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

Meera Iyer, a resident individual aged 35 from Chennai, has a total income of ₹10,00,000 for tax year 2026-27. All of it is normal-rate income and none is special-rate income. She does not opt out of the default (new) tax regime. Using the slab rates of the Income-tax Act, 2025 for the year, what is her total tax liability including health and education cess?

Her liability is nil. Slab tax under the default regime is ₹40,000, but a resident individual with total income up to ₹12,00,000 gets a rebate of up to ₹60,000. The rebate wipes out the entire ₹40,000 tax, so no cess is payable either.

  1. ANilCorrect
  2. B₹40,000
  3. C₹41,600
  4. D₹60,000

Explanation

Slab tax: 4,00,001-8,00,000 at 5% = ₹20,000; 8,00,001-10,00,000 at 10% = ₹20,000; total ₹40,000. Total income does not exceed ₹12,00,000, so the rebate equals the lower of the tax (₹40,000) and ₹60,000, which is ₹40,000. Tax after rebate is nil, so cess is nil. ₹41,600 wrongly ignores the rebate and adds cess.

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