If the income tax is increased by 20%. Then the net income is decreased by 5%. Find the rate of income tax.
Answer & explanation
Correct answer: option 3
Here,
Net Income × 5% = Tax × 20%
Net Income × 1 = Tax × 4
Net income = 4R, Tax = 1R
So, Gross Income = net income + tax = 4 + 1 = 5
Income tax rate = \(\frac{1}{5}\) × 100 = 20%