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Nilanjan Bhowmick AIR 3, CSIR NET (Earth Science)
- UGC NET
- Economics
Kindly explain . answer is 3.
kindly explain . answer is 3..................................
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Ravindra nath mahto Best Answer
First of all we will understand that what is progressive tax? If the tax rate increases as the income rises, but the tax rate rises more than the income. Such kind of tax is said to be progressive tax. For example, Suppose that there is 10% of tax rate at the level of income Rs.100. Now if the income rises to Rs. 200, then if progressive tax rate is followed then the tax rate must go up, say that it becomes 30%. Now we would discuss about marginal rate of tax. Marginal rate of tax is the change in the tax rate due to change in the income. In the above example, marginal rate of tax = change in the tax rate / change in the income = 30% - 10% / 200 - 100 = 20%/100 = 0.2 average rate of tax = 30%/200= 0.15 We have found that marginal tax rate is greater than the average tax rate. It is so because change in the tax rate is more than the change in the income.
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Please specify that what have you not understood?
actually I am trying to upload photo of my working but somehow I am unable to do that
Okay keep trying.
shouldn't avg rate of tax be 0.3. as 30% of 200 / 200 is 0.3
Listen, Average rate of tax = Tax Rate / Income. That's it.
got it.
and Total tax collection = Tax Rate of Income.