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100+ Free CA Inter Paper 3: Taxation Practice Questions

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Key Facts: CA Inter Paper 3: Taxation Exam

100

Total Marks

ICAI CA Intermediate Paper 3

3 hrs

Exam Duration

ICAI Examination Pattern

70:30

Descriptive to MCQ Split

ICAI Examination Pattern

2 sections

Income-tax and GST

ICAI Syllabus

40%

Minimum Paper Marks

ICAI Passing Rules

No

Negative Marking

ICAI Examination Pattern

CA Intermediate Paper 3 Taxation is a 100-mark, three-hour paper in CA Intermediate Group I under the ICAI new scheme of 2023. It has two sections: Section A, Income-tax Law (about 50 marks), and Section B, Goods and Services Tax (about 50 marks). The pattern is roughly 70% descriptive plus 30% compulsory MCQs, with no negative marking. To pass, a candidate must secure at least 40% in the paper and 50% aggregate in the group. ICAI does not publish a per-paper pass rate, and the applicable assessment year and GST provisions are notified for each attempt.

Sample CA Inter Paper 3: Taxation Practice Questions

Try these sample questions to test your CA Inter Paper 3: Taxation exam readiness. Each question includes a detailed explanation. Start the interactive quiz above for the full 100+ question experience with AI tutoring.

1Under the Income-tax Act, 1961, the 'previous year' for an assessee is generally the financial year:
A.In which income is earned, ending on 31st March
B.In which income is assessed to tax
C.Beginning on 1st January and ending on 31st December
D.Chosen by the assessee from any 12-month period
Explanation: Section 3 defines the previous year as the financial year (1 April to 31 March) in which income is earned. The income of the previous year is taxed in the immediately following assessment year. India uniformly uses 1 April-31 March, not the calendar year.
2An individual is treated as a 'resident' in India for a previous year if he is in India for 182 days or more in that year, OR for 60 days or more in that year and:
A.365 days or more in the 4 preceding previous years
B.182 days or more in the immediately preceding year
C.90 days or more in the 7 preceding years
D.any period in the preceding 10 years
Explanation: Under section 6(1), the second basic condition requires 60 days or more in the relevant previous year plus 365 days or more during the 4 immediately preceding previous years. Meeting either basic condition makes an individual a resident.
3Agricultural income earned in India is:
A.Exempt under section 10(1) but may be aggregated for rate purposes
B.Fully taxable under the head Income from Other Sources
C.Taxable only if it exceeds Rs. 5,000
D.Always exempt with no impact on tax computation
Explanation: Agricultural income is exempt under section 10(1). However, for a non-corporate assessee, net agricultural income above Rs. 5,000 (with non-agricultural income above the basic exemption) is aggregated under the partial integration scheme to determine the applicable tax rate on non-agricultural income.
4Income deemed to accrue or arise in India is taxable in the hands of:
A.Only a resident and ordinarily resident
B.A non-resident as well, but not a resident
C.All assessees, irrespective of residential status
D.Only a resident but not ordinarily resident
Explanation: Under section 5, income that accrues or arises in India, or is deemed to accrue or arise in India, is taxable for every assessee regardless of residential status. Residential status only affects the taxability of foreign-source income, not Indian-source income.
5For AY 2025-26, under the default tax regime u/s 115BAC, the standard deduction available to a salaried employee from salary income is:
A.Rs. 75,000
B.Rs. 50,000
C.Rs. 1,00,000
D.Not available
Explanation: From AY 2025-26, the standard deduction under the default new regime (section 115BAC) was increased to Rs. 75,000 under section 16(ia). Under the old regime, the standard deduction remains Rs. 50,000.
6Mr. A receives a gratuity of Rs. 12,00,000 on retirement. He is covered by the Payment of Gratuity Act, 1972. The maximum exemption limit under section 10(10) for such employees is:
A.Rs. 20,00,000
B.Rs. 10,00,000
C.Rs. 15,00,000
D.Rs. 12,00,000
Explanation: For employees covered by the Payment of Gratuity Act, 1972, the maximum exemption ceiling under section 10(10)(ii) is Rs. 20,00,000. The exemption is the least of the actual gratuity, the statutory formula amount, or Rs. 20,00,000.
7Which of the following allowances is fully exempt from tax in the hands of a salaried employee?
A.City compensatory allowance
B.Dearness allowance
C.Allowance granted to a High Court Judge
D.Entertainment allowance to a private-sector employee
Explanation: Allowances paid to High Court and Supreme Court Judges (sumptuary allowance) are fully exempt. City compensatory allowance and dearness allowance are fully taxable, and entertainment allowance deduction under section 16(ii) is available only to government employees.
8The annual value of a self-occupied house property used for own residence, where no other benefit is derived, is taken as:
A.Municipal value of the property
B.Fair rent of the property
C.Nil
D.Standard rent under Rent Control Act
Explanation: Under section 23(2), the annual value of one (or two, at the assessee's option) self-occupied house property is taken as Nil. Consequently no income arises, though interest on borrowed capital may still be claimed within prescribed limits under the old regime.
9The standard deduction allowed under section 24(a) while computing income from a let-out house property is:
A.30% of the Net Annual Value
B.30% of the Gross Annual Value
C.Actual repair expenses incurred
D.Rs. 30,000 fixed
Explanation: Section 24(a) allows a flat standard deduction of 30% of the Net Annual Value (NAV = GAV less municipal taxes paid by owner), irrespective of actual expenditure on repairs or maintenance. Interest on borrowed capital is separately deductible under section 24(b).
10Under the old tax regime, the maximum deduction for interest on borrowed capital for a self-occupied house property (acquired with capital borrowed on or after 1.4.1999 and construction completed in time) is:
A.Rs. 30,000
B.Rs. 1,50,000
C.Rs. 2,00,000
D.No limit
Explanation: Under section 24(b), for a self-occupied property the interest deduction is capped at Rs. 2,00,000 where the loan is taken for acquisition/construction on or after 1.4.1999 and construction is completed within 5 years. Otherwise the limit is Rs. 30,000.

About the CA Inter Paper 3: Taxation Exam

CA Intermediate Paper 3 Taxation is a 100-mark paper under the ICAI new scheme, split into Section A on Income-tax Law and Section B on Goods and Services Tax, combining about 70 marks of descriptive questions with about 30 marks of compulsory MCQs in three hours.

Assessment

Question count not published by the exam provider

Time Limit

3 hours

Passing Score

Minimum 40% in the paper and 50% aggregate in the group, per ICAI rules

Exam Fee

No separate fee; covered by CA Intermediate registration and examination fees set by ICAI (Institute of Chartered Accountants of India (ICAI))

CA Inter Paper 3: Taxation Exam Content Outline

8-12%

Basic Concepts and Residential Status

Income-tax framework, definitions, charge of tax, agricultural income, residential status under section 6, and scope of total income.

20-25%

Heads of Income

Salaries, House Property, Profits and Gains of Business or Profession, Capital Gains, and Other Sources, with exemptions, deductions and presumptive schemes.

8-12%

Clubbing, Set-off and Deductions

Income of other persons, aggregation, set-off and carry forward of losses, and Chapter VI-A deductions from gross total income.

8-12%

Advance Tax, TDS, TCS and Returns

Advance tax, tax deduction and collection at source, filing of return of income, self-assessment, and computation of total income and tax liability.

10-14%

GST Concepts and Charge

GST framework, supply, composite and mixed supply, levy of CGST, SGST and IGST, reverse charge, and the composition scheme.

10-14%

Place, Time and Value of Supply

Place of supply of goods and services, time of supply under forward and reverse charge, and valuation under section 15.

8-12%

Input Tax Credit and Registration

ITC eligibility, conditions, blocked credits, utilisation order, and threshold, compulsory and special-category registration.

8-12%

Invoicing, Returns and Payment

Tax invoice, bill of supply, credit and debit notes, e-way bill, GST returns, electronic ledgers, interest, and payment of tax.

How to Pass the CA Inter Paper 3: Taxation Exam

What You Need to Know

  • Passing score: Minimum 40% in the paper and 50% aggregate in the group, per ICAI rules
  • Assessment: Question count not published by the exam provider
  • Time limit: 3 hours
  • Exam fee: No separate fee; covered by CA Intermediate registration and examination fees set by ICAI

Keys to Passing

  • Work through all 100 available questions
  • Review every answer and explanation
  • Track weak areas and revisit them
  • Use our AI tutor for tough concepts

CA Inter Paper 3: Taxation Study Tips from Top Performers

1Practise full Income-tax computations head by head rather than memorising sections in isolation.
2Track ICAI amendments and the notified assessment year, since slab rates and limits change between attempts.
3Solve GST place, time and value of supply problems until the section flowcharts become automatic.
4Attempt every compulsory MCQ because there is no negative marking.
5Use ICAI Revision Test Papers and past question papers to rehearse the 70:30 descriptive-MCQ split.
6Maintain an error log tagged by chapter to convert repeated mistakes into marks.

Frequently Asked Questions

How many marks is CA Intermediate Paper 3 Taxation?

Paper 3 Taxation is a 100-mark paper of three hours. It is divided into Section A, Income-tax Law (about 50 marks), and Section B, Goods and Services Tax (about 50 marks), under the ICAI new scheme of 2023.

What is the exam pattern of CA Inter Taxation?

The pattern is roughly 70% descriptive questions and 30% compulsory multiple-choice questions. The MCQ part is answered on an OMR sheet, carries one or two marks each, and has no negative marking.

What is the passing criterion for CA Inter Paper 3?

A candidate must score at least 40% in the paper and 50% in aggregate across the group. Securing 60% or more in a paper grants an exemption in that paper for subsequent attempts, subject to ICAI rules.

What topics are covered in CA Inter Taxation?

Section A covers Income-tax basic concepts, residential status, the five heads of income, clubbing, set-off of losses, deductions, advance tax, TDS, TCS and returns. Section B covers GST concepts, charge, place, time and value of supply, input tax credit, registration, invoicing, returns and payment.

Is there negative marking in CA Inter Taxation MCQs?

No. ICAI does not apply negative marking to the multiple-choice questions in CA Intermediate Taxation, so candidates should attempt all MCQs even when unsure.

Which assessment year applies in CA Inter Taxation?

ICAI notifies the applicable assessment year for each examination attempt. Candidates should always study from the study material edition and amendments that ICAI declares applicable for their specific exam session.