If the income tax rate changes from 30% to 40% on income over Rs30,000 and a person's income is Rs 31,000 then her marginal tax rate is ?
Correct answer: D. 40%
- A. 30%
- B. 10%
- C. 70%
- D. 40%
Explanation
The marginal tax rate applies to the next rupee earned, not to the person’s entire income. Since the extra income above Rs30,000 is taxed at 40%, the marginal rate is 40%, even though earlier income is taxed at 30%.
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Government revenue and expenditure are analysed through taxation, public borrowing, budgets, subsidies, transfers and public debt. The topic explains how fiscal policy affects resource allocation, income distribution, economic stability and growth, while distinguishing direct from indirect taxes, progressive from regressive taxation, and public goods from goods supplied by private markets.
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