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

Mrs. Sunita Rao, a resident individual aged 65, has total income of ₹6,00,000 for tax year 2026-27, all taxable at normal rates. She opts out of the default regime and is taxed under the old regime, where the basic exemption limit for a senior citizen is ₹3,00,000 and rebate is available only if total income does not exceed ₹5,00,000. Slabs: 5% on ₹3,00,000-₹5,00,000; 20% on ₹5,00,000-₹10,00,000. What is her tax liability including 4% cess?

Her liability is ₹31,200. Using the senior-citizen exemption limit of ₹3,00,000, slab tax is ₹30,000; the rebate is unavailable because income exceeds ₹5,00,000, and 4% cess of ₹1,200 is added.

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

Explanation

Tax: 5% of ₹2,00,000 = ₹10,000 plus 20% of ₹1,00,000 = ₹20,000, total ₹30,000. Rebate is not available since income exceeds ₹5,00,000. Cess 4% = ₹1,200, so liability is ₹31,200. ₹33,800 uses the ₹2,50,000 general exemption limit instead of ₹3,00,000.

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