Question

Jogen’s taxable income for 2010-11 is Rs.500000. The tax rates are

1. Nil for the first 150000
2. 10% for the 150000 – 300000
3. 20% for the remaining
   His tax liability is
   A) Rs. 45000
   B) Rs. 50000
   C) Rs. 55000
   D) Rs. 60000

Answer 1

The income is 500000 and we are given three slabs which clearly states that the total tax to be nil for the first 150000 and 10% of 150000 and 20% of 200000. Finding the values of percentages and summing them gives his tax liability.

Complete step by step solution:
Now we have the income to be 500000 and we are given three slabs.
The first slab says there is no tax for the first 150000 of his income
So now the remaining is Rs 350000.
The second slab says the tax rate is 10% for the 150000 – 300000
This clearly shows that the tax rate is 10% for the next 150000
And now the remaining amount is Rs.200000
The third slab says the tax rate is 20% for the remaining amount
From this we get the total tax to be nil for the first 150000 and 10% of 150000 and 20% of 200000.
$\Rightarrow total{\text{ }}tax = 0 + \dfrac{{10}}{{100}}\times 150000 + \dfrac{{20}}{{100}}\times 200000 \\\ \Rightarrow total{\text{ }}tax = 15000 + 2\times 20000 \\\ \Rightarrow total{\text{ }}tax = 15000 + 40000 \\\ \Rightarrow total{\text{ }}tax = 55000 \\\$
Therefore his tax liability is Rs.55000

The correct option is (C).

Note:
Many students tend to apply 20% directly as the income is above 300000 but it is wrong we need to split it into three slabs.
Students may also make a mistake in calculating the slab for the second slab . They may take the next 300000 for the second slab but the maximum limit for the second slab is only 150000.