Question

a) The monthly basic salary of the married Chief of Army Staffs (COAS) General is Rs 79,200 with Rs 2,000 dearness allowance. He gets Dashain allowance which is equivalent to his basic salary of one month. He contributes 109% of his basic salary in Employee's Provident Fund (EPF) and he pays Rs 50,000 as the premium of his life insurance. Given that 196 social security tax is levied upon the income of Rs 6,00,000, 109% and 20% taxes are levied on the next incomes of Rs 2,00,000 and up to Rs 3,00,000 respectively. Answer the following questions. (i) What is his monthly basic salary? Find his taxable income. (iii) Find the total income tax paid by him.​

Answer 1

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(i) Monthly basic salary and taxable income:

Monthly basic salary =
`\displaystyle\sf Rs\ 79,200`

Dearness allowance =
`\displaystyle\sf Rs\ 2,000`

Total monthly income = Monthly basic salary + Dearness allowance

=
`\displaystyle\sf Rs\ 79,200 + Rs\ 2,000`

=
`\displaystyle\sf Rs\ 81,200`

Dashain allowance = Monthly basic salary =
`\displaystyle\sf Rs\ 79,200`

Total monthly income with Dashain allowance = Total monthly income + Dashain allowance

=
`\displaystyle\sf Rs\ 81,200 + Rs\ 79,200`

=
`\displaystyle\sf Rs\ 1,60,400`

Contribution to EPF =
`\displaystyle\sf 109\%` of Monthly basic salary

=
`\displaystyle\sf 109\% * Rs\ 79,200`

=
`\displaystyle\sf Rs\ 86,328`

Life insurance premium =
`\displaystyle\sf Rs\ 50,000`

Taxable income = Total monthly income with Dashain allowance - Contribution to EPF - Life insurance premium

=
`\displaystyle\sf Rs\ 1,60,400 - Rs\ 86,328 - Rs\ 50,000`

=
`\displaystyle\sf Rs\ 24,072`

Therefore, the monthly basic salary is
`\displaystyle\sf Rs\ 79,200` and the taxable income is
`\displaystyle\sf Rs\ 24,072`.

(ii) Total income tax paid:

Social security tax =
`\displaystyle\sf Rs\ 196`

Tax on income of Rs 6,00,000 =
`\displaystyle\sf Rs\ 196`

Tax on income of Rs 2,00,000 =
`\displaystyle\sf 109\%` of Rs 2,00,000

=
`\displaystyle\sf 0.09 * Rs\ 2,00,000`

=
`\displaystyle\sf Rs\ 18,000`

Tax on income from Rs 2,00,001 to Rs 3,00,000 =
`\displaystyle\sf 20\%` of Rs 1,00,000

=
`\displaystyle\sf 0.2 * Rs\ 1,00,000`

=
`\displaystyle\sf Rs\ 20,000`

Total income tax = Social security tax + Tax on income of Rs 2,00,000 + Tax on income from Rs 2,00,001 to Rs 3,00,000

=
`\displaystyle\sf Rs\ 196 + Rs\ 18,000 + Rs\ 20,000`

=
`\displaystyle\sf Rs\ 38,196`

Therefore, the total income tax paid by him is
`\displaystyle\sf Rs\ 38,196`.

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