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Insurance, EMI and Income Tax Slabs Class 9 Solved

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Social ScienceCBSE Class 9 · Managing Your Personal Finances

Insurance, EMI and Income Tax Class 9: Protection and Taxes

Updated 17 October 2026 · Fact-checked

Insurance protects savings by sharing risk: people pay a premium into a common pool and those who suffer a loss are compensated. Borrowing can be useful if productive, but EMIs include interest and too many reduce savings. Taxes are compulsory payments to fund public services; income tax is progressive, so higher income is taxed at higher rates through slabs.

Each EMI contains principal and interest, so you pay Rs 6,000 more than the price; too many EMIs squeeze your savings.

Illustration drawn for QuestionBuddy.

Understand Insurance, Borrowing, EMIs and Income Tax Slabs

Insurance. Illness, accidents, job loss or damage can wipe out savings. Insurance is a legal contract: you pay a regular premium and the company compensates specified losses. It works on risk sharing: many people pay into a pool and those who suffer a loss are paid from it. Benefits: security in emergencies, a smaller impact of loss, faster recovery and disciplined saving.

Types of insurance.

  • Health insurance: hospital costs, medicines and tests. The government scheme Ayushman Bharat PM-JAY covers eligible low-income families.
  • Life insurance: supports dependants if the breadwinner dies (daily expenses, education, loan repayment).
  • General insurance: motor, property (fire, theft, flood, earthquake), crop (natural disasters, pests, price changes) and cattle.

Borrowing. Borrowing from banks, relatives or others is helpful when used productively, for example an education loan, but becomes a debt burden if used for unnecessary goods. Responsible borrowing means borrowing only when needed and repaying on time.

EMI (equated monthly instalment). A fixed monthly payment that repays a loan; each EMI has a part of the principal and a part of interest. NCERT's example: a Rs 30,000 refrigerator repaid at Rs 3,000 a month for 12 months costs Rs 36,000 in all, Rs 6,000 more than the price. Too many EMIs squeeze savings and emergency funds.

Taxes. Taxes are compulsory payments to the government to fund schools, hospitals, transport, defence and other services.

  • Direct taxes are paid on income or profits (income tax).
  • Indirect taxes are added to prices (GST).

Personal income tax is paid on income earned in a financial year (1 April to 31 March), and income below a limit is exempt. Progressive taxation means the tax rate rises with income to reduce inequality: those with more capacity contribute more.

Slab system (new regime, FY 2025-26, as in the chapter).

Taxable incomeRate
Up to Rs 4 lakhNil
Rs 4 lakh to Rs 8 lakh5 per cent
Rs 8 lakh to Rs 12 lakh10 per cent
Rs 12 lakh to Rs 16 lakh15 per cent
Rs 16 lakh to Rs 20 lakh20 per cent
Rs 20 lakh to Rs 24 lakh25 per cent
Above Rs 24 lakh30 per cent

Each rate applies only to the part of income inside that slab. Slabs are proposed by the Ministry of Finance in the Union Budget and the CBDT administers direct tax laws.

NCERT's worked example. Priya earns Rs 14 lakh. With a standard deduction of Rs 75,000 her taxable income is Rs 13,25,000. Tax: nil on the first Rs 4 lakh; 5 per cent of the next Rs 4 lakh = Rs 20,000; 10 per cent of the next Rs 4 lakh = Rs 40,000; 15 per cent of the remaining Rs 1,25,000 = Rs 18,750. Total tax = Rs 78,750. (Questions here ignore any rebate or cess not mentioned in the chapter.)

Insurance, Borrowing, EMIs and Income Tax Slabs: key facts

Insurance idea
  • Pay premium
  • Pool of many people
  • Loss compensated from pool
Risk sharing.
Types of insurance
  • Health
  • Life
  • General: motor, property, crop, cattle
Chapter list.
EMI total
Total paid = EMI x number of months | Extra paid = total paid - loan amount
Rs 3,000 x 12 = Rs 36,000.
Taxes
Direct: on income or profit (income tax) | Indirect: added to prices (GST)
Compulsory payments.
Tax slabs (new regime FY 2025-26)
Up to 4 lakhnil
4 to 8 lakh5 per cent
8 to 12 lakh10 per cent
12 to 16 lakh15 per cent
16 to 20 lakh20 per cent
20 to 24 lakh25 per cent
above 24 lakh30 per cent
Applied slab by slab.
Taxable income
Taxable income = income - standard deduction | Priya: 14,00,000 - 75,000 = 13,25,000
Tax = sum over slabs.

How to answer Insurance, Borrowing, EMIs and Income Tax Slabs questions

Questions cover how insurance works, EMI cost calculations, direct versus indirect taxes, the idea of progressive taxation and slab-wise tax computation.

  1. 1For insurance, mention premium, pooled risk, and a type with its purpose.
  2. 2For EMI, multiply EMI by months, then subtract the original price to find the extra paid.
  3. 3For tax, first subtract any deduction to get taxable income.
  4. 4Split taxable income across slabs from the lowest, multiply each part by its rate, then add.
  5. 5Check that the parts of income across slabs add up to the taxable income.

Insurance, Borrowing, EMIs and Income Tax Slabs in real life

The idea, met in an everyday situation. Answer the question in your own words, then compare with the model answer. The one-line hook is what to remember.

A shared pool

Suppose 1,000 shopkeepers each pay Rs 2,000 a year to a fire-insurance pool, and in one year 5 shops suffer a fire.

How is the money used and what does it show?

Try it first, then show the solutionSolution
  1. The pool collects 1,000 x 2,000 = Rs 20,00,000.
  2. Only a few shops suffer loss, so compensation is paid from the common pool.
  3. Each shopkeeper pays a small amount to avoid a very large loss.

Answer: The pool has Rs 20,00,000, which compensates the five affected shops. It shows risk sharing: many pay a little so that those who suffer a loss are not ruined.

Memory hook: Many share a few's loss.

Instalments on a gadget

Suppose a Rs 24,000 phone is bought on EMI of Rs 2,000 a month for 15 months.

What extra does the buyer pay?

Try it first, then show the solutionSolution
  1. Total paid = 2,000 x 15 = Rs 30,000.
  2. Extra = 30,000 - 24,000 = Rs 6,000.
  3. This extra is the cost of borrowing (interest).

Answer: The buyer pays Rs 6,000 more than the price, the cost of borrowing. It is worth planning EMIs so they do not eat into savings.

Memory hook: EMI makes it easy now but costs more later.

Tricks to remember Insurance, Borrowing, EMIs and Income Tax Slabs

Short memory aids. Say each one aloud once, then use it on a question the same day.

  • Insurance = P-P-C

    Premium, Pool, Compensation.

    Use it when: How insurance works.

  • Direct vs indirect

    Direct: you pay it on what you earn; Indirect: it hides in what you buy.

    Use it when: Types of taxes.

  • Slab by slab

    Each rate bites only its own slice of income.

    Use it when: Tax calculations.

Insurance, Borrowing, EMIs and Income Tax Slabs: solved examples

Ordered from board level to HOTS. Try each one before you open the solution.

Example 1: Type of tax · 1 mark · MCQBoard level

GST is an example of:
(a) a direct tax
(b) an indirect tax
(c) a loan
(d) an insurance premium

Try it first, then show the solutionSolution
  1. GST is added to prices, so it is indirect (1 mark).

Answer: (b) an indirect tax

Example 2: Insurance (2 marks) · 2 marks · Very short answerBoard level

What is insurance and why is it based on risk sharing? (2 marks)

Try it first, then show the solutionSolution
  1. A legal contract in which a premium is paid and specified losses are compensated (1 mark).
  2. Many people pay into a common pool and the few who suffer a loss are paid from it (1 mark).

Answer: Insurance is a legal contract in which a person pays a regular premium and the company compensates specified losses. It is based on risk sharing because many pay into a common pool and those who suffer a loss are paid from it.

Example 3: EMI cost (3 marks) · 3 marks · Short answerHarder board level

A Rs 18,000 laptop is bought on EMIs of Rs 1,600 for 12 months. Find the total paid and the extra paid. State one caution about taking many EMIs. (3 marks)

Try it first, then show the solutionSolution
  1. Total paid = 1,600 x 12 = Rs 19,200 (1 mark).
  2. Extra = 19,200 - 18,000 = Rs 1,200 (1 mark).
  3. Caution: too many EMIs squeeze savings and emergency funds (1 mark).

Answer: Total paid = 1,600 x 12 = Rs 19,200. Extra paid = 19,200 - 18,000 = Rs 1,200, which is the cost of borrowing. Too many EMIs can squeeze savings and emergency funds.

Example 4: Assertion-reason: progressive tax · 1 mark · Assertion-reasonHarder board level

Assertion (A): Income tax is progressive in India's slab system.
Reason (R): A higher part of income is taxed at higher rates.
(a) Both A and R are true, and R is the correct explanation of A.
(b) Both A and R are true, but R is not the correct explanation of A.
(c) A is true, but R is false.
(d) A is false, but R is true.

Try it first, then show the solutionSolution
  1. The rate rises across slabs, so R explains A (1 mark).

Answer: (a) Both A and R are true, and R is the correct explanation of A.

Example 5: Computing tax (5 marks) · 5 marks · Long answerHOTS / competency

Using the chapter's slabs, find the income tax on a taxable income of Rs 18,00,000, and the tax on a salary of Rs 9,75,000 after a standard deduction of Rs 75,000. (Ignore rebates and cess.) (5 marks)

Try it first, then show the solutionSolution
  1. Taxable income of 18 lakh: nil on 4 lakh; 5% of 4 lakh = 20,000; 10% of 4 lakh = 40,000; 15% of 4 lakh = 60,000; 20% of 2 lakh = 40,000 (2 marks).
  2. Total = 20,000 + 40,000 + 60,000 + 40,000 = Rs 1,60,000 (1 mark).
  3. Salary 9,75,000 - 75,000 = 9,00,000 taxable (1 mark).
  4. Tax: 5% of 4 lakh = 20,000; 10% of 1 lakh = 10,000; total Rs 30,000 (1 mark).

Answer: For Rs 18,00,000: nothing on the first 4 lakh; 5 per cent of the next 4 lakh = Rs 20,000; 10 per cent of the next 4 lakh = Rs 40,000; 15 per cent of the next 4 lakh = Rs 60,000; 20 per cent of the last 2 lakh = Rs 40,000. Total tax = 20,000 + 40,000 + 60,000 + 40,000 = Rs 1,60,000. For the salary of Rs 9,75,000, taxable income is 9,75,000 - 75,000 = Rs 9,00,000: nothing on the first 4 lakh, 5 per cent of the next 4 lakh = Rs 20,000 and 10 per cent of the remaining 1 lakh = Rs 10,000, so the tax is Rs 30,000.

Example 6: Case: Imran and his loan · 4 marks · Case-basedHOTS / competency

Read the case and answer the questions.

Imran's father earns Rs 40,000 a month. He takes a loan to buy a tractor that lets him earn extra income, and another loan to buy an expensive television he does not need. He also pays a small premium every month for health insurance. When his mother is hospitalised, the insurer pays most of the bill.

(i) Which loan is productive? (1)
(ii) Why can the television loan become a debt burden? (1)
(iii) How did insurance protect the family's savings, and which type was it? (2)

Try it first, then show the solutionSolution
  1. (i) The tractor loan (1 mark).
  2. (ii) It does not increase income, yet repayments reduce savings (1 mark).
  3. (iii) Health insurance; the insurer paid most of the hospital bill, so savings were not used up (2 marks).

Answer: (i) The tractor loan, because it helps earn extra income. (ii) The television loan adds repayments without increasing income, which can squeeze savings. (iii) It was health insurance. The premium paid regularly allowed the insurer to cover most of the hospital bill, so the family's savings were protected.

Where students lose marks in Insurance, Borrowing, EMIs and Income Tax Slabs

The slips examiners see most often, and what to write instead.

  • Mistake: Taxing the whole income at one rate

    Ignoring slabs.

    Wrong working

    Tax on 13,25,000 = 15% of 13,25,000.

    Right working

    Tax each part at its slab rate: Rs 78,750.

    Do this: Split first.

    Usually costs: 2-3 marks.

  • Mistake: Forgetting the deduction

    Using salary directly.

    Wrong working

    Taxable income = 14,00,000.

    Right working

    Taxable income = 14,00,000 - 75,000 = 13,25,000.

    Do this: Subtract deduction first.

    Usually costs: 1-2 marks.

  • Mistake: EMI cost confusion

    Thinking EMI total equals price.

    Wrong working

    Total paid equals Rs 24,000 for a Rs 24,000 phone.

    Right working

    Total = EMI x months; extra is the interest.

    Do this: Multiply and subtract.

    Usually costs: 1 mark.

  • Mistake: Insurance as saving only

    Missing risk sharing.

    Wrong working

    Insurance is a bank deposit.

    Right working

    It is a contract that compensates specified losses from a pool.

    Do this: State premium and pool.

    Usually costs: 1 mark.

Exam tips

  • For tax questions, write a mini-table: slab, amount in slab, rate, tax; then add.
  • Verify that slab amounts add up to taxable income.
  • Use the words "premium", "pool" and "compensation" in every insurance answer.
  • State that calculations follow the chapter's slab table and ignore rebates and cess.

Practice questions on Insurance, Borrowing, EMIs and Income Tax Slabs

Write each answer on paper first. Open the hint only if you are stuck, and the answer only when you have finished.

  1. Q1 · 1 mark · MCQBoard level

    Which of these is a general insurance cover mentioned in the chapter?
    (a) Crop insurance
    (b) Term of a fixed deposit
    (c) Mutual fund
    (d) SENSEX

    Hint

    Motor, property, crop, cattle.

    Answer

    (a) Crop insurance

  2. Q2 · 2 marks · Very short answerBoard level

    A shopkeeper pays income tax on his yearly profit and also charges GST on items in the bill. Classify each tax as direct or indirect and give the reason. (2 marks)

    Hint

    Income vs price.

    Answer

    Income tax is a direct tax because it is paid on income or profits. GST is an indirect tax because it is added to the price of goods and services.

  3. Q3 · 3 marks · Short answerHarder board level

    A Rs 12,000 refrigerator is bought by paying Rs 1,100 a month for 12 months. Find the total paid and extra paid. (3 marks)

    Hint

    EMI x months.

    Answer

    Total paid = 1,100 x 12 = Rs 13,200. Extra paid = 13,200 - 12,000 = Rs 1,200.

  4. Q4 · 1 mark · Assertion-reasonHarder board level

    Assertion (A): Borrowing is always harmful.
    Reason (R): Productive borrowing such as an education loan can help a person earn more in future.
    (a) Both A and R are true, and R is the correct explanation of A.
    (b) Both A and R are true, but R is not the correct explanation of A.
    (c) A is true, but R is false.
    (d) A is false, but R is true.

    Hint

    Productive versus consumption.

    Answer

    (d) A is false, but R is true.

  5. Q5 · 5 marks · Long answerHarder board level

    Using the chapter's slabs, compute the tax on a taxable income of Rs 12,50,000 (ignore rebate and cess), showing slab-wise working. (5 marks)

    Hint

    Split 12.5 lakh across slabs.

    Answer

    First Rs 4,00,000: nil. Next Rs 4,00,000 at 5 per cent = Rs 20,000. Next Rs 4,00,000 at 10 per cent = Rs 40,000. Remaining Rs 50,000 (above 12 lakh) at 15 per cent = Rs 7,500. Total = 20,000 + 40,000 + 7,500 = Rs 67,500.

  6. Q6 · 3 marks · Short answerHOTS / competency

    Suppose two people earn Rs 6,00,000 and Rs 20,00,000 taxable income respectively. Without computing in full, explain why the second person pays a higher percentage of income in tax, and name this principle. (3 marks)

    Hint

    Progressive rates.

    Answer

    The second person's income reaches higher slabs, and income in those slabs is taxed at higher rates (up to 20 per cent on parts of it), so the overall percentage of income paid rises. This is progressive taxation, which aims to reduce inequality by making those with more capacity contribute more.

Test your recall

Answer in your head or on paper first, then open the card. Pulling an answer out of memory makes it stick far better than re-reading.

  1. 1.What is a premium?Show answer

    The regular payment made for an insurance cover.

  2. 2.What does an EMI contain?Show answer

    Part principal and part interest.

  3. 3.Name a direct and an indirect tax.Show answer

    Income tax and GST.

  4. 4.What is progressive taxation?Show answer

    Tax rates rise as income rises.

  5. 5.How much was Priya's tax in the chapter?Show answer

    Rs 78,750 on a taxable income of Rs 13,25,000.

Insurance, Borrowing, EMIs and Income Tax Slabs: frequently asked questions

What are the types of insurance in Class 9?

Health, life and general insurance (motor, property, crop and cattle).

What is an EMI?

An equated monthly instalment: a fixed monthly payment that repays a loan with interest.

Why do governments collect taxes?

To fund public services such as schools, hospitals, transport and defence.

How is income tax calculated in slabs?

Each part of taxable income is taxed at the rate of its own slab, and the amounts are added.