Introduction to Structure of Indian Economy MCQs and Answers

If you’re looking to test your knowledge of the Indian economy, look no further. In this blog post, we’ll be providing you with a series of MCQs (multiple choice questions) and answers, to help you get a better understanding of the structure of the Indian economy. So, without further ado, let’s get started!

Introduction to Structure of Indian Economy MCQs

1. What is the main source of revenue for the Indian government?

a. Income tax

b. Corporate tax

c. Customs duty

d. Excise duty

Answer: a

Explanation: The Indian government’s main source of income is from Goods and Services Tax (GST) and income tax. Both forms constitute nearly 90% of the government’s total tax collection. GST is a value-added tax levied on the sale of goods and services. Income tax is levied on the income of individuals, firms, and companies. The government has also introduced a new corporate tax regime, which has lowered the effective tax rate for companies. This has led to an increase in tax compliance and has helped boost government revenues.


2. Which of the following sectors is the largest contributor to India’s GDP?

a. Agriculture

b. Manufacturing

c. Service

d. Mining

Answer: c

Explanation: The service sector is the largest contributor to India’s GDP and employs millions of people. The sector includes a wide range of activities such as trade, hotels and restaurants, transport, storage, communication, banking and insurance, real estate, business services, and community services.


3. Which of the following is not a source of tax revenue for the Indian government?

a. Income tax

b. Corporate tax

c. Customs duty

d. Dividends and profits

Answer: d

Explanation: Dividends and profits are not a source of tax revenue for the Indian government. This is because the government does not tax corporate dividends and profits. However, the government does tax individual shareholders when they receive dividends from companies. This means that shareholders are ultimately responsible for paying taxes on their dividends. While this may seem unfair, it is actually a good thing for shareholders. This is because it allows them to control how much tax they pay on their dividends. They can either reinvest their dividends in the company or take the money out and pay taxes on it. This flexibility is one of the main reasons why many people prefer to invest in shares.


4. What is the main source of revenue for the states in India?

a. Taxes

b. Grants

c. Loans

d. Borrowings

Answer: a

Explanation: Sales tax is the most important source of revenue for state governments in India. It is a tax levied on the sale of goods and services. The tax is collected by the state government and is used to fund public services and infrastructure.


5. Which of the following taxes is levied by the central government and collected by the states?

a. Income tax

b. Corporate tax

c. Customs duty

d. Stamp duties

Answer: d

Explanation: Stamp duties are levied by Union and collected and appropriated by States. They are taxes that are imposed on certain documents or transactions. The most common type of stamp duty is on property transactions. While stamp duties may not be a huge amount of money, they still play an important role in the taxes we pay. So next time you see a stamp duty charge on your bill, you’ll know what it’s for.


6. Which of the following is not a type of tax levied by the Indian government?

a. Income tax

b. Corporate tax

c. Customs duty

d. Toll Tax

Answer: d

Explanation: The term “toll tax” is often used to refer to a type of tax levied by the Indian government. However, this is not an accurate characterization of the tax. The toll tax is a user fee, not a tax. It is charged by the government for the use of certain roads or bridges. The toll tax is not a type of tax levied by the Indian government.


7. What is the main source of revenue for panchayats in India?

a. Taxes and Grants

b. Loans

c. Borrowings

d. None of these

Answer: a

Explanation: The main source of revenue for panchayats in India is through taxes and grants from the central and state governments. Panchayats also collect user charges for services provided, like water and electricity. Additionally, they receive funds from NGOs and other organizations.


8. What is the main source of revenue for municipalities in India?

a. Property tax

b. Grants

c. Loans

d. Borrowings

Answer: a

Explanation: Property tax is the major source of revenue for most of the municipalities in India. It is important to pay your property tax on time to avoid any penalties. You can pay your property tax online or in person at the municipality office.


9. Which of the following is not a type of tax levied by local governments in India?

a. Property tax

b. Water tax

c. Sewerage tax

d. Trade tax

Answer: d

Explanation: The central government of India imposes a variety of taxes on the country’s trade. These taxes include customs duty, excise duty, and service tax. However, trade tax is not a type of tax levied by local governments in India.

Local governments in India do have the authority to levy taxes on trades within their jurisdiction. However, these taxes are typically not imposed on trades between businesses. Instead, they are generally imposed on individuals engaged in business activities.


10. What is the primary sector of the Indian economy?

a. Agriculture

b. Manufacturing

c. Services

d. Retail

Answer: a

Explanation: The primary sector of the Indian economy is agriculture. The Indian economy is broadly classified into three sectors – primary, secondary, and tertiary. The primary sector is the most important sector in the Indian economy as it is the sector that provides the basic raw materials for all the other sectors. The secondary sector is the sector that uses these raw materials to produce finished goods and the tertiary sector is the sector that provides services to the other two sectors.

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