Chapter 7: Income Tax

Example 3. Mr. Pawan Kumar a retired Judge is 66 years old. He gets pension of Rs. 18,600 per month and earns Rs. 18,400 annually from other source. He contributes Rs. 5000 per month toward PPF and invests Rs. 70,000 in National Saving certificate. He donates Rs. 1600o to a charitable trust (eligible for 50% deduction). Calculate the income tax he has to pay during the year.

Assume the following for calculating the income tax:

  1. Exemptions on savings: Savings up to Rs. 1 lakh in specified investments will be deducted from the income before calculating the tax
  2. Exemptions on Donations: Deduction on income is allowed on certain specified donations.
  3. >Rates of Income Tax (senior citizen)
    Taxable Income Rates
    1. Upto 1.85 lakh
    2. More than Rs. 1.85 lakh up to Rs. 2.5 lakh
    3. More than 2.5 lakh
    		 Nil
    20%
    30%
  4. Education Cess: 2% on tax payable.

Solution:- Gross Income

  1. Pension = Rs. 18,600 X 12 = Rs. 2,23,200
  2. Salary                                      = Rs. 1,84,000
                                           Total = Rs. 4,07,200

Saving:

  1. Contribution to PPF = Rs. 5000 X 12
                                         = Rs. 60,000
  2. Investment in NSCs = Rs. 70,000
                                Total = Rs. 1,30,000

Saving = Rs. 4.07.0200 - Rs. 1,00,000

= Rs. 3,07,200

Donations:

To a charitable Trust = 50% of Rs.10,000

Rs. = 5000

Taxable income = Rs. 3,07,200 - Rs. 5000

= Rs. 3,02,200

Computation of Income Tax:

  1. Tax on first 1.85 lakh = Nil
  2. Tax on next        = Rs.(2,50,000 - 1,85,000)
                                = 20% of Rs. 65,000
                                 = Rs. 20/100 X 65,000
                                 = Rs. 13,000
  3. Tax on next     = Rs. (3,07,200 - 2,50,000)
                             = 30% of Rs. 57,200
                             = Rs. 30/100 X 57,200
                             = Rs. 17,160

Tax Payable Total = 13,000 + 17,160

= Rs. 30,160

Education Cess = 2% of Rs. 30,160

= Rs. 603.20

Net Tax Payable = Tax Payable + Education cess

= Rs. 30,160 + 603.20

= Rs. 30,763

 

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Subjects Maths (Part-1) by Mr. M. P. Keshari
Chapter 1 Linear Equations in Two Variables
Chapter 2 HCF and LCM
Chapter 3 Rational Expression
Chapter 4 Quadratic Equations
Chapter 5 Arithmetic Progressions
Chapter 6 Instalments
Chapter 7 Income Tax
Chapter 8 Similar Triangles