Ravi’s salary is increased by 20%. On the increased salary, the tax rate is 10% higher. The percentage increase in tax liability is:

The correct option is 22%.

To understand why this is the correct answer, we look at the interpretation of the problem where the tax rate is increased only on the incremental (increased) portion of the salary. Let us break down the steps using this logical derivation:
First, we assume convenient initial values to simplify the percentage calculations.

Let Ravi's initial salary be:
$$\text{Initial Salary}=100$$
Let the initial tax rate on this base salary be:
$$\text{Initial Tax Rate}=10\%$$

Therefore, the initial tax liability is:
$${\text{Tax}}_{\text{initial}}=100\times 10\%=10$$

Now, we find the increment in Ravi's salary. Since the salary is increased by 20%, the increased portion (increment) is:
$$\text{Increment}=20\%\text{of}100=20$$

The problem states that on this increased salary portion, the tax rate is 10% higher than the initial tax rate.
Thus, the tax rate applied to the incremental salary is:
$${\text{Tax Rate}}_{\text{increment}}=10\%\times (1+10\%)=11\%$$

Now, we calculate the tax liability on the incremental salary of 20:
$${\text{Tax}}_{\text{increment}}=20\times 11\%=2.2$$

Next, we sum the initial tax liability and the tax on the increment to get the new total tax liability:
$${\text{Tax}}_{\text{new}}={\text{Tax}}_{\text{initial}}+{\text{Tax}}_{\text{increment}}=10+2.2=12.2$$

Finally, we calculate the percentage increase in tax liability:
$$\text{Percentage Increase}=\frac{{\text{Tax}}_{\text{new}}-{\text{Tax}}_{\text{initial}}}{{\text{Tax}}_{\text{initial}}}\times 100$$
Substituting the calculated values:
$$\text{Percentage Increase}=\frac{12.2-10}{10}\times 100=\frac{2.2}{10}\times 100=22\%$$