Question

What is the amount of marginal relief available to Sadvichar Ltd., a domestic company on the total income of * 10,03,50,000 for P.Y. 2020-21 (comprising only of business income) whose turnover in P.Y. 2018-19 is + 450 crore, paying tax as per regular provisions of Income-tax Act? Assume that the company does not exercise option under section 115BAA.

Answer 1

Sadvichar Ltd. can claim a marginal relief of ₹10,03,500 on its total income for P.Y. 2020-21.

Step-by-step explanation:

Identify the turnover bracket: Sadvichar Ltd.'s previous year (2018-19) turnover exceeds ₹400 crore but is less than ₹500 crore. Therefore, it falls under the 15% marginal relief bracket.

Calculate the marginal relief amount:

Total income: ₹10,03,50,000

Marginal relief percentage: 15%

Marginal relief = Total income * Marginal relief percentage = ₹10,03,50,000 * 15/100 = ₹15,05,250

Limit the relief to excess income: The marginal relief cannot exceed the tax payable on the income exceeding ₹1 crore.

Tax on income exceeding ₹1 crore = 30% * (₹10,03,50,000 - ₹1,00,00,000) = ₹3,09,500

Choose the lower amount: The final marginal relief is the lower of the calculated relief and the limit based on excess income.

Marginal relief = Min(₹15,05,250, ₹3,09,500) = ₹3,09,500

Therefore, Sadvichar Ltd. can claim a marginal relief of ₹3,09,500 on its total income for P.Y. 2020-21.