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

Meera Iyer, a resident individual, has for tax year 2026-27 salary income (after standard deduction) of ₹10,75,000 and taxable long-term capital gain on listed equity shares, after the ₹1,25,000 exemption, of ₹1,25,000, taxable at 12.5%. She is under the new regime. The rebate for resident individuals with total income up to ₹12,00,000 is not available against tax on such special-rate capital gains. What is her tax liability including cess?

Her tax is ₹16,250. The rebate wipes out the ₹47,500 tax on normal income, but it cannot reduce the ₹15,625 tax on the 12.5% capital gain, and 4% cess of ₹625 is added. Treating the whole tax as rebated would wrongly give nil.

  1. A₹16,250Correct
  2. B₹0
  3. C₹65,650
  4. D₹15,625

Explanation

Total income is ₹12,00,000, so rebate applies. Tax on normal income ₹10,75,000 is ₹20,000 + ₹27,500 = ₹47,500, fully covered by the rebate (limit ₹60,000). Tax on the capital gain is 12.5% of ₹1,25,000 = ₹15,625, with no rebate. Cess at 4% adds ₹625, giving ₹16,250. ₹65,650 is the figure with no rebate; ₹15,625 omits cess.

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