d tax invoice for taxable income on yearly basis for annual

# Word Problem 3 (Tax and Income Tax)

Problem 3: If tax on annual income range of Rs 400001 to Rs 750000 is 5% of the amount exceeding Rs 4000000, calculate the amount of income tax at 5% of a person whose income is Rs 578000 for the year.

a) Rs 8000                b) Rs 8900                       a) Rs 8700                           a) Rs 9000`

Solution:

## Tax slab

Tax slab is the limit for taxable income. This limit is set by income tax departments on annual basis. Tax slab depends upon government policies. Yearly tax invoice is becomes  ready keeping in view the tax slab for the year.

Given Tax slab ;

 Annual income range Rate of tax Rs 400001 – Rs 750000 5% of the amount exceeding Rs 400000

We are given;

Annual Income of the person = Rs 57800

So taxable income i-e amount that exceeds 400000 is  as under;

Taxable Income= 578000-400000= Rs 178000

Tax on this difference will be applicable at rate of 5% ( as per  slab)

so,

$Tax = \frac{5}{100}\times 178000 = Rs 8900$

So he will pay a tax of Rs 8900 on his annual income !

Whole annual income becomes tax able if it crosses the slab limit. It is perception that only the amount exceeding the slab is taxable which is wrong. Copyright secured by Digiprove © 2020