Average Rate of Tax

Tax Glossary Definition

Average Rate of Tax

The average rate of tax represents the ratio of total tax payable to total taxable income, expressed as a percentage. It indicates the overall tax burden borne by a taxpayer, showing what proportion of their income goes toward taxes. Unlike the marginal rate of tax, which applies only to the last slab of income, the average rate provides a more comprehensive view of a person’s or entity’s effective tax liability.

Example: If an individual’s total tax payable amounts to ₹30,000 on a taxable income of ₹3,00,000, the average rate of tax would be 10% (i.e., ₹30,000 ÷ ₹3,00,000 × 100).

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