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PRACTISE NOW 9
particular year, Mr Cheong earned a gross annual income of $284 000.
Of this $284 000, the amount that will not be subjected to income tax is shown in
In a
the following table:
Personal relief. $3000
Child relief. $4000 per child
CPF contributions. $28500
Donations. $3500
Given that he has 2 children and that for the remaining income that will be taxed,
the gross tax payable for the first $200 000 is $20 750 and the tax rate for the rest is
18%, find his income tax payable.
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Answer:
To calculate Mr Cheong's income tax payable, we need to consider the various components of his income and the applicable tax rates.
Given:
Gross annual income: $284,000
Personal relief: $3,000
Child relief: $4,000 per child (Mr Cheong has 2 children)
CPF contributions: $28,500
Donations: $3,500
Tax rate for the first $200,000: $20,750
Tax rate for the remaining income (above $200,000): 18%
First, let's calculate the taxable income by subtracting the non-taxable components from the gross annual income:
Taxable income = Gross annual income - Personal relief - (Child relief * Number of children) - CPF contributions - Donations
Taxable income = $284,000 - $3,000 - ($4,000 * 2) - $28,500 - $3,500
Taxable income = $284,000 - $3,000 - $8,000 - $28,500 - $3,500
Taxable income = $241,000
Next, let's calculate the tax payable for the first $200,000 using the given tax rate:
Tax payable for the first $200,000 = Tax rate for the first $200,000 * $200,000
Tax payable for the first $200,000 = $20,750
Now, let's calculate the tax payable for the remaining income (above $200,000) using the given tax rate:
Tax payable for the remaining income = Tax rate for the remaining income * (Taxable income - $200,000)
Tax payable for the remaining income = 18% * ($241,000 - $200,000)
Tax payable for the remaining income = 18% * $41,000
Tax payable for the remaining income = $7,380
Finally, let's calculate the total income tax payable:
Total income tax payable = Tax payable for the first $200,000 + Tax payable for the remaining income
Total income tax payable = $20,750 + $7,380
Total income tax payable = $28,130
Therefore, Mr Cheong's income tax payable is $28,130.