Public Finance & Taxation

Statement 1 is Incorrect: National Investment and Infrastructure Fund (NIIF) is India's first sovereign wealth fund that was set up by the Government of India in February 2015. The objective behind creating this fund was to maximise economic impact mainly through infrastructure investment in commercially viable projects, both Greenfield and Brownfield. Statement 2 is Incorrect: In the Union Budget 2015-16, India's Finance Minister, Arun Jaitley announced the creation of the National Investment and Infrastructure Fund. It was proposed to be established as an Alternative Investment Fund to provide long-term capital for infrastructure projects with an inflow of Rs. 20,000 crore from the Government of India. NIIF was approved in August 2015 by the Department of Economic Affairs. The first meeting of its governing council was held in December 2015 further to which it was registered with SEBI as Category II Alternative Investment Fund. Hence, option D is the correct answer.

Statement 1 is Incorrect: Whether the owner is aware or not isn't the sole factor. A property transaction can be considered benami if
* The property is transferred to one person (benamidar) for a consideration paid by another (real owner).
* The transaction is conducted in a fictitious name. Statement 2 is Correct: Properties held benami are indeed liable for confiscation by the Central Government. This discourages the practice of using benami transactions to hide ownership. Statement 3 is Incorrect: The PBPT Act does provide for an appellate mechanism. Here's the hierarchy. The Adjudicating Authority Investigates and decides on benami transactions initially.
Appellate Tribunal Parties aggrieved by the Adjudicating Authority's decision can appeal to this tribunal. Therefore, the correct answer is 2 only.Hence, option B is the correct answer.

Statement 1 is correct: This is a classic example of Capital Expenditure. This type of spending creates physical assets for the country and is long-term in nature. Therefore, it is included in the capital budget. Statement 2 is correct: This is a Capital Receipt. When the government receives a loan, it creates a liability (it has to be repaid in the future). Since it affects the government's liabilities, it is part of the capital budget. Statement 3 is correct: This is also a form of Capital Expenditure. When the central government grants a loan, it creates a financial asset for itself (the loan is an asset that will earn interest and be repaid). As this spending creates an asset, it is included in the capital budget. Since all three items are either capital expenditures or capital receipts, they are all part of the Capital Budget of the Government of India.

The term "Base Erosion and Profit Shifting (BEPS)" refers to tax planning strategies used by multinational companies to artificially shift profits from higher-tax jurisdictions to lower-tax jurisdictions, thereby reducing their overall tax liabilities. This practice often involves exploiting gaps and mismatches in tax rules between different countries. BEPS has been a major concern for governments worldwide as it can lead to significant revenue losses and erode the tax base of countries where economic activity occurs. Efforts to address BEPS involve cooperation among countries to develop common standards and guidelines to prevent tax avoidance by multinational corporations.

Actions that can help reduce the deficit: 1. Reducing revenue expenditure (Correct): This involves cutting back on non-essential government spending. Examples include reducing administrative costs, curtailing travel expenses, or postponing discretionary infrastructure projects. 3. Rationalizing subsidies (Correct): This means making subsidies more targeted and efficient. The government can identify and eliminate wasteful subsidies or ensure they reach the intended beneficiaries. Actions that will likely increase the deficit: 2. Introducing new welfare schemes (Incorrect): This would increase government spending and contribute to the deficit. 4. Reducing import duty (Incorrect): Lower import duties can lead to a decrease in government revenue collected from customs duties. This can worsen the deficit. Therefore, the correct answer is 1 and 3 only (Reducing revenue expenditure and Rationalizing subsidies)

Both statements (1 and 2) are correct regarding the taxation system of Krishna Deva Raya, the ruler of Vijayanagar. Statement 1 is correct. Land tax based on quality The Vijayanagara Empire, under Krishna Deva Raya, had a well-defined taxation system. Land revenue was the primary source of income, and the tax rate was determined based on the land's quality, fertility, and irrigation methods. This ensured a fair system where more productive lands yielded higher tax revenue. Statement 2 is correct. Industry tax, besides land tax, the empire levied taxes on various professions and activities. Private workshops and businesses likely paid an industry tax, contributing to the state's treasury.

To reduce a persistent budget deficit, the government can take actions that decrease spending or increase revenue. 1. Reducing revenue expenditure (Correct): This involves cutting back on non-essential government spending. This can include areas like administrative costs, travel, or certain subsidies. 2. Introducing new welfare schemes (Incorrect): This would likely increase government spending and worsen the deficit. 3. Rationalizing subsidies (Correct): Subsidies can be a significant source of government expenditure. Reviewing and potentially reducing or reforming subsidies can help control spending. 4. Expanding industries (Depends): While industrial expansion can lead to increased tax revenue in the long run, it might not have an immediate impact on the budget deficit. In the short term, the government might need to invest in infrastructure to support expansion, potentially increasing expenditure. Therefore, the correct answer is 1 and 3 only (Reducing revenue expenditure and Rationalizing subsidies).

Statement 1 is incorrect: Department of Economic Affairs prepares the Budget. Statement 2 is correct: As per Article 114 of the Constitution, the government can withdraw money from the Consolidated Fund only after receiving approval from Parliament. Statement 3 is incorrect: Public Accounts include provident fund deposits, judicial deposits, savings bank deposits, departmental deposits, remittances and so on. This account is operated by executive action, that is, the payments from this account can be made without parliamentary appropriation. Such payments are mostly like banking transactions. So, only the second statement is correct.

The answer is (D) tax imposed and collected by the State Government is correct. In India, sales tax has been replaced by the Goods and Services Tax (GST). However, before the implementation of GST, sales tax was levied by individual states in India. While there might have been some central guidelines, the power to impose and collect sales tax primarily rested with the state governments.

There are two components of expenditure - plan and non-plan. Of these, plan expenditures are estimated after discussions between each of the ministries concerned and the Planning Commission. Non-plan revenue expenditure is accounted for by - interest payments, - subsidies (mainly on food and fertilisers), - wage and salary payments to government employees, - grants to States and Union Territories governments, - pensions, - police, - economic services in various sectors, - other general services such as tax collection, - social services, and - grants to foreign governments. Non-plan capital expenditure mainly includes defence , loans to public enterprises,and loans to States, Union Territories and foreign governments. The Plan and Non-Plan classification was done away with from fiscal 2017-18. Now emphasis is on Revenue and Capital expenditure.