CA Final Direct Tax Laws MCQs 2026: Practice Questions

The CA Final Direct Tax Laws MCQs 2026 from the May 2026 examination covered several practical areas of Direct Tax Laws and International Taxation. The questions were mainly presented through integrated case studies and application-based situations.

The MCQs tested concepts such as TDS and TCS, Liberalised Remittance Scheme, updated returns, taxation of non-residents, capital gains, accreted income of charitable trusts, tax planning, deductions under the default tax regime and residential status.

CA Final Direct Tax Laws MCQs 2026 PDF 

The CA Final Direct Tax Laws MCQs 2026 PDF can be used to practise case-based questions from Paper 4, Direct Tax Laws & International Taxation. Candidates can attempt the questions first and then refer to the answer key to evaluate their preparation.

Download CA Final Direct Tax Laws MCQs 2026 PDF

The PDF covers questions based on areas such as TDS and TCS, LRS, non-resident taxation, capital gains, charitable trusts, tax planning, and salary taxation.

Case-Based Questions on TDS and TCS

The first case study focused on transactions involving the purchase of goods, overseas tour packages, education-related remittances, gifts under LRS and updated returns.

Question 1

Mr. Krishan had a business turnover of ₹9.90 crore in FY 2024-25 and purchased goods worth ₹90 lakh from Mr. Anil in FY 2025-26. Mr. Anil's previous-year turnover was ₹10.10 crore. Which statement is correct?

A. TDS and TCS provisions are not applicable
B. TDS at 0.1% applies on ₹40 lakh
C. TDS at 0.1% applies on ₹90 lakh
D. TCS at 0.1% applies on ₹40 lakh

Answer: A

Question 2

Mr. Anil paid ₹6 lakh for an overseas holiday package to Singapore. What amount of TCS was required to be collected?

A. ₹3,000
B. ₹6,000
C. ₹30,000
D. No TCS

Answer: C

Question 3

Mr. Anil remitted ₹13 lakh from his personal savings for his daughter's higher education in the USA through an authorised dealer. Which TCS treatment applies?

A. 5% on ₹3 lakh
B. 5% on ₹13 lakh
C. 0.5% on ₹13 lakh
D. No TCS

Answer: A

Question 4

Mr. Anil sent ₹6.5 lakh to his sister in London as a gift under LRS. What TCS was applicable?

A. No TCS because the gift is exempt
B. No TCS because the remittance is below ₹10 lakh
C. TCS of ₹1.30 lakh
D. TCS of ₹32,500

Answer: C

Question 5

Mr. Albert had undisclosed foreign investment and dividend income for AY 2025-26. Subject to other conditions, when could he file an updated return?

A. Any time up to 31 March 2030
B. Up to 31 March 2030 or before communication of the specified information by the Assessing Officer, whichever is earlier
C. Even after the specified information is communicated
D. He cannot file an updated return

Answer: B

Non-Resident Taxation and Capital Gains

The second case study dealt with a non-resident earning dividend and interest income and selling shares acquired in convertible foreign exchange.

Question 6

Mr. Nitin, a non-resident, received ₹3.60 lakh as dividend from an Indian company. Which option correctly states the taxable dividend and TDS amount under the conditions given?

A. ₹3.60 lakh and ₹36,000
B. ₹3 lakh and ₹30,000
C. ₹3 lakh and ₹60,000
D. ₹3.60 lakh and ₹72,000

Answer: D

Question 7

Mr. Nitin sold shares of an Indian public company for ₹18.25 lakh. The shares had been acquired for ₹4.65 lakh in convertible foreign exchange, with ₹7,000 incurred on sale. Under the special provisions applicable to certain non-residents, what LTCG amount was considered?

A. ₹13,53,000
B. ₹9,95,772
C. ₹9,97,142
D. ₹13,60,000

Answer: B

Question 8

Under the special provisions applicable to the transaction in Question 7, at what rate was the LTCG chargeable to tax?

A. 10%
B. 20%
C. 12.5% on gains exceeding ₹1.25 lakh
D. 12.5%

Answer: D

Questions on Accreted Income of a Charitable Trust

The third case study covered the merger of Asha Trust with an unregistered trust and required calculation of fair market value, accreted income and additional income tax.

Question 9

For calculating the accreted income of Asha Trust, what FMV of the Noida land was considered?

A. ₹75 lakh
B. ₹78 lakh
C. ₹70 lakh
D. Nil

Answer: D

Question 10

Based on the assets specified in the case, what was the FMV of total assets?

A. ₹2.66 crore
B. ₹2.672 crore
C. ₹1.882 crore
D. ₹2.632 crore

Answer: C

Question 11

What was the accreted income of Asha Trust?

A. ₹1.562 crore
B. ₹1.572 crore
C. ₹1.532 crore
D. ₹78.20 lakh

Answer: D

Question 12

What additional income-tax was payable on the accreted income?

A. ₹54,58,250
B. ₹24,39,840
C. ₹15,64,000
D. ₹27,32,620

Answer: D

Tax Planning and Default Tax Regime

The remaining questions tested practical understanding of salary restructuring, deductions and taxation of income earned by a government employee posted abroad.

Question 13

An employee proposes to restructure taxable allowances using eligible tax-free perquisites and employer's NPS contribution within the prescribed limits. How is this arrangement classified?

A. Tax evasion
B. Tax planning
C. Tax avoidance
D. Colourable method

Answer: B

Question 14

Raman, a State Government employee, made eligible investments and received an employer contribution to NPS. What deduction from Gross Total Income was available under the default tax regime based on the given facts?

A. ₹1,44,000
B. ₹2,88,000
C. ₹3,98,000
D. ₹1,74,000

Answer: A

Question 15

Mr. Puneet, a Government employee posted to the Indian Embassy in Canada, received salary, foreign allowance and interest from a bank deposit in India. What was his Gross Total Income under the New Tax Regime?

A. ₹8 lakh
B. ₹15 lakh
C. ₹10 lakh
D. ₹2 lakh

Answer: C

CA Final DT MCQs Preparation Strategy

The CA Final Direct Tax MCQs require more than simple recall because many questions are based on practical situations. Candidates should focus on the following areas:

• Revise important TDS and TCS provisions with applicable thresholds and rates.

• Practise LRS-based questions involving education, gifts and overseas tours.

• Revise special provisions applicable to non-residents.

• Practise capital gains calculations involving foreign currency assets.

• Understand the calculation of accreted income of charitable trusts.

• Revise deductions available under the default tax regime.

• Solve integrated case studies within a fixed time.

Preparation Resources:

• CA Final Advanced Auditing MCQs

• PW CA Final Online Batches