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Question
Which of the following is a tax on tax?
Which of the following is a tax on tax?
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Solution
The correct option is D Surcharge
A surcharge is a tax on tax. It is an additional tax calculated on the payable tax, and not on the income generated. For example, if there exists an income tax of 20% and a surcharge of 10% on an income of ₹100, the payable tax would be ₹20. Then, a surcharge of 10% calculated on ₹20 would amount to ₹2. So, the total payable tax would be ₹20 + ₹2 = ₹22.
A surcharge is a tax on tax. It is an additional tax calculated on the payable tax, and not on the income generated. For example, if there exists an income tax of 20% and a surcharge of 10% on an income of ₹100, the payable tax would be ₹20. Then, a surcharge of 10% calculated on ₹20 would amount to ₹2. So, the total payable tax would be ₹20 + ₹2 = ₹22.
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