Taxation Interview Questions and Answers

Taxation Interview Questions and Answers

This section covers commonly asked and expert level Taxation Interview questions and answers. The types of questions covered are general, conceptual, behavioral, situational and experience based. You can also find interesting examples and sample answers with each question.

Who are these Taxation Interview Questions useful for?

These interview questions will be very useful to all the candidates interviewing for the Taxation roles in Investment banking, Retail banking and other financial services.

Both entry level freshers and experienced candidates will be benefited by these questions and answers.

1. What is Income Tax?

Income tax is a tax which is charged on income of a person. Everyone who earns or gets an income in India is subject to income tax. Your income could be salary, pension or could be from a savings account that’s quietly accumulating a 4% interest.

2. What is Assessee?

An Assessee is a person who has paid any tax, has or had any obligation to pay any tax.

3. What is Taxation?

Taxation is one of the mode used by the government to finance their expenditure by imposing charges on citizens and corporate entities. Taxes are levied in almost every country of the world, primarily to raise revenue for government expenditures.

4. How many heads are there under total income?

There are five heads under total income:

Income from salary - Income from salary and pension are covered under here

Income from house property - This is rental income mostly

Profits and gains of business or profession - This is when you are self-employed, work as a freelancer or contractor, or you run a business.

Income from Capital gains - Income from sale of a capital asset such as mutual funds, shares, house property

Income from other sources - Income from savings bank account interest, fixed deposits, winning lottery.

5. Which income is considered as accrued income?

Income which has been earned but not yet received is known as accrued income. Income is recorded in the same accounting period in which it is earned rather than in the subsequent period in which it will be received.

6. What is capital gain?

Capital gain means the profit earned from the sale of an asset. When the Capital Asset is being sold or transferred, the profit or gains arising out of it or you can term that as the difference between the actual price at which the asset was acquired and the price at which it is sold or transferred.

7. What do you understand by dissolution of firm?

Dissolution of firm means assets of firm are realized and liabilities are paid off and the surplus, if any is distributed among the partners according to their right. It is to be noted that ‘dissolution of Firm’ involves dissolution of partnership but dissolution of partnership may not lead to dissolution of firm.

8. What is TDS?

TDS stands for tax deducted at source. It is tax which is deducted on source of income. As per the Income Tax Act, any company or person making a payment is required to deduct tax at source if the payment exceeds certain threshold limits.

TDS is deducted on the following types of payments:

Salaries

Interest payments by banks

Commission payments

Rent payments

Consultation fees

Professional fees