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

Ms. Kavya Reddy, a resident individual, has a net total income of ₹12,10,000 for tax year 2026-27, all from salary and taxed under the default new regime (nil up to ₹4 lakh, 5% for ₹4-8 lakh, 10% for ₹8-12 lakh, 15% for ₹12-16 lakh). Income exceeds ₹12,00,000, so the full rebate is not available, but marginal relief applies. What is her tax liability including 4% cess?

Her liability is ₹10,400. Slab tax of ₹61,500 is cut by marginal relief to ₹10,000, the amount by which income exceeds ₹12,00,000, and 4% cess of ₹400 is added. Without relief she would pay far more than her income above the threshold.

  1. A₹63,960
  2. B₹61,500
  3. C₹10,000
  4. D₹10,400Correct

Explanation

Slab tax on ₹12,10,000 = ₹20,000 + ₹40,000 + 15% of ₹10,000 (₹1,500) = ₹61,500. With marginal relief, tax is limited to the income above ₹12,00,000, which is ₹10,000. Cess at 4% on ₹10,000 is ₹400, so the total is ₹10,400. ₹63,960 is slab tax plus cess with no marginal relief.

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