Which statement best describes a tax exemption?
Correct answer: D. Income is excluded from tax under specified law
- A. Tax is shifted from the buyer to the seller
- B. Tax is collected later through withholding
- C. Tax is increased because income is undisclosed
- D. Income is excluded from tax under specified law
Explanation
An exemption removes specified income, goods or transactions from tax under the applicable law. Withholding concerns the method of collection, while concealment is associated with unlawful tax evasion.
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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.
Practise Taxation
50 free Taxation MCQs from Accounting, each with the correct answer and an explanation. Unlimited attempts, no account needed.
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