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Suresh Chandra

· started a discussion

· 1 Months ago

How to solve these type of questions? (Question: 119452.0 )

Topper please give details of how to solve such questions.

Question:
The rate of income tax is increased from 4% to 5% as the result of it, tax liability of a person is increased by 10%. Percent increase or decrease in his income is:
Options:
A) 5% increase
B) 9% increase
C) 9% decrease
D) 12% decrease
Solution:
Ans: (d)

Percent increase in income tax rate = 5% - 4% = 1%

\(\therefore\) Relative increase in tax rate = \(\cfrac{5-4}{4}=\cfrac{1}{4}\)

\(\therefore\) New tax rate = 1+  \(\cfrac{1}{4}=\cfrac{5}{4}\) of initial tax rate

\(\therefore\) Income must be \(\cfrac{4}{5}\)  of the original income so that the tax liability remains same.

But tax liability = 100 + 10 = 110% of original liability

\(\therefore\) Income = \(\cfrac{4}{5} \times110\%= 88\%\)  of original income

\(\therefore\) Income is reduced by 12% 

Knowledge Expert

· commented

· 1 Months ago

Dear student
Given solution is appropriate .

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