Question 1 (a)

Tax liability on a taxable income of ₹3,49,800, with the rebate under section 87A (as set, 1961 Act, AY 2019-20)

3 marks

Time to write: About 6 minutes

From an older CBCS paper

Question

Question 1 (a) · 3 marks

Calculate the income tax liability for AY 2019-20 of Mr. Shikhar, aged 36 years and a resident individual, whose Taxable Income is ₹ 3,49,800. 3

Paper note: The as-set version: set and answered under the Income-tax Act, 1961 for assessment year 2019-20 (previous year 2018-19), with the dates as printed.

Reworded from the university paper: names and figures differ, the task is the same. The original paper belongs to the University of Delhi. See DU's question bank.

Before you write

Read off the question and its marks

6 minfor 3 marks

Read from the question

CalculateHead by head: each income under its head, exempt items marked exempt, then the deductions and the tax.

Write it in this order

1 Tax at the slab rates 1 mark 2 min
2 Rebate under section 87A for 2019-20 1 mark 2 min
3 Cess and rounding 1 mark 2 min

123

Try it first. About 6 minutes for 3 marks. Write it out, then open the solution.

Solution

Hover or tap a marked figure, like 72,000, to see how it is made and where else it appears.

Facts used

Mr. Shikhar is a resident individual aged 36, so the general slabs apply to him (he is below 60). His taxable income for the assessment year 2019-20 is ₹3,49,800, already a multiple of ten (section 288A).

Slabs for an individual below 60 (Finance (No. 2) Act, 2019, First Schedule, Part I, Paragraph A, item (I)): nil up to ₹2,50,000; 5% on ₹2,50,001 to ₹5,00,000; 20% on ₹5,00,001 to ₹10,00,000; 30% above ₹10,00,000; health and education cess at 4% of the tax (Finance (No. 2) Act, 2019, section 2(11)).

Computation of tax liability

Particulars	₹
Taxable income	3,49,800
Tax on the first ₹2,50,000	Nil
Tax on the next ₹99,800 at 5%	4,990
Tax on total income	4,990
Less: rebate under section 87A (the lower of the tax and ₹2,500)	2,500
Tax after rebate	2,490
Add: health and education cess at 4%	99.60
Tax and cess	2,589.60
Tax liability, rounded to the nearest ten rupees (section 288B)	2,590

Notes

Rebate. Section 87A gives a resident individual whose total income does not exceed the stated limit a rebate from the tax on that income, equal to the tax or the stated amount, whichever is lower. The held text shows a limit of ₹5,00,000 and an amount of ₹12,500, but its footnotes show that those figures took the place of ₹3,50,000 and ₹2,500 only from 1 April 2020. For assessment year 2019-20 the limit is therefore ₹3,50,000 and the rebate at most ₹2,500. Mr. Shikhar's total income of ₹3,49,800 is within the limit, so he gets ₹2,500.
Order. The rebate comes off the tax computed on total income; the cess is then charged on the tax left after the rebate (Finance (No. 2) Act, 2019, section 2(11)).
Rounding. The tax payable is rounded off to the nearest multiple of ten rupees (section 288B): ₹2,589.60 becomes ₹2,590.
Had his income been ₹200 higher, at ₹3,50,000, he would still get the rebate; ₹1 more than ₹3,50,000 takes it away altogether.

Where the 3 marks sit

#	Component	Marks
1	Tax at the slab rates	1
2	Rebate under section 87A for 2019-20	1
3	Cess and rounding	1
	Total	3

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