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

Rohit Malhotra, a resident individual, is assessed under the default regime for tax year 2026-27. His total income is ₹12,40,000, all taxed at normal slab rates. Slabs: up to ₹4 lakh nil; ₹4–8 lakh 5%; ₹8–12 lakh 10%; ₹12–16 lakh 15%. Rebate is not available because income exceeds ₹12,00,000, but marginal relief applies. Cess is 4%. What is his tax payable?

Tax payable is ₹41,600. Slab tax of ₹66,000 would exceed the amount by which income crosses ₹12,00,000, so marginal relief caps tax at ₹40,000. Adding 4% cess of ₹1,600 gives ₹41,600 payable.

  1. A₹68,640
  2. B₹40,000
  3. C₹41,600Correct
  4. D₹66,000

Explanation

Slab tax is ₹20,000 + ₹40,000 + 15% of ₹40,000 (₹6,000) = ₹66,000. Marginal relief limits tax to the income above ₹12,00,000, which is ₹40,000. Cess at 4% on ₹40,000 is ₹1,600, giving ₹41,600. ₹68,640 is slab tax plus cess with no relief.

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