Answer questions 1 and 2 based on the following information:
IncomeTax rates for the financial
year 200910


Individual & HUF below age of
65 Years

Women below age of 65 Years

Tax Rates

Income
upto Rs. 1,60,000/

Income
upto Rs. 1,90,000/

Nil

Rs.
1,60,001/ to Rs. 3,00,000/

Rs.
1,90,001/ to Rs. 3,00,000/

10%

Rs.
3,00,001/ to Rs. 5,00,000/

Rs.
3,00,001/ to Rs. 5,00,000/

20%

Above
Rs. 5,00,001/

Above
Rs. 5,00,001/

30%

Educational Cess: An additional sur charge called
“Educational Cess” is levied at the rate of 2% on the
amount of income tax.
Secondary and Higher Educational Cess: An additional sur
charge called “Secondary and Higher Educational Cess” is levied at the rate of
1% on the amount of income tax.
Q1) Sangeeta is a young working lady. Towards the end of the
financial year 200910, she found her total annual income to be Rs. 3,37,425/.
What % of income is payable as income tax? (1 Mark)
(1)5.64 (2)6.82 (3)7.38 (4)8.10 (5)
None of the above
Q2) Mr.Madan observed his tax deduction at source done by his
employer, as Rs. 3,17,910/. What was his total income (in Rs.) if he neither
has to pay an additional tax nor is eligible for any refund? (2 Marks)
(1)13,48,835/ (2)
14,45,522/ (3) 14,47,169/ (4) 15,70,718/ (5) None of the above
Solution follows here:
Solution:
These two are straight forward problems. The only difficulty
we face here is of a bit complex calculation.
Q1)
Sangeeta’s income = Rs. 3,37,425/
Tax on first Rs. 1,90,000 = 0
Tax on income from Rs. 1,90,000/ to Rs. 3,00,000/ = 10%
= 10% on (3,00,000  1,90,000) = 10% on 1,10,000/ = Rs.
11,000/
Tax on income from Rs. 3,00,000/ to Rs. 5,00,000/ = 20%
= 20% on (3,37,425  3,00,000 ) = 20% on (37,425) = Rs. 7,485/
Net tax = 11,000 + 7,485 = 18,485/
Given that “Educational Cess” is 2% and “Secondary and Higher
Educational Cess” is 1%
=> total cess = 3% on income tax = 3% on 18,485 ≈ Rs 555
Total income tax = 18,485 + 555 = Rs. 19,040/
% of tax on income = (19040 / 337425) * 100 ≈ 5.64%
Answer
(1)
Q2)
Let Madan’ income be x.
Tax on first Rs. 1,60,000 = 0
Tax on income from Rs. 1,60,000/ to Rs. 3,00,000/ = 10%
= 10% on (3,00,000  1,60,000) = 10% on 1,40,000/ = Rs. 14,000/
Tax on income from Rs. 3,00,000/ to Rs. 5,00,000/ = 20%
= 20% on (5,00,000  3,00,000 ) = 20% on (2,00,000) = Rs. 40,000/
14,000 + 40,000 = 54,000, this is less than the Madan’s tax
of Rs. 3,17,910 => Madan’s income is
greater than Rs. 5,00,000/
So, if we go a step further,
Tax on income more than Rs. 5,00,000/ = 30%
= 30% of (x  5,00,000)
Net tax = 14,000 + 40,000 + {30% of (x  5,00,000)}
To find final total tax, 3 % of cess shall be added to this
=> Total tax = 1.03 * [14,000 + 40,000 + {30% of (x  5,00,000)}]
= 3,17,910
On simplifying, we get x ≈ 13,48,835/
Answer (1)
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