"Fiscal Policy, Budget & Taxation" — Practice

Question 1

The Union Budget's formal constitutional name, under Article 112, is the:
(a) Annual Financial Statement (b) Finance Bill (c) Appropriation Bill (d) Consolidated Fund Statement

Accepted Answer

(a) Annual Financial Statement.

Article 112 requires the President to cause this statement of estimated receipts and expenditure to be laid before both Houses of Parliament each year.

Question 2

Fiscal Deficit is calculated as:
(a) Total Expenditure minus Total Receipts, excluding borrowings (b) Total Receipts minus Total Expenditure (c) Revenue Expenditure minus Revenue Receipts (d) Fiscal Deficit plus Interest Payments

Accepted Answer

(a) Total Expenditure minus Total Receipts, excluding borrowings.

This represents the amount the government must borrow to cover the gap between spending and non-borrowed income — the most closely watched Budget number each year.

Question 3

If Fiscal Deficit is ₹12 lakh crore and Interest Payments are ₹4 lakh crore, the Primary Deficit is:
(a) ₹8 lakh crore (b) ₹16 lakh crore (c) ₹12 lakh crore (d) ₹4 lakh crore

Accepted Answer

(a) ₹8 lakh crore.

Primary Deficit = Fiscal Deficit − Interest Payments = 12 − 4 = 8 lakh crore, isolating the current year's borrowing requirement from the burden of past debt.

Question 4

Withdrawal of money from the Consolidated Fund of India requires:
(a) prior parliamentary authorisation via an Appropriation Act (b) only the President's approval, with no parliamentary role (c) approval from the Finance Commission (d) no authorisation of any kind

Accepted Answer

(a) prior parliamentary authorisation via an Appropriation Act.

This is a BEFORE-the-fact authorisation, unlike the Contingency Fund, where parliamentary approval is sought after the expenditure has already occurred.

Question 5

The Contingency Fund of India, under Article 267, is used to meet:
(a) unforeseen/urgent expenditure, with parliamentary approval sought after the fact (b) routine annual government expenditure (c) provident fund contributions (d) state government expenditure only

Accepted Answer

(a) unforeseen/urgent expenditure, with parliamentary approval sought after the fact.

This fund is at the President's disposal specifically for urgent situations that cannot wait for prior parliamentary approval.

Question 6

The Public Account of India holds money where the government acts as a:
(a) banker/trustee, such as provident fund contributions (b) direct owner of all funds (c) tax collector only (d) foreign currency reserve manager

Accepted Answer

(a) banker/trustee, such as provident fund contributions.

Because this money doesn't ultimately belong to the government, payments from the Public Account do not require parliamentary appropriation, unlike the Consolidated Fund.

Question 7

The Fiscal Responsibility and Budget Management (FRBM) Act was enacted in which year to institutionalise fiscal discipline?
(a) 2003 (b) 1991 (c) 2016 (d) 1994

Accepted Answer

(a) 2003.

The Act requires the government to progressively work toward specified fiscal deficit and revenue deficit targets, with the exact numerical targets revised multiple times through subsequent amendments.

Question 8

Income Tax is classified as a direct tax because:
(a) its burden cannot be shifted to someone else; the payer bears it (b) it is levied on goods and services (c) its burden is always shifted to the final consumer (d) it applies only to corporations

Accepted Answer

(a) its burden cannot be shifted to someone else; the payer bears it.

Indirect taxes like GST, by contrast, are levied on transactions and their burden can typically be shifted to the final consumer.

Question 9

Indirect taxes like GST are often criticised as regressive in effect because:
(a) the same flat tax amount represents a proportionally larger share of income for poorer taxpayers (b) the tax rate legally increases as income decreases (c) they apply only to the wealthy (d) they are calculated using a progressive income slab system

Accepted Answer

(a) the same flat tax amount represents a proportionally larger share of income for poorer taxpayers.

This is despite the nominal tax rate being identical for all consumers regardless of income level.

Question 10

GST was introduced in India via which constitutional amendment, effective from which date?
(a) 101st Amendment, effective 1 July 2017 (b) 73rd Amendment, effective 1 April 1992 (c) 42nd Amendment, effective 1 January 1976 (d) 86th Amendment, effective 1 April 2002

Accepted Answer

(a) 101st Amendment, effective 1 July 2017.

This amendment replaced a large number of earlier central and state indirect taxes with a single, unified tax structure.

Question 11

A transaction between two businesses in different states would attract:
(a) IGST (Integrated GST) (b) CGST and SGST only (c) SGST only (d) no GST, since inter-state trade is GST-exempt

Accepted Answer

(a) IGST (Integrated GST).

CGST and SGST apply together only to intra-state (within one state) supplies; IGST applies to inter-state supplies and imports, later apportioned between the Union and the destination state.

Question 12

GST is described as a 'destination-based' tax because revenue accrues to the state where:
(a) goods/services are ultimately consumed (b) goods/services are produced (c) the selling company is headquartered (d) the transaction is processed by a bank

Accepted Answer

(a) goods/services are ultimately consumed.

This is a significant shift from the earlier origin-based tax structure, which benefited production-heavy states rather than consumption-heavy ones.

Question 13

In the GST Council, the voting weight is distributed as:
(a) Union government: 1/3rd; States collectively: 2/3rd (b) Union government: 2/3rd; States collectively: 1/3rd (c) equal 50-50 split (d) each state has an equal vote regardless of the Union

Accepted Answer

(a) Union government: 1/3rd; States collectively: 2/3rd.

This design requires broad Centre-state consensus for GST Council decisions on rates, exemptions and administration.

Question 14

The Finance Bill, which gives effect to the government's taxation proposals, must be passed within how many days of introduction?
(a) 75 days (b) 14 days (c) 6 months (d) there is no fixed timeline

Accepted Answer

(a) 75 days.

This is distinct from the Appropriation Bill, which authorises withdrawal of funds from the Consolidated Fund of India to meet Budget expenditure.

Question 15

Since 2017, the Union Budget has been conventionally presented on:
(a) 1 February (b) the last working day of February (c) 1 April (d) 31 March

Accepted Answer

(a) 1 February.

This shift from the earlier last-day-of-February tradition allows the Budget to be passed before the new financial year begins on 1 April; the same year also saw the Railway Budget merged with the General Budget.

Practice — "Fiscal Policy, Budget & Taxation"

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