Subjects taxation

Tax Calculation

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Tax Calculation


1. **Problem Statement:** Calculate the tax due based on the taxable income using the given tax brackets and formula: $$\text{TAX DUE} = a + b \times (\text{Income} - c)$$ where $a$ is the basic amount, $b$ is the additional rate, and $c$ is the excess income threshold. 2. **Understanding the Tax Brackets:** - For income up to 250,000, no tax is due. - For income between 250,000 and 400,000, tax is $0 + 0.15 \times (\text{Income} - 250,000)$. - For income between 400,000 and 800,000, tax is $22,500 + 0.20 \times (\text{Income} - 400,000)$. - For income between 800,000 and 2,000,000, tax is $102,500 + 0.25 \times (\text{Income} - 800,000)$. - For income between 2,000,000 and 8,000,000, tax is $402,500 + 0.30 \times (\text{Income} - 2,000,000)$. - For income above 8,000,000, tax is $2,202,500 + 0.35 \times (\text{Income} - 8,000,000)$. 3. **Example Calculation:** Suppose taxable income is 1,000,000. - This falls in the 800,000 to 2,000,000 bracket. - Using the formula: $$\text{TAX DUE} = 102,500 + 0.25 \times (1,000,000 - 800,000)$$ $$= 102,500 + 0.25 \times 200,000$$ $$= 102,500 + 50,000 = 152,500$$ 4. **Explanation:** The tax due is calculated by adding the basic amount for the bracket plus the additional rate multiplied by the amount exceeding the lower limit of the bracket. 5. **Summary:** To find tax due for any income, identify the correct bracket, then apply the formula $a + b \times (\text{Income} - c)$ accordingly. This method ensures progressive taxation based on income ranges.