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Word Problem 4 (Income tax )

Problem 4: Income tax on annual income range of Rs 1800001 to Rs 1800000 is applicable as sum of amount of Rs 140000 and 17.5% of the amount exceeding  Rs 1800000 , then if the annual income of a person is Rs 1885000, then calculate the amount of income tax if he paid zakat of Rs 47125.

a) Rs 146628.12                        b) Rs 146638.12                   c) Rs 146628.21                         d) Rs 146627.12

Solution:

We are give;

Taxable income slab:

Annual income range Rate of tax
Rs 18000001 – Rs 2500000 Rs 140000+17.5% of the amount exceeding  Rs 1800000

Annual income = Rs 1885000

Zakat paid = Rs 47125

 

To find the taxable income we first exclude from annual income the amount which he paid away as zakat !

i-e

Taxable income = Annual income – zakat = 1885000-47125=Rs 1837875

This taxable income  lies in the above given slab range , so tax will be ;

Tax = Rs 1400000 + the 17.5% of amount exceeding than Rs 1800000

but, amount exceeding than Rs 1800000 = 1837875-1800000=Rs 37875

so,

\[ Tax = 1400000+\frac{17.5}{100}\times (37875 )=1400000+ 6628.12=Rs146628.12 \]

 

So , he has to pay tax of Rs 146628.12 on his annual income

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