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NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Concepts in Taxation

Mr. Iyer, a resident individual under the old tax regime, has taxable income of Rs 8,00,000 consisting only of salary. Which statement about the rate of tax applied to his income is correct?

Individuals are taxed on a progressive slab basis, so each portion of income falling within a slab is taxed at that slab's rate. The higher rate applies only to the income above the threshold, not to the entire income.

  1. AA flat rate applies on the entire income once it crosses the basic exemption limit
  2. BIncome is taxed at progressively higher rates on successive slabs, so only the part within each slab bears that slab's rateCorrect
  3. CThe highest slab rate applies to the whole income if any part falls in that slab
  4. DSalary income is taxed at a flat rate irrespective of amount

Explanation

Individual income tax in India uses a slab system where each slice of income is taxed at the rate for that slice. The highest rate does not apply to the whole income, and there is no flat rate for salary.

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