Question

explain the tax base tax rate tax brackets marginal tax rate and the average tax rate with a clarifying example of tax system in a country

Answer 1

India has income tax brackets as given below.(All figures in Indian rupees)

0-2,50,000 =0%

2,50,001-5,00,000 = 5%

5,00,001-10,00,000 = 20%

10,00,000 + = 30%

.If my income is 9,00,000 then marginal tax rate is 20 % as it is last tax slab applicable to me.

For my income of 9,00,000 tax paid will be: 0+ (5/10*2,50,000) + (20/100*4,00,000)

0+12500+80000 = 92,500 is tax paid by me as income tax.

Average tax rate = (tax paid/total income)*100 = 92,500/900,000= 10.27%

A tax base is a total amount of assets or income that can be taxed by a taxing authority, usually by the government.