Word Problem 5 (Tax, Charity, and Income tax)

Problem 5: If taxable income slab is set for annual income with range of Rs 180000 to Rs 2500000 and rate of tax is set as Rs 140000+17.5% of the amount exceeding 1800000, find the tax to be paid by a person whose annual income is Rs 2085000 and he also gives charity of Rs 52125 during the year.

a) Rs 180753                                  b) Rs 180754                       c) Rs 180743                         d) Rs 180756

Solution:

Here we are given ;

Tax slab :

Total annual income = Rs 2085000

Charity amount = Rs 52125

Taxable income = 2085000 – 52125 = 2032875

Thus income after excluding charity amount is Rs 2032875 which falls in the above given taxable income slab.

Tax will be applicable on the amount which exceeds 1800000 (given). So we find that amount first!

The Exceeding amount = Income – 1800000= 2032875 – 1800000=  Rs 232875

On this amount the tax will be Rs 140000+17.% of taxable income;

i-e

\[ Tax = 140000+\frac{17.5}{100}\times 2032875=140000+40753=Rs 180753 \]

So the income tax he will pay is Rs Rs 180753

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