Question

Ashwin's annual salary was Rs. 150,000. He contributed Rs. 5,000to Public Provident Fund and Rs. 10,000 to National Savings Certificate. The income tax paid by him is

• A. Rs. 10,200
  
• B. Rs. 10,500
  
• C. Rs. 10,800
  
• D. Rs. 11,200
  

Answer 1

The correct option is B Rs. 10,500

Annual Salary = Rs. 150,000

Standard Deduction = Rs. 30,000

Net taxable income = Rs. 150,000 $-$ Rs. 30,000 $=$ Rs. 120,000

The tax to be paid if Ashwin had no investments

$=1000+\frac{20}{100}(120000-60000)$

$=1000+12000=13000$

Contribution to PPF = Rs. 5,000

Contribution to NSC = Rs. 10,000

Total contribution = Rs. 15,000

That is, he would have recieved a rebate of 20% on his savings, i.e., $\frac{20}{100}\left(15000\right)=Rs.3000$

Surcharge Rate = 5%

$=\frac{5}{100}(13000-3000)$

$=\frac{5}{100}\left(10000\right)=500$

Therefore, amount of tax to be paid by him = Rs. 10,000 + Rs. 500 = Rs. 10,500.