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CS Executive · Tax Laws and Practice · Basic Concept of Income Tax

Under the Income-tax Act, 2025 (applicable from the June 2027 session), where the total income of an assessee includes income on which no income-tax is payable, the assessee is entitled to a deduction from the tax on total income equal to tax computed at which rate on that exempt amount?

The deduction is computed at the average rate of income-tax. Section 190 of the Income-tax Act, 2025 reduces the tax on total income by tax calculated at the average rate on the income that is not taxable, rather than at the maximum marginal rate or a flat rate.

  1. AThe maximum marginal rate applicable to the assessee
  2. BThe average rate of income-taxCorrect
  3. CA flat rate of 20%
  4. DThe rate applicable to the highest slab only

Explanation

Section 190 of the Income-tax Act, 2025 allows a deduction from the tax on total income equal to tax calculated at the average rate of income-tax on the amount on which no tax is payable. The maximum marginal rate would over-relieve the assessee and is not what the section provides.

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