Taxation: UPSC Previous Year Questions (Indian Economy)
1 previous year UPSC Prelims question 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.
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UPSC 2022Indian Economy · Taxation
Q1. Which one of the following situations best reflects "Indirect Transfers" often talked about in media recently with reference to India?
Explanation
The term "Indirect Transfers" in the Indian context refers to situations where a foreign entity transfers shares, and those shares derive significant value from assets located in India. This concept gained prominence due to high-profile tax cases such as Vodafone and Cairn Energy. Case Study: In 2007, Vodafone International Holdings BV acquired shares of a Cayman Islands-based company which indirectly owned a majority stake in Indian telecom operator Hutchi-son Essar Limited. Although this transaction took place outside India between two foreign entities, India’s tax authorities argued that it involved the indirect transfer of Indian assets and demanded capital gains tax. Vodafone challenged this tax demand and the Supreme Court of India (2012) ruled in Vodafone’s favor, stating that indirect transfers were not taxable under Indian law at the time. The Indian government later amended tax laws retroactively, reinforcing its authority to tax such transactions. This led to international arbitration, which again ruled in Vodafone’s favor, citing unfair taxation practices.
Answer key for these questions
Q
UPSC year
Correct answer
1
2022
(d) A foreign company transfers shares and such shares derive their substantial value from assets located in India.
Frequently asked questions
How many previous year UPSC questions are there on Taxation?
This page covers 1 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.
