UPSC Prelims 2009 · General Studies
Question 49: Economy and Social Development
Consider the following :
- 1.Fringe Benefit Tax
- 2.Interest Tax
- 3.Securities Transaction Tax
Which of the above is/are Direct Tax/Taxes ?
AnswerThe answer is (d).
All three are direct taxes: the burden falls on the person or entity that pays them and cannot be passed on. The Fringe Benefit Tax was charged on employers for benefits given to employees (introduced in 2005 and abolished in 2009). The Interest Tax was levied on the interest income of banks and credit institutions (1974, abolished in 2000). The Securities Transaction Tax is charged on transactions in listed securities and is classed with direct taxes.
- 1. Fringe Benefit Tax was a direct tax on employers.
- 2. Interest Tax was a direct tax on the interest income of banks.
- 3. Securities Transaction Tax is classed as a direct tax.
How you could have got this
- If you were sure statement 1 is correct, (c) goes: it leaves 1 out.
What you needed to know: Fringe Benefit Tax was a direct tax on employers.
- Then, if you were sure statement 2 is correct, (a) and (b) go: each of them leaves 2 out.
What you needed to know: Interest Tax was a direct tax on the interest income of banks.
Only (d) is left. You didn’t need statement 3.
This follows an unofficial answer: UPSC has not published its key for this year, and if that answer is wrong, so is this path.
Which options go is worked out from UPSC’s key and the options, not by a model.
Why each option is right or wrong
- (a) Wrong: Interest Tax and Securities Transaction Tax are also direct.
- (b) Wrong: Interest Tax is also direct.
- (c) Wrong: Fringe Benefit Tax is also direct.
- (d) Right: all three are direct taxes.
Explanation: written by UPSC Grade, not by UPSC.
Source: UPSC, Civil Services (Preliminary) Examination 2009, General Studies. UPSC's own paper isn't online; the words are from a published compilation. The paper on upsc.gov.in.