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

Mr. Gopal Nair, a resident individual aged 65, has business income of ₹6,00,000 for tax year 2026-27 and no other income. He opts for the old regime, where the basic exemption for a senior citizen is ₹3,00,000, with 5% on the next ₹2,00,000 and 20% on income from ₹5,00,000 to ₹10,00,000. What is his tax liability including 4% cess?

His liability is ₹31,200. With the senior citizen exemption of ₹3,00,000, tax is ₹10,000 on the next ₹2,00,000 and ₹20,000 at 20% on the final ₹1,00,000, totalling ₹30,000. Adding 4% cess of ₹1,200 gives ₹31,200.

  1. A₹31,200Correct
  2. B₹30,000
  3. C₹33,800
  4. D₹20,800

Explanation

Tax is 5% on ₹3,00,000 to ₹5,00,000 = ₹10,000 plus 20% on ₹1,00,000 = ₹20,000, totalling ₹30,000. The old-regime rebate is not available as income exceeds ₹5,00,000. Cess of 4% is ₹1,200, giving ₹31,200. ₹33,800 wrongly uses the ₹2,50,000 exemption of ordinary individuals.

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