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

Mr. Arvind Nair, a resident individual aged 35, has a net total income of ₹11,50,000 for tax year 2026-27. All of it is normal income, with no special-rate income. He is taxed under the default new regime (section 202 slabs: nil up to ₹4,00,000, 5% for ₹4-8 lakh, 10% for ₹8-12 lakh, 15% for ₹12-16 lakh, and so on) and is eligible for the rebate for residents (up to ₹60,000 where income does not exceed ₹12,00,000). What is his total tax liability including cess?

His tax liability is nil. Slab tax on ₹11,50,000 under the new regime is ₹55,000, and because income is within ₹12,00,000 the rebate covers the whole tax, which is below the ₹60,000 cap. Nothing remains to attract health and education cess.

  1. A₹57,200
  2. B₹55,000
  3. C₹NilCorrect
  4. D₹60,000

Explanation

Tax on slabs = 5% of ₹4,00,000 = ₹20,000, plus 10% of ₹3,50,000 = ₹35,000, giving ₹55,000. Income is within ₹12,00,000, so the rebate equals the lower of the tax (₹55,000) and ₹60,000, which is ₹55,000. Tax after rebate is nil, so cess is also nil. ₹57,200 is wrong because it adds cess and ignores the rebate.

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