Q.7 An individual earns wage income (W) at the rate of Rs. 30.000 per month. He also
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Q.7 An individual earns wage income (W) at the rate of Rs. 30.000 per month. He also owns physical assets that were worth Rs. 600,000 at the beginning of the fiscal year but now have a market value of 690.000. The individual's income tax liability is determined under a proportional tax system (with ATR = MTR 7.5%) on the basis of his net worth at the end of the fiscal year. He is also subject to paying wealth tax @ 2% per annum and a capital gains @tax 1.5% per annum. Calculate the total tax liability of the individual when the tax system allows for (a) zero inflation, and (b) 12/o inflation. On the basis of your calculations, explain what is the correct way of taxing capital gains in the presence of inflation?
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