QUESTION- Prelims-IAS – ECONOMICS MCQ-32
- ANS- C
- Statements 1, 2 and 4 are correct. Statement 3 is wrong as Tax avoidance is of international concern now and several countries have either already codified GAAR in their tax statutes or are in the process of doing so.
- The regulation allows tax officials to deny tax benefits, if a deal is found without any commercial purpose other than tax avoidance.
- It allows tax officials to target participatory notes. Under GAAR, the investor has to prove that the participatory note was not set to avoid taxes. It also allows officials to deny double taxation avoidance benefits, if deals made in tax havens like Mauritius were found to be avoiding taxes.
- ANS- C
- The nominal Exchange rate adjusted for inflation gives us the real Exchange rate.
- The real exchange rate measures the prices abroad relative to those at home while the nominal exchange rate measures only the numerical exchange value, and does not say anything about other aspects such as the purchasing power of that currency.
- Thus when the real exchange rate is more than the nominal exchange rate the rupee is said to be overvalued.
- US FED tapering is the gradual reduction in the bond buying program of the US Federal Reserves.
- This has led to gradual decrease in supply of dollars in the international markets resulting in depreciation of rupee.
- A deliberate downward adjustment to the value of a country’s currency, relative to another currency is known as devaluation.
- The value of rupee depreciates on increasing the exchange rate.
- ANS- B
- S. S. Tarapore Committee was constituted by RBI to set out the framework for fuller capital account convertibility. Its members were Surjith S. Bhalla, M.G. Bhide, R.H. Patil, A.V. Rajwade, Ajith Ranade.
- ANS- B
- DTAA also referred as Tax Treaty is a bilateral economic agreement between two nations that aims to avoid or eliminate double taxation of the same income in two countries. This clarification of tax jurisdiction promotes cross-border economic activity.
- The provision is not applicable on share investments before April 01, 2017. Such investments have been grandfathered that is exempted from new amendment.
- DTAA is not an agreement to share information on black money. However the information exchanged under the agreement might lead to discovery of black money. However, this would not include domestically parked black money in real estate, gold, etc.
- ANS- B
- Currency appreciation negatively impact export sector as same goods and services will fetch less value for money.
- But it will positively impact import sector as more goods and services can be purchased for less value of money.
- In Currency appreciation lesser will chase more goods and services which will help in controlling inflation.
- Normally currency appreciate if economy is doing well and appreciating currency is the result of booming economy which can be seen as increase in foreign investment, ECB and NRI deposits.
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