and it can either be long term or short term.

Under the Income Tax Act, capital gains tax in India need not be paid in case the individual inherits the property and there is no sale. However, if the person who has inherited the property decides to sell it, tax will have to be paid on the income that has been generated from the sale. Some of the examples of capital assets are jewellery, machinery, leasehold rights, trademarks, patents, vehicles, house property, building, and land.

Solution: B

Income of a member of a Scheduled Tribe [as per article 366(25) of the Constitution] is exempt from tax, if following conditions are satisfied:

• Such member resides in any area in the State of Nagaland, Manipur, Tripura, Arunachal Pradesh, Mizoram or district of North Cachar Hills, Mikir Hills, Khasi Hills, Jaintia Hills and Garo Hills or in the Ladakh region of the State of Jammu and Kashmir.
• Such exemption is available in respect of income which accrues/arises from any source in such areas or income by way of dividends/interest on securities arises from any area.

Solution: D

Istanbul Convention:

Poland is to withdraw from Istanbul Convention- a treaty aimed at preventing violence against women.

What’s the issue?

• The reason behind withdrawal is that Poland thinks the Convention is harmful because it required schools to teach children about gender. Also, it says, the treaty tries to construct a “socio-cultural gender against the biological gender”. For example, some items of the convention foresee educating children and young people about forming homosexual families.

What is the Istanbul Convention?

1. • It is also called as the Council of Europe Convention on preventing and combating violence against women and domestic violence.
   • The treaty is the world’s first binding instrument to prevent and tackle violence against women.
   • It is the most comprehensive legal framework that exists to tackle violence against women and girls, covering domestic violence, rape, sexual assault, female genital mutilation (FGM), so-called honour-based violence, and forced marriage.

1. The Convention sets minimum standards for governments to meet when tackling violence against women.
2. When a government ratifies the Convention, they are legally bound to follow it.

Solution: A

Capital Account records all international transactions of assets.

Current Account is the record of trade in goods and services and transfer payments.

Solution: B

SATYABHAMA portal:

• Launched by Ministry of Mines.
• SATYABHAMA stands for Science and Technology Yojana for Aatmanirbhar Bharat in Mining Advancement.
• Designed, developed and implemented by National Informatics Centre (NIC), Mines Informatics Division.
• It allows online submission of project proposals along with monitoring of the projects and utilization of funds / grants. The researchers can also submit progress reports and Final Technical Reports of the projects in the electronic format in the portal.