Meaning of Surcharge

• Surcharge is an additional tax levied on the amount of income tax payable.
  
• It applies to taxpayers with high income levels beyond certain thresholds.
  
• It is calculated as a percentage of the income tax and not on total income.
  
• Surcharge rates vary based on the taxpayer’s income slab.
  
• It is applicable to individuals, firms, and companies based on their income.
  

When Surcharge Is Applicable

• For individuals, surcharge is levied when income exceeds ₹50 lakh in a financial year.
  
• The rate increases at income levels of ₹50 lakh, ₹1 crore, ₹2 crore, and ₹5 crore.
  
• For domestic companies, surcharge is levied if income exceeds ₹1 crore.
  
• Firms and associations may also attract surcharge depending on taxable income.
  
• The surcharge ensures a higher tax burden on super-rich taxpayers.
  

Surcharge Rates for Individuals

• 10% of income tax if total income is above ₹50 lakh and up to ₹1 crore.
  
• 15% of income tax if income is above ₹1 crore and up to ₹2 crore.
  
• 25% of income tax if income is above ₹2 crore and up to ₹5 crore.
  
• 37% of income tax if income exceeds ₹5 crore (not applicable to certain types of income).
  
• The rates may be capped at 15% for specific capital gains and dividend income.
  

Surcharge for Other Taxpayers

• Domestic companies with income above ₹1 crore pay 7% or 12% surcharge depending on income.
  
• Foreign companies are subject to 2% or 5% surcharge based on income thresholds.
  
• Firms, LLPs, and local authorities have 12% surcharge on income above ₹1 crore.
  
• Different surcharge rules apply for special income categories under separate sections.
  
• Non-resident individuals and entities are also subject to surcharge where applicable.
  

Marginal Relief Provision

• Marginal relief is provided to prevent excess tax due to sudden surcharge entry.
  
• It ensures the additional tax payable does not exceed the income exceeding the threshold.
  
• Applied automatically by the Income Tax Department during computation.
  
• Helps maintain fairness in tax calculation near surcharge limits.
  
• Ensures no undue burden on taxpayers just crossing the income thresholds.