What is the main purpose of a tax deduction for an allowable expense?
Correct answer: B. To reduce the income on which tax is calculated
- A. To increase the taxpayer's gross receipts
- B. To reduce the income on which tax is calculated
- C. To convert taxable income into sales tax
- D. To eliminate the need to file a return
Explanation
An allowable deduction is subtracted in determining taxable income, so it normally reduces the base on which income tax is calculated. It does not directly eliminate filing obligations or change income tax into sales tax.
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About Taxation
Taxation covers the principles used to assess and collect taxes from individuals, businesses and transactions, with emphasis on income tax and sales tax concepts in Pakistan. Questions involve taxable income, exemptions, deductions, tax liability, withholding, returns, assessment, tax avoidance versus evasion, and the distinction between direct and indirect taxes.
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50 free Taxation MCQs from Accounting, each with the correct answer and an explanation. Unlimited attempts, no account needed.
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