ncome Tax Surcharge Rate & Marginal Relief – Latest Rates

By Mohammed S Chokhawala

Updated on: Jul 4th, 2024

4 min read

Do you come under one of the higher income tax brackets i.e. 30%? – If yes, you maybe liable to pay
an additional surcharge on your Income Tax liability over some limit. To simplify, a surcharge on
income tax is an extra tax to be paid by the taxpayers earning a higher income i.e. beyond a certain
limit.

Our government ensures that with the surcharge provision, the rich contribute to the income taxes
more than the poor. It also provides a marginal relief on the surcharge for a certain class of
taxpayers. Let’s see the related provisions in detail:

Latest update

 The highest surcharge rate on income above 5 crores is changed from 37% to 25%, which will
reduce the Maximum Marginal rate of Tax from 42.74% to 39% of income. This will be
applicable only under the new tax regime from 1st April 2023.

 A tax rebate is introduced on income upto 7 lakhs in the new tax regime. This would mean
you won't have to pay tax if your income is less than Rs. 7 lakhs.

Surcharge on Income Tax

Income tax surcharge is an additional charge payable on income tax. It is an added tax on the
taxpayers having a higher income inflow during a particular financial year.

Surcharge Rates for Different Taxpayers (Current Rates)

There are different rates of surcharge applicable to different taxpayers under the Income Tax Act,
1961. From 1st April 2023, the highest surcharge rate of 37% shall be reduced to 25% under the new
tax regime.

Surcharge Rates for Individual/HUF/AOP/BOI/ Artificial Judicial Person

Surcharge Rate on the amount of Surcharge Rate on the amount of

Net Taxable Income limit income tax income tax

under old tax regime under new tax regime

Less than Rs 50 lakhs Nil Nil

More than Rs 50 lakhs ≤ Rs

10% 10%
1 Crore
 More than Rs 1 Crore ≤ Rs 2
15% 15%
Crore

More than Rs 2 Crore ≤ Rs 5

25% 25%
Crore

More than Rs 5 Crore 37% 25%

*Budget 2023 Update: Under new tax regime, the highest surcharge of 37% has been reduced to
25% which will be applicable from 1st April 2023 (FY 2023-24)

Note:

 Surcharge for AOPs having only companies as its members to 15%. It is applicable to AOPs
whose total income during the financial year exceeds Rs 1 crores.

 Surcharge on long term capital gains(LTCG) on listed equity shares, units, etc., has been
capped at 15%.

Surcharge Rates for Domestic Company

Net Taxable Income Surcharge Rate on the amount of Surcharge Rate on the amount of
limit income tax under normal provisions income tax us 115BAA or 115BAB

Less than Rs.1 Crores -

More than Rs 1 Crore ≤

7% 10%*
Rs 10 Crore

More than Rs.10 Crores 12%

* Surcharge @10% of income-tax computed under section 115BAA or section 115BAB would be
leviable. Since there is no threshold limit for the applicability of surcharge, consequently, there
would be no relief.

Surcharge Rates for Foreign Company

Net Taxable Income limit Surcharge Rate on the amount of income tax

More than Rs 1 Crore ≤ Rs 10 Crore 2%

More than Rs.10 Crores 5%

Surcharge rates for Firm/ LLP/ Local Authority :

Where the total income exceeds 1 crore, surcharge is payable at the rate of 12% of income-tax
computed.

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Marginal Relief for Individuals

Case 1: Where the total income* is more than Rs.50 Lakhs but does not exceed Rs.1 crore, the
taxpayers have to pay a surcharge at the rate of 10% on the income tax computed.
*Here total income means the net income after all possible deductions or the taxable income.
(Calculate your taxes here.)

According to the Income-tax provisions, a marginal relief will be provided to certain taxpayers up to
the amount of the difference between the excess tax payable (including surcharge) on the income
above Rs.50 lakhs and the amount of income that exceeds Rs.50 Lakhs.
Suppose, an individual has a total income of Rs.51 Lakhs in a FY 2023-24.

 He will have to pay taxes inclusive of a surcharge of 10% on the tax computed i.e., total tax
payable will be Rs. 14,76,750.

 But, if he would have earned only Rs.50 lakhs, then the tax liability would have been
Rs.13,12,500 only(excluding cess).

 Isn’t it unfair for the individual? For earning an extra Rs.1,00,000, he will end up paying
income tax of Rs.1,64,250. The individual’s tax liability should be reduced to avoid any such
excess tax payable.

 The individual will get a marginal relief of the difference amount between the excess tax
payable on higher income i.e (Rs.14,76, 750 minus Rs.13,12,500 = Rs.1,64,250 ) and the
amount of income that exceeds Rs. 50 Lakhs i.e. (Rs.51,00,000 minus Rs.50,00,000 =
Rs.1,00,000).

 The marginal relief will be Rs.64,250 (Rs.1,64,250 minus Rs.1,00,000).

 Hence, income tax liability on income of Rs. 51,00,000 will be Rs.14,12,500 (excluding cess)

Note : If tax is paid in new tax regime surcharge would remain the same, but the income tax slab will
change to the below mentioned slab:

First 3,00,000 - Nil

Next 3,00,001 – 6,00,000 - @5%

Next 6,00,001 – 9,00,000 - @10%

Next 9,00,001 – 12,00,000 - @15%

Next 12,00,001 – 15,00,000 - @20%

More than 15,00,000 - @30%

Case 2: Where the total income is more than Rs.1 crore but less than Rs. 2 crore
  A surcharge of 15% will be levied on the income tax payable.

 A marginal relief will be provided to the taxpayer up to the amount of difference between
the excess tax payable (including surcharge) on income above Rs.1 crore and the amount of
income that exceeds Rs.1 crore.

 Suppose, if the total income of an individual is Rs.1.01 crore in any FY, he will have to pay tax
inclusive of a surcharge of 15% on the tax computed i.e., total tax payable will be
Rs.32,68,875.

 But, if he would have earned only Rs.1 crore, then the tax payable would have been
Rs.30,93,750 only. For earning an extra Rs.1,00,000, he will end up paying income tax of
Rs.1,75,125.

 Hence, the individual will get a marginal relief of the difference amount between the excess
tax payable on higher income i.e (Rs.1,75,125 ) and the amount of income that exceeds Rs.1
crore i.e. (Rs. 1,00,000, in this case).

 The marginal relief will be Rs.75,125 (Rs.1,75,125 minus Rs.1,00,000).

Note: If tax is paid in the new tax regime surcharge would remain the same, but the income tax slab
will change, which is mentioned above.

Marginal Relief for Firms/LLP/Local Authorities

Where the total income is more than Rs.1 crore, a surcharge of 12% will be levied on the income tax
payable. A marginal relief will be provided to such taxpayers having a total income of more than Rs.1
crore i.e., the income tax payable (including surcharge) on the higher income should not exceed the
income tax payable on Rs.1 crore by more than the amount of income that exceeds Rs.1 crore. To
simplify, if the total income of a firm is Rs.1.01 crores, it will have to pay an income tax inclusive of a
surcharge of 12% on the tax computed i.e., total tax payable will be Rs.32,24,000. But, if the total
income would have been only Rs. 1 crore, then the tax payable would have been Rs.31,20,000 only.
For earning an extra Rs.1,00,000, it will end up paying income tax of Rs.1,04,000.

Hence, the firm will get a marginal relief of the difference amount between the excess tax payable on
higher income i.e. (Rs.1,04,000) and the amount of income that exceeds Rs.1 crore i.e. (Rs.1,00,000,
in this case). The marginal relief will be Rs.4,000 (Rs.1,04,000 minus Rs.1,00,000).

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Marginal Relief for Companies

Case 1: Where the total income of a domestic company is more than Rs.1 crore but does not exceed
Rs.10 crore, a surcharge of 7% will be levied on the income tax payable.

Similarly, for foreign companies having total income more than Rs.1 crore but less than Rs. 10 crores,
a surcharge of 2% will be levied on the income tax payable.

Marginal relief will only be provided to such companies having a total income of more than Rs.1
crore but less than Rs.10 crores i.e., the income tax payable (including surcharge) on the higher
income should not exceed the income tax payable on Rs.1 crore by more than the amount of income
that exceeds Rs.1 crore.

Case 2: Where the total income of a domestic company is more than Rs.10 crores, a surcharge of
12% will be levied on the income tax payable.

Similarly, for foreign companies having total income more than Rs.10 crores, a surcharge of 5% will
be levied on the income tax payable.

Marginal relief will only be provided to such companies having a total income of more than Rs.10
crores i.e., the income tax payable (including surcharge) on the higher income should not exceed the
income tax payable on Rs.10 crores by more than the amount of income that exceeds Rs.10 crores.