Taxation: UPSC Previous Year Questions (Indian Economy)
2 previous year UPSC Prelims questions on Taxation (Indian Economy). Choose an option to see the answer and explanation.
Explanations state facts as of the year each question was asked; words like “recently” refer to that year.
Showing 1–2 of 2 questions
UPSC 1996Indian Economy · Taxation
Q1. Given below are two statements, one labelled as Assertion (A) and the other labelled as Reason (R). Assertion (A): An important policy instrument of economic liberalization is reduction in import duties on capital goods. Reason (R): Reduction in import duties would help the local entrepreneurs to improve technology to face the global markets. In the context of the above two statements, which one of the following is correct?
Explanation
Assertion A is true: Economic liberalization in India, initiated in 1991, focused on reducing import duties on capital goods as a key policy instrument to make the economy globally competitive. Reason R is true: This reduction in import duties facilitated access to advanced technology, machinery, and equipment at lower costs, enabling Indian entrepreneurs to modernize industries and compete in global markets. The Reason (R)explains the Assertion (A) correctly, as lower import duties encouraged the adoption of cutting-edge technologies and fostered export competitiveness in sectors like manufacturing and IT.
UPSC 1996Indian Economy · Taxation
Q2. A redistribution of income in a country can be best brought about through:
Explanation
Redistribution of income is best achieved through progressive taxation, where higher-income groups are taxed at a higher rate, and progressive expenditure, where government spending is directed toward social welfare programs, such as education, healthcare, and poverty alleviation. This ensures equitable resource distribution and addresses income inequality. Examples include India’s National Food Security Act and subsidies for essential services like health and education funded by a progressive tax structure. This combination promotes social equity and economic stability. Options (b), (c), and (d) are incorrect:
Regressive expenditure would widen income inequality by favoring higher-income groups. Regressive systems, in both taxation and expenditure, would exacerbate inequality. Regressive taxation would disproportionately burden the poor, even if expenditures are progressive.
Answer key for these questions
Q
UPSC year
Correct answer
1
1996
(a) Both A and R are true and R is the correct explanation
2
1996
(a) progressive taxation combined with progressive expenditure
Frequently asked questions
How many previous year UPSC questions are there on Taxation?
This page covers 2 previous year UPSC Prelims GS Paper-I questions on Taxation (Indian Economy), asked from 1996 to 2025. Each has the correct answer and an explanation.
How should I use previous year UPSC questions for Prelims?
Attempt each question first, then open the answer and read the explanation for every option. Repeat by chapter, and track which statements UPSC reuses across years. Previous year questions show the exam pattern and difficulty level.
Which years are covered for Taxation?
Questions on Taxation (Indian Economy) are available for 15 years, from 1996 to 2025. Use the Year filter to practise a single paper.
