Question
When the income of the man is increase by Rs. 9000 then
tax rate reduces from 18% to 15%. While in both the situation 25% income is tax free. Find his initial income if he paid equal tax in both the cases.Solution
Let the initial income be x. The taxable income is 75% of x, and the tax rate is 18%. So, the tax paid initially is 0.135x. After the income increases by Rs. 9000, the new income is x+9000. The taxable income is 75% of this new amount, and the tax rate becomes 15%. So, the tax paid is 0.1125(x+9000). Since the tax paid in both cases is the same, we set up the equation: 0.135x=0.1125(x+9000) Solving for x, we find that the initial income is Rs. 45,000.
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