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

Mr. Imran Sheikh, a resident individual aged 40, opts out of the default new regime for tax year 2026-27. His net total income under the old regime is ₹5,20,000, all normal income. Old-regime slabs are nil up to ₹2,50,000, 5% for ₹2.5-5 lakh, 20% for ₹5-10 lakh, and cess is 4%. The old-regime rebate applies only where total income does not exceed ₹5,00,000. What is his tax liability?

His liability is ₹17,160. Slab tax on ₹5,20,000 under the old regime is ₹16,500, and since income is above ₹5,00,000 the rebate is denied entirely. Adding 4% cess of ₹660 gives the final figure.

  1. A₹16,500
  2. B₹4,000
  3. C₹17,160Correct
  4. D₹Nil

Explanation

Slab tax = 5% of ₹2,50,000 (₹12,500) + 20% of ₹20,000 (₹4,000) = ₹16,500. Income exceeds ₹5,00,000, so the old-regime rebate is not available at all. Cess at 4% is ₹660, giving ₹17,160. ₹16,500 omits cess, and nil wrongly grants the rebate.

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