Final answer:
To calculate the annual income tax paid by an individual, one must apply the appropriate tax rates to the individual's income, considering both percentage-based tax and any potential flat tax amounts, then multiply the monthly tax by 12 to find the annual total.
Step-by-step explanation:
To calculate the income tax paid by an individual in a year, we need to know the tax schedule that would apply, which typically progresses from lower rates for lower amounts of income to higher rates for higher amounts of income. In our case, the monthly salary is Rs 1,80,000. However, as we do not have the specific tax schedule for this individual, we can use the given examples to have a better understanding of how taxes are generally calculated.
For instance, if an individual's income tax schedule is such that the tax liability is comprised of a flat amount plus a percentage of their income over a certain threshold (as shown in Figure 3), then we can calculate the monthly tax, multiply it by 12 for the whole year, and arrive at the annual tax paid.
Without the specific tax rate, we can only say that the individual would need to apply the respective tax rates to their monthly income, add any flat taxes if applicable, and then multiply by 12 to find the annual total.