1. Explain me what is alternative minimum tax (AMT)?
The Alternative Minimum Tax (AMT) is a way to restrict wealthy taxpayers from tax evasion. AMT uses a separate set of rules to calculate taxable income after allowed deductions. This is generally for higher income group as AMT sets a limit on certain benefits that reduces a taxpayer's regular tax amount. As a result, if the benefits on tax reduce total tax below AMT limit, taxpayer has to pay the higher AMT amount.
Previous Year is the year in which the income earned becomes taxable in the following assessment year. It can be stated as the Financial year preceding the Assessment year. For example- If the present assessment year is 2015-16 then the previous year will be 2014-2015.
3. Do you know what is Taxation?
Taxation is one of the mode used by the government to finance their expenditure by imposing charges on citizens and corporate entities. Government levy tax on citizens to encourage or discourage certain economic decisions.
A twelve month period starting from 1 April and ending at 31 March which is used for calculating various annual financial statements in businesses and organization is known as financial year.
5. Tell me what do you mean by fair rent?
Fair rent is the rent charged for a private property that is fixed and registered by a rent officer. Fair rent is decided on the basis of size, condition, and usefulness of the property. Fair rent is calculated in place of mortgage interest, other financing costs and depreciation related to certain property, including land, buildings and non movable equipment. It is calculated only once; at the time the facility begins operation.
A “person” means an individual, an ordinary partnership, a non-juristic body of person and an undivided estate. The term "person" under the Income Tax Act includes an individual, a Hindu Undivided Family, a Company, a Firm, an Association of Persons, a Local Authority and Artificial Juridical persons.
7. Do you know what is reserves and surpluses?
Reserves and Surpluses indicate that portion of the earnings, receipt or other surplus of the company appropriated by the management for a general or specific purpose other than provisions for depreciation or for a known liability. Reserves are classified as: Capital Reserve and Capital Redemption Reserve.
8. Explain me which income is considered as accrued income?
Income which has been earned but not yet received is known as accrued income. Income is recorded in the same accounting period in which it is earned rather than in the subsequent period in which it will be received.
9. Do you know what is balanced Capitalization?
Capitalization is a collection of share capital, loans, reserves and debentures. It represents permanent investment in companies and it also removes the need of long-term loan plans. It is used to show the reality of the industry by promoting competition, development, profit and investment between individuals, companies and businesses. Balance capitalization is part of this Capitalization only where it is compared to the relative importance, value and other things to make it proportionate in every sense. In balance capitalization debits and credits should be equal on both sides and the share should be shared among all in equal proportions.
10. Please explain explain deferred tax asset?
When a firm has overpaid on taxes then the amount is recorded in the balance sheet as deferred asset tax which is also known as provision for future taxation. Deferred tax asset arises when the firm, pays taxes early or have paid excess of tax and is entitled to get some money back from the tax authorities.
11. Tell us who are resident but not ordinary resident?
A resident but not ordinary resident is the one who is not the resident in India for 9 out of the 10 preceding previous years or he has during the 7 preceding years been in India for a period of, or period amounting to 729 days or less.
12. Tell me do you know what is goodwill?
Goodwill is an asset that captures excess of the purchase price over fair market value of an acquired business. Let's walk through the following example: Acquirer buys Target for $500m in cash. Target has 1 asset: PPE with book value of $100, debt of $50m, and equity of $50m = book value (A-L) of $50m.
☛ Acquirer records cash decline of $500 to finance acquisition
☛ Acquirer's PP&E increases by $100m
☛ Acquirer's debt increases by $50m
☛ Acquirer records goodwill of $450m
13. Tell me at what rate firms are required to pay tax on their income?
Income Tax is paid at 30% of taxable income. Surcharge is charged at 10% of the Income Tax, where taxable income is more than Rs. 1 crore. (Marginal Relief in Surcharge, if applicable) and Education Cess is 3% of the total of Income Tax and Surcharge.
14. Do you know what is Permanent Account Number (PAN)?
Permanent Account Number (PAN) is a ten-digit alphanumeric number, which is issued by the Income Tax Department in the form of laminated card as PAN enables the department to link all kinds of transactions of the person with the department. Transactions include tax payments, TDS/TCS credits, returns of income/wealth/gift/FBT, specified transactions, correspondence, etc. PAN helps the department in maintaining a fair record of every persons transactions through a ten digit number in order to avoid tax evasion in any case.
15. Do you know what is deferred tax?
A tax liability that a company has to pay but does not pay at that current point and it will be responsible for paying it in future is termed a deferred tax. Deferred tax occurs due to the difference in a company's balance sheet, due to the differences between accounting practices and tax regulations.
16. Tell me what is opportunity Cost?
Opportunity Cost is the cost incurred by the organisation when one alternative is selected over another. For example: A person has Rs. 100000 and he has two options to invest his money, either invests in fixed deposit scheme or buy a land with the money. If he decides to put is money to buy the land then the loss of interest which he could have received on fixed deposit would be an opportunity cost.
17. Please explain us are you a team player?
Almost everyone says yes to this question. But it is not just a yes/no question. You need to provide behavioral examples to back up your answer.
A sample answer: "Yes, I'm very much a team player. In fact, I've had opportunities in my work, school and athletics to develop my skills as a team player. For example, on a recent project…"
Emphasize teamwork behavioral examples and focus on your openness to diversity of backgrounds. Talk about the strength of the team above the individual. And note that this question may be used as a lead in to questions around how you handle conflict within a team, so be prepared.
18. Please explain what is luxury tax?
A tax imposed on goods and services that are non-essential or not included in the necessities. Luxury tax is included in the indirect tax and is incurred by those who purchase or use the product. Ad valorem tax or progressive tax are some luxury tax that is imposed on high priced goods such as cars above a certain value or engine size, villas etc.
19. Differentiate between Financial Year, Assessment Year and Previous Year?
Assessment year and previous year are the types of financial year which consists of twelve months starting from 1 April to 31 March. Previous financial year is the preceding year of assessment financial year.
Assessment year is the period that starts from 1 April and ends on 31 march. It is the year immediately succeeding the financial year wherein the income of the previous financial year is assessed. Government use assessment year for calculating tax on the previous year.
For example : If the current assessment year is 2015-16, which starts from I April 2015 and ends on 31 March 2016. To this assessment year financial year is 2014-15, starting from I April 2014 and ends on 31 March 2015. You will be calculating income tax for financial year in the assessment year.
21. What is your greatest strength as Income Tax Expert?
This is your time to shine. Just remember the interviewer is looking for work related strengths. Mention a number of them such as being a good motivator, problem solver, performing well under pressure, being loyal, having a positive attitude, eager to learn, taking initiative and attention to detail. Whichever you go for, be prepared to give examples that illustrate this particular skill.
22. Explain me what is capitalization? What is its importance?
Capitalization is a term which has different meanings in both financial and accounting context. Capitalization in accounting means the cost to buy an asset which is included in the price of the asset whereas in financial terms it is the cost which is required to buy an asset which includes price of a particular asset and it also include the retained earnings of a company with stock debt and long term debt. There are two kinds of capitalization which are called as Over-capitalization and another is called as Under-capitalization. Capitalization is very import aspect in determining the value of the company in the market which is based on the economic structure of the company. This aspect depends on the previous records and economics of the company. This also shows a particular behaviour of the companies structure and allows them to create a plan to do the marketing.
23. Regarding salary, what are your expectations as Income Tax Expert?
This question is always a tricky one and a dangerous game to play in an interview. It is a common mistake to discuss salary before you have sold yourself and like in any negotiation, knowledge is power. Do your homework and make sure you have an idea of what this job is offering. You can try asking them about the salary range. If you want to avoid the question altogether, you could say that at the moment, you are looking to advance in your career and money isn't your main motivator. If you do have a specific figure in mind and you are confident you can get it, then it may be worth going for.
24. Tell me suppose if a NRI buys property in India, does he has to pay property tax?
Any income or capital gain that the NRI generates from the sale/ rent or lease of a valued property or an asset based in India will be taxed as per the Income Tax rules. f the property is more than 3 years old, long term capital gains tax will be incurred on the sale of the property. On long term capital gains, tax is payable at 20%.
25. Please explain what is tax audit?
A tax audit is assessment of an organization's or individual's tax return by Internal Revenue Service (IRS) in order to find out that the income and deductions are recorded accurately.
26. Please explain what is the difference between costing and cost accounting?
Costing is the process of ascertaining costs whereas cost accounting is the process of recording various costs in a systematic manner, in order to prepare statistical date to ascertain cost.
27. Do you know how is the income statement linked to the balance sheet?
Net income flows into retained earnings.
28. Tell me what is Entertainment Tax?
Entertainment tax is imposed on every financial transaction that is related to entertainment such as movie tickets, major commercial shows and big private festivals, amusement parks, video games, exhibitions, celebrity stage shows, sports activities etc.
As per the Indian Constitution, entertainment is included in List 2. Revenue collected from entertainment tax is reserved primarily for the state governments.
29. What is your biggest weakness as Income Tax Expert?
This is a challenging question-as if you have no weaknesses you are obviously lying! Be realistic and mention a small work related flaw. Many people will suggest answering this using a positive trait disguised as a flaw such as "I'm a perfectionist" or "I expect others to be as committed as I am." I would advocate a certain degree of honesty and list a true weakness. Emphasize what you've done to overcome it and improve. This question is all about how you perceive and evaluate yourself.
30. Do you know what is Excise & Service Tax? What is the difference?
Excise tax is an indirect tax that is imposed on the manufacture, sale or use on certain types of goods and products. Excise taxes are generally imposed on goods such as cigarettes or alcohol, also in the price of an activity such as gambling. Excise taxes may be imposed by both Federal and state authorities.
Service tax is an indirect tax imposed by the government on service providers on certain service transactions, but is actually paid by the customers. Services provided by air-conditioned restaurants and short term accommodation provided by hotels, inns, etc are included in the taxable services.
The major difference between excise tax and service tax is that excise tax is charged on manufactured goods and sales tax is imposed on certain services provided.
31. Tell us who are non resident?
An individual who does not fulfill the below mentioned conditions in that previous year will be considered as Non Resident:
1. You have to be in India atleast 182 days in that year, OR
2. You have to atleast be in India for 365 days during 4 years preceding that year and atleast 60 days in that year.
32. Please explain what is a deferred tax liability and why might one be created?
Deferred tax liability is a tax expense amount reported on a company's income statement that is not actually paid to the IRS in that time period, but is expected to be paid in the future. It arises because when a company actually pays less in taxes to the IRS than they show as an expense on their income statement in a reporting period.
Differences in depreciation expense between book reporting (GAAP) and IRS reporting can lead to differences in income between the two, which ultimately leads to differences in tax expense reported in the financial statements and taxes payable to the IRS.
33. Explain me how has your education prepared you for your career as Income Tax Expert?
This is a broad question and you need to focus on the behavioral examples in your educational background which specifically align to the required competencies for the career.
An example: "My education has focused on not only the learning the fundamentals, but also on the practical application of the information learned within those classes. For example, I played a lead role in a class project where we gathered and analyzed best practice data from this industry. Let me tell you more about the results…"
Focus on behavioral examples supporting the key competencies for the career. Then ask if they would like to hear more examples.
34. Please walk me through a cash flow statement?
A. Start with net income, go line by line through major adjustments (depreciation, changes in working capital and deferred taxes) to arrive at cash flows from operating activities.
☛ Mention capital expenditures, asset sales, purchase of intangible assets, and purchase/sale of investment securities to arrive at cash flow from investing activities.
☛ Mention repurchase/issuance of debt and equity and paying out dividends to arrive at cash flow from financing activities.
☛ Adding cash flows from operations, cash flows from investments, and cash flows from financing gets you to total change of cash.
☛ Beginning-of-period cash balance plus change in cash allows you to arrive at end-of-period cash balance.
35. Do you know what is cost accountancy? What are the objects of Cost Accountancy?
Cost accountancy is the application of costing and cost accounting principles, methods and techniques to the science, art and practice of cost control and the ascertainment of profitability as well as the presentation of information for the purpose of managerial decision making.
Following are the objects of Cost Accountancy
☛ Ascertainment of Cost and Profitability
☛ Determining Selling Price
☛ Facilitating Cost Control
☛ Presentation of information for effective managerial decision
☛ Provide basis for operating policy
☛ Facilitating preparation of financial or other statements
