A tax payer is allowed (frac{1}{8})th of his income tax-free, and pays 20% on the…

A tax payer is allowed (frac{1}{8})th of his income tax-free, and pays 20% on the remainder. If he pays N490.00 tax, what is his income?

Correct Answer: Option C

Explanation

He pays tax on 1 – (frac{1}{8}) = (frac{7}{8})th of his income
20% is 490, 100% is (frac{100}{20}) x 490, N2,450.00
= (frac{7}{8}) of his income = N2,450.00
(frac{1}{frac{7}{8}}) x 2450
= (frac{8 times 2450}{7})
= (frac{19600}{7})
= N2800.00