Tax Calculation

The step that you have arrived at [10] is Rs.2,32,000 which is equal to Tax + Surcharge - Marginal Relief. If you calculate the same step [10] assuming taxable income only Rs.10.30 Lakhs [i.e excluding Agri. Income], then the answer will be as follows:

Thanx Satish,Soumyanarayannan,srnivasan for reply.

But i'd like to read the provisions all of u apllied in dis case, i refrd Direct Tax by Singhania, Bare Act, related Finance Act but no details of the type u explained  found. pls tell me resource for this so that i can read the provsns more in details

Tanx a lot again

Dear All,

Please send me Schedule V - Part II {Annual Return} in .Xls or .Doc format which is required to upload along with Form 20B of ROC

its ok it is helpful for us

The treatment given by our software is correct...while computing Marginal Relief Agriculture is excluded and based upon on it treatment by ur software is correct...

Tax Liability computed by ur software is correct...

Let me ask you a simple question.  Non Agri income is 9,50,000 and agri income is 55000.  While finding IT on Non-Agri+Agri Income, will you apply surcharge as the total income exceeds 10lacs?

We will definitely apply surcharge rate.  If you don't believe it, refer to the last question in the following link.

https://docs.google.com/viewer?a=v&q=cache%3A3Djef626fcQJ%3Awww.icwai.org%2Ficwai%2Fdocs%2Ftax-solution%2F2.pdf+Surcharge+when+agricultural+income&hl=en&gl=in&sig=AHIEtbS5HRa46H38zANlZ3XPkgaHTzVX9A&pli=1

So when the total income(10,06,000) in step6 exceeds Rs.10 lac, why haven't you applied surcharge in Step 8.  In the Act, there is no specific concession that while finding out marginal relief, no surcharge is to be applied on total income if it exceeds 10 lacs due to agricultural income.  So eventhough we find tax on total income (10lac +Agri Income) on notional basis, surcharge is still to be applied if it exceeds 10 lacs unless said otherwise by Act.

Again, a question may arise, the purpose of finding marginal relief itself is to get exemption from surcharge rate.  So while finding such concession, how can we apply surcharge again.  The answer is if you consider itself to be too much of liability, give the total agricultural income itself which exceeds 10 lacs as tax amount.

The spirit of law with regard to marginal relief is the additional tax liability at any time cannot exceed the additional income we earned.  So only regarding marginal relief, we pay our extra income itself as income tax rather than including them in total income and incurring extra surcharge. 

So,

1) Find out Tax on Total Income(Agri+NonAgri) 1036000 which is Rs. 2,12,800

Tax Liability =(212800-600)*1.1 = 233420

2) Find out (Tax on 10lac+Agri Income)+30000 which is (2,03,800+30,000)=2,33,800

Tax Liability = (233800-600)*1.1 = 256520

3) Find out (Tax on 10lac)+Agri Income+30000 which is (2,02,000+6000+30000)=2,38,000

Tax Liability = (238000-600) = 237400

Choosing the minimum, we get Tax Liability would be Rs.233420 with no marginal Relief.

Following these three steps for every problem will determine whether to include agri income in total income or to get marginal relief on both agri income and income exceeding 10 lacs.

Even though there are three steps for understanding the working, the second option is not at all necessary.  Because obviously, it will never be less than Option 1 in any case.  So taking option 1 and option 3 itself is enough.