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

Rohan Kapoor, a resident individual aged 40, has business income of ₹50,10,000 for tax year 2026-27 and no other income. He is taxed under the default regime. Surcharge is 10% on income above ₹50,00,000, subject to marginal relief. Tax on ₹50,00,000 is ₹10,80,000. What is his total tax payable including 4% cess?

Total tax is ₹11,33,600. Tax plus surcharge is capped at the tax on ₹50,00,000 plus the ₹10,000 excess income, that is ₹10,90,000, by marginal relief. Adding 4% cess of ₹43,600 gives ₹11,33,600.

  1. A₹11,33,600Correct
  2. B₹12,38,952
  3. C₹10,90,000
  4. D₹11,26,320

Explanation

Tax on ₹50,10,000 is ₹10,80,000 + 30% of ₹10,000 = ₹10,83,000. Surcharge at 10% is ₹1,08,300, but tax plus surcharge cannot exceed ₹10,80,000 + ₹10,000 = ₹10,90,000 after marginal relief, so surcharge is ₹7,000. Cess at 4% on ₹10,90,000 is ₹43,600, giving ₹11,33,600. ₹12,38,952 ignores marginal relief.

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