Surcharge is levied on Income Tax and is levied if Income is more than Rs. 50 Lakhs in case of Individuals and Rs. 1 Crores in case of Companies. Different rates of surcharge are applicable for different categories of taxpayers and the current rates of Surcharge are as follows:-
Individuals, HUF, Association of Persons, Body of Individuals, Artificial Judicial Persons
| Level of Income | Surcharge on Income Tax |
| Less than Rs. 50 Lakhs | Nil |
| Rs. 50 Lakhs to Rs. 1 Crore | 10% |
| Rs. 1 Crore to Rs. 2 Crores | 15% |
| Rs. 2 Crores to Rs. 5 Crores | 25% |
| More than Rs. 5 Crores | 37% |
Related Notable Points
25% Surcharge and 37% Surcharge would not be applicable in following cases:-
- Dividend Income
- Income chargeable as Short Term Capital Gains on Sale of Shares/ Mutual Funds under Section 111A or Long Term Capital Gains on Sale of Shares/ Mutual Funds under Section 112A
Firms, Co-operative Societies and Local Authorities
| Level of Income | Surcharge on Income Tax |
| Less than Rs. 1 Crores | Nil |
| More than Rs. 1 Crores | 12% |
Domestic Company
| Level of Income | Surcharge on Income Tax |
| Less than Rs. 1 Crores | Nil |
| Rs. 1 Crores to Rs. 10 Crores | 7% |
| More than Rs. 10 Crores | 12% |
Foreign Company
| Level of Income | Surcharge on Income Tax |
| Less than Rs. 1 Crores | Nil |
| Rs. 1 Crores to Rs. 10 Crores | 2% |
| More than Rs. 10 Crores | 5% |
Note: The Rate of Surcharge on Income Tax on Foreign Company is less as compared to Surcharge on Individuals as Domestic Companies and Foreign Companies are already being charged a higher rate of income tax as compared to Individuals. The rates of Income Tax have been mentioned on this link – Income Tax Rates in India
Manner of Computation of Surcharge on Income Tax
After the computation of Income, the next step is to calculate the Income Tax would be levied as per the following schedule
| Category of Taxpayer | Income Tax Rate |
| Individuals & HUF | As per Income Tax Slab Rates |
| Firms and Local Authorities | Flat 30% |
| Domestic Company – Turnover less than Rs. 250 Crore | Flat 25% |
| Domestic Company – Turnover more than Rs. 250 Crore | Flat 30% |
| Foreign Company | Flat 40% |
It is pertinent to note that Surcharge is levied on the total income tax of the individual and not on the income of the individual. The criteria for income above Rs. 50 Lakhs/ Rs. 1 Crore is only to check whether the Surcharge would be levied or not. Once the income tax has been computed, surcharge would be levied on the income tax.
For the purpose of computation of Income, the total taxable income under all heads after deductions under Chapter VI-A and Section 80C would be taken into account. Some examples of deductions allowed under Chapter VI-A & Section 80C at the time of filing of income tax returns are as follows:-
- PPF Account
- Tax Saving Fixed Deposit
- Tax Saving Mutual Funds
- Senior Citizen Savings Scheme
- National Savings Certificate
- Contribution to National Pension Scheme
- Contribution to Pension Funds
- Payment of Medical Insurance Premium
- Payment for treatment of specified disease
- Donations
The above list is only illustrative and there are many other deductions allowed under Chapter VI-A and Section 80C.
Examples of Levy of Surcharge on Income Tax
The following examples have been prepared assuming the taxpayer is a Individual and therefore Income Tax Slab Rates are applicable.
| Particulars | Taxpayer A | Taxpayer B |
| Total Taxable Income | 47,00,000 | Rs. 53,00,000 |
| Total Tax payable as per Income Tax Slabs | 12,22,500 | 14,02,500 |
| Applicability of Surcharge | No | Yes |
| Surcharge @ 10% | 1,40,250 | |
| Total Tax payable (incl Surcharge) | 12,22,500 | 15,42,750 |
| Edu Cess @ 2% & SHEC @ 1% | 36,675 | 46,282.50 |
| Total tax Payable (after Edu Cess & SHEC) | 12,59,175 | 15,89,033 |
Marginal Relief in case of levy of Surcharge on Income Tax
To explain the concept of Marginal Relief we are stating another example.
| Particulars | Amount | Amount |
| Total Taxable Income | 50,00,000 | 51,00,000 |
| Total Tax payable as per Income Tax Slabs | 13,12,500 | 13,42,500 |
| Applicability of Surcharge | No | Yes |
| Surcharge @ 10% | 1,34,250 | |
| Total Tax payable (incl Surcharge) | 13,12,500 | 14,76,750 |
| Increase in Tax Liability (excl Cess) due to Increase in Income | 1,64,250 |
In the above example, when the income is Rs. 50 Lakhs, Surcharge won’t be applicable. But if the income increases by Rs. 1 Lakh to Rs 51 Lakhs, Surcharge on Income Tax would be applicable.
Although the Income has only increased by Rs 1 Lakh, the total tax payable has increased by 1,64,250 (i.e. 14,76,750- 13,12,500). As the increase in total tax payable is more than the actual increase in income above Rs. 50 Lakhs, the concept of marginal relief would be applicable in this case.
Marginal Relief would be computed as follows:-
| Increase in Tax (excl Cess) | 1,64,250 (14,76,750 – 13,12,500) |
| (Less)Income above Rs. 50 Lakhs | 1,00,000 |
| Marginal Relief | 64,250 |
This marginal relief would be subtracted from the surcharge on Income Tax and would be as follows:-
| Particulars | Income: 50 Lakhs | Income: 51 Lakhs | |
| Total Taxable Income | 50,00,000 | 51,00,000 | |
| Total Tax payable as per Income Tax Slabs | 13,12,500 | 13,42,500 | |
| Applicability of Surcharge | No | Yes | |
| Surcharge @ 10% | 1,34,250 | ||
| (Less) Marginal Relief | 65,150 | 70,000 | |
| Total Tax payable (incl Surcharge) | 12,97,500 | 14,12,500 | |
| Edu Cess @2% and SHEC @ 1% | 39,375 | 42,375 | |
| Total Tax payable (incl Surcharge & Cess) | 13,51,875 | 14,54,875 | |
