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CA Intermediate · Taxation · Income Tax Liability - Computation and Optimisation

Karthik Rao, a resident individual aged 30, has salary income of ₹12,95,000 for tax year 2026-27 and no other income or deductions apart from the standard deduction. He is taxed under the default regime. Total income exceeds ₹12,00,000 slightly, so marginal relief on the rebate applies. What is his tax payable including 4% cess?

Tax payable is ₹20,800. Income after standard deduction is ₹12,20,000 and slab tax is ₹63,000. Marginal relief caps tax at the ₹20,000 by which income exceeds ₹12,00,000, and 4% cess of ₹800 is added.

  1. A₹20,800Correct
  2. B₹65,520
  3. C₹20,000
  4. D₹3,120

Explanation

Total income is 12,95,000 − 75,000 = ₹12,20,000. Slab tax is ₹20,000 + ₹40,000 + 15% of ₹20,000 (₹3,000) = ₹63,000. Marginal relief limits tax to the income above ₹12,00,000, which is ₹20,000. Cess of 4% is ₹800, giving ₹20,800. ₹65,520 ignores relief, and ₹3,120 wrongly deducts the full ₹60,000 rebate.

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