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

Meera Iyer, a resident individual, is under the default new tax regime for tax year 2026-27 and has total income of Rs 12,10,000, all taxed at normal slab rates. Slabs are nil up to Rs 4L, 5% to Rs 8L, 10% to Rs 12L and 15% to Rs 16L. What is her tax liability including 4% cess?

Her tax is Rs 10,400. Slab tax of Rs 61,500 is restricted by marginal relief to the Rs 10,000 by which income exceeds Rs 12,00,000, since the rebate itself is not available above that limit. Adding 4% cess of Rs 400 gives Rs 10,400.

  1. ARs 63,960
  2. BRs 10,400Correct
  3. CRs 10,000
  4. DRs 1,560

Explanation

Slab tax is Rs 20,000 + Rs 40,000 + Rs 1,500 = Rs 61,500. The rebate is not available because income exceeds Rs 12L, but marginal relief limits tax to the income above Rs 12L, which is Rs 10,000. Cess of 4% adds Rs 400, giving Rs 10,400. Rs 63,960 ignores marginal relief, and Rs 1,560 wrongly deducts the full Rs 60,000 rebate.

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