Fiscal Policy and Revenue (Part – III)

Total Questions: 50

31. Which one of the following was not stipulated in the Fiscal Responsibility and Budget Management Act, 2003? [I.A.S. (Pre) 2010]

(a) Elimination of revenue deficit by the end of the fiscal 135. V year 2007-08
(b) Non-borrowing by the central government from Re- serve Bank of India except under certain circumstances
(c) Elimination of primary deficit by the end of the fiscal year 2008-09
(d) Fixing government guarantees in any financial year as a percentage of GDP

Correct Answer: (c) Elimination of primary deficit by the end of the fiscal year 2008-09

Solution:The elimination of primary deficit by the end of the fiscal year 2008-09 was not stipulated in the Fiscal Responsibility and Budget Management Act, 2003. Other options are correct as per the provisions of question period.

32. Fiscal Responsibility and Budget Management Act, 2003 is adopted in Rajasthan with objectives to: [R.A.S./R.T.S.(Pre) 2007]

(a) Ensure financial discipline in Government
(b) Eliminate Fiscal deficit by March 2009
(b) Eliminate Fiscal deficit by March 2009
(d) Introduce budget in the month of January

Correct Answer: (a) Ensure financial discipline in Government

Solution:The Fiscal Responsibility and Budget Management (FRBM) Act, 2003 of the Government of India was adopted in Rajasthan by the Rajasthan FRBM Act, 2005 (enacted in 2005) to ensure prudence in fiscal management and fiscal stability by progressive reduction of revenue deficit, prudent debt management consistant with fiscal sustainability, greater transparency in fiscal operations of the Government and conduct of fiscal policy in a medium term fiscal framework and for matters connected therewith or incidental thereto.

33. What was the disinvestment target for Public Sector Banks and Financial Institutions in the Union Budget 2020-21? [U.P. R.O/A.R.O. (Mains) 2021]

(a) Rs. 80,000 Crore
(b) Rs. 90,000 Crore
(c) Rs. 100,000 Crore
(d) None of the above

Correct Answer: (b) Rs. 90,000 Crore

Solution:In the Union Budget 2020-21, the total disinvestment target for 2020-21 was pegged at Rs. 2.1 lakh crore, in which the government expected a substantial Rs. 90,000 crore revenue from the disinvestment of government stake in public sec- tor banks and financial institutions. In the Interim Union Budget for 2024-25, the government has set a total disinvestment target of Rs. 50,000 crore, which is at Rs. 30,000 crore in revised estimates of 2023-24.

34. Which amount has been targeted in the Union Budget 2019-20 from the disinvestment of Public Sector Enterprises including AIR INDIA? [Chhattisgarh P.C.S. (Pre) 2019]

(a) Rs. 90,000 Crores
(b) Rs. 1,05,000 Crores
(c) Rs. 1,50,000 Crores
(d) Rs. 1,95,000 Crores

Correct Answer: (b) Rs. 1,05,000 Crores

Solution:In the Union Budget 2019-20, disinvestment revenue was pegged at Rs. 1,05,000 lakh crore. However, the actual realisation was only Rs. 50,304 crore. The government has set a target of Rs. 50,000 crore from disinvestment in Interim Union Budget 2024-25. It is also the lowest budgeted disinvestment target in eight years.

35. As against the target of Rs. 10,000 crore from disinvestment by the Government of India for 2000-2001, there was a realisation of only: [U.P.P.C.S. (Mains) 2002*]

(a) Rs. 4,843 crore
(b) Rs. 3,038 crore
(c) Rs. 2,600 crore
(d) Rs. 1,8429 crore

Correct Answer: (d) Rs. 1,8429 crore

Solution:After liberalization of Indian economy in 1991, the policy of the government intended towards disinvestment of public sector enterprises. In the budget year 2000-2001 the govern- ment set a target of Rs. 10000 crore from the disinvestment but the actual achievement was only Rs. 1829 crore. In the Interim Union Budget 2024-25 disinvestment target is set at Rs. 50,000 crore.

36. According to Railway Budget 2016-17, which research organization will be set up under Railways? [U.P. P.C.S (Mains) 2016]

(a) VISHLESHAN
(b) SRESTHA
(c) AVATARAN
(d) NAVRACHNA

Correct Answer: (b) SRESTHA

Solution:In Railway Budget 2016-17, Minister for Railways has announced to set up a 'Special Railway Establishment for Strategic Technology & Holistic Advancement-SRESTHA' to drive long-term research and development in guided transport in India.

37. The Railway Budget 2013-14 has approved to introduce a new hyper luxury class. It is to be called- [U.P.P.C.S. (Mains) 2014]

(a) Udaan
(b) Anand
(c) Apoorva
(d) Anubhuti

Correct Answer: (d) Anubhuti

Solution:In the Railway Budget 2013-14, introduction of Anubhuti coaches with excellent tech-driven amenities in selected Rajdhani and Shatabdi trains was announced.

38. Direct Tax Code in India is related to which of the following? [U.P.P.C.S. (Pre) 2018]

(a) Sales Tax
(b) Income Tax
(c) Excise Tax
(d) Service Tax

Correct Answer: (b) Income Tax

Solution:Among the given options, Direct Tax Code (DTC) in India is related to Income Tax (and other direct taxes). Through DTC, the government aims to simplify the structure of direct tax laws into a single legislation. The DTC will replace the Income Tax Act, 1961 and other direct tax legislations like the Wealth Tax Act, 1957. The first Direct Tax Code Bill was introduced in the Parliament in 2010, but it was lapsed. In 2017, the government set up a task force (headed by Akhilesh Ranjan) to draft a new DTC. The report of the task force on DTC was submitted to Finance Minister Nirmala Sitharaman in August, 2019.

39. Who had suggested the imposition of 'expenditure tax' in India for the first time? [U.P.P.C.S (Pre) 2010]

(a) Kalecki
(b) Kaldor
(c) R.J. Chelliah
(d) Gautam Mathur

Correct Answer: (d) Gautam Mathur

Solution:In order to widen the tax base, Kaldor in his tax reform proposal for India, suggested the imposition of expenditure tax in India for the first time. He also suggested to introduce wealth tax, property tax and gift tax. Expenditure tax was abolished in India from April, 1962. Kaldor was a Cambridge's economist and citizen of Britain. He had been advisor to Labour Government in Britain from the year 1964. Besides this he had been invited in many countries as tax advisor.

40. Which one of the following situations best reflects 'Indirect Transfers' often talked about in media recently with reference to India? [I.A.S (Pre) 2022]

(a) An Indian company investing in a foreign enterprise and paying taxes to the foreign country on the profits arising out of its investment
(b) A foreign company investing in India and paying taxes to the country of its base on the profits arising out of its investment
(c) An Indian company purchases tangible assets in a foreign country and sells such assets after their value increases and transfers the proceeds to India
(d) A foreign company transfers shares and such shares derive their substantial value from assets located in India

Correct Answer: (d) A foreign company transfers shares and such shares derive their substantial value from assets located in India

Solution:'Indirect transfers' refer to situations where when foreign entities own shares or assets in India, the shares of such foreign entities are transferred instead of a direct transfer of the underlying assets in India. The issue of taxability of gains arising from the transfer of assets located in India, through the transfer of the shares of a foreign company (known as 'indirect transfer of Indian assets'), has been a subject matter of protracted litigation. There are innumerable permutations to such indirect transfers, many of which have been sought to be taxed by the Indian Government in the recent past. Beginning from the Vodafone case involving a tax demand of approximately US$ 2.1 billion, which was followed by knee-jerk amendments to the Income Tax Act annually, to the recent Cairn case involving a tax demand of approximately US$ 1.6 billion, the imposition of this enacted 'The Taxation Laws (Amendment) Act, 2021' to with- tax has taken quite a few twists and turns. The Government enact retrospective applicability of provisions relating to indirect transfer under the Income-tax Act, 1961.

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