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

Mr. Vikram Oberoi, a resident individual under the default new tax regime, has a total income of ₹50,50,000 for tax year 2026-27, entirely normal income. Tax on a total income of ₹50,00,000 is ₹10,80,000 before surcharge and cess. Taking surcharge of 10% on income above ₹50 lakh with marginal relief, what is his total tax liability including 4% cess?

His liability is ₹11,75,200. Tax plus 10% surcharge would be ₹12,04,500, but marginal relief caps it at the tax on ₹50 lakh plus the ₹50,000 excess income, namely ₹11,30,000. Adding 4% cess of ₹45,200 gives ₹11,75,200.

  1. A₹11,75,200Correct
  2. B₹12,52,680
  3. C₹11,30,000
  4. D₹12,04,500

Explanation

Tax on 50,50,000 = 10,80,000 + 30% of 50,000 = 10,95,000. Surcharge at 10% = 1,09,500, so tax plus surcharge = 12,04,500. Marginal relief caps tax plus surcharge at 10,80,000 + 50,000 (excess income) = 11,30,000. Cess at 4% = 45,200, so total = 11,75,200. ₹12,52,680 ignores marginal relief and ₹11,30,000 omits cess.

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