The concept of surcharge was introduced by the Government of India to collect additional taxes from the super-rich assesses. It is a tax on tax which shall be calculated on total income tax payable before Health and Education Cess. Different Surcharge rate is applicable on different person having income more than threshold limit.
Surcharge Rates under Income Tax
Individuals and HUF
The Finance Act, 2019 introduced in July 2019 has introduced a multi-tier surcharge for individuals for FY 2019-20(i.e., AY 2020-21).
The rates of surcharged are-
| Slab of Total Income | Rate of Surcharge |
| 50lakh or below | 0% |
| more than 50lakh upto 100lakh | 10% |
| more than 100lakh upto 200lakh | 15% |
| more than 200lakh upto 500lakh | 25% |
| more than 500lakh | 37% |
Example, Mr BabaTax an individual having total income of Rs 80,00,000. His tax liability will be as follows-
| Particulars | Amount (Rs) |
| First Rs 250000 | Nil |
| Next Rs 250000 upto 500000 @5% | 12,500 |
| Next Rs 500000 upto 1000000 @20% | 1,00,000 |
| Above Rs 1000000 @30% | 21,00,000 |
| total | 22,12,500 |
| As income is above Rs 50,00,000 so surcharge would be applicable @10% | 2,21,250 |
| Total tax liability before Cess | 24,33,750 |
Read Also: Income Tax Rate For AY- 2020-2021/ FY- 2019-2020
Partnership and LLP
| Slab of Total Income | Rate of Surcharge |
| 1 crore or below | 0% |
| More than 1 crore | 12% |
Domestic Company
| Level of total income | Rate of surcharge |
| 1 crore or below | 0% |
| More than 1 crore upto 10 crore | 7% |
| More than 10 crore | 12% |
For example, XYZ PVT ltd. a domestic company has gross receipts ₹6,00,00,000. Compute tax liability.
| Particulars | Amount (Rs) |
| Rs 60000000 @30% | 1,80,00,000 |
| As income is above Rs 1,00,00,000 so surcharge would be applicable @7% | 12,60,000 |
| Total tax liability before Cess | 1,92,60,000 |
Read Also: TDS and TCS Rates Chart – Examples of how to calculate TDS for FY 2020-21
Foreign Company
| Level of total income | Rate of surcharge |
| 1 crore or below | 0% |
| More than 1 crore upto 10 crore | 2% |
| More than 10 crore | 5% |
Marginal Relief is provided to the Assessee as Surcharge is calculated on the entire tax amount due to which increase in tax due to surcharge may be greater than the increase in income, so such defect is rectified by allowing marginal relief.
However, Income Tax Act, 1961 limits the surcharge rate on capital gain Income upto 15%. In other words, in no case surcharge will exceed 15% on income from capital gain.
Example
| S.No. | Particulars | Rate | Components of total income | The applicable rate of surcharge |
| (i) | Where the total income (including income under section 111A and 112A) > 50 lakhs but ≤ 1 crore | 10% | – STCG u/s 111A 30 lakhs – LTCG u/s 112A 25lakhs – Other income 40lakhs | Surcharge would be levied @ 10% on income-tax computed on total income of 95 lakhs. |
| (ii) | Where total income (including income under section 111A and 112A) exceeds 1crore but does not exceed 2 crores. | 15% | – STCG u/s 111A 60 lakhs – LTCG u/s 112A 65 lakhs – Other income 50 lakhs | Surcharge would be levied@15% on income-tax computed on total income of 1.75 crores. |
| (iii) | Where total income (excluding income under section 111A and 112A) exceeds 2 crores but does not exceed 5 crores The rate of surcharge on the income-tax payable on the portion of income chargeable to tax under section 111A and 112A. | – 25% – Not more than 15% | – STCG u/s 111A 54 lakhs – LTCG u/s 112A 55 lakhs – Other income 3 crores | Surcharge would be levied @15% on income-tax on: STCG of 54 lakhs chargeable to tax u/s 111A, LTCG of 55 lakhs chargeable to tax u/s 112A. Surcharge@25% would be leviable on income-tax computed on other income of 3 crores included in total income. |
| (iv) | Where total income (excluding income under section 111A and 112A) exceeds 5 crores. The rate of surcharge on the income-tax payable on the portion of income chargeable to tax under section 111A and 112A. | – 37% – Not more than 15% | -STCG u/s 111A 50 lakhs -LTCG u/s 112A 65 lakhs -Other income 6 crores | Surcharge would be levied @15% on income-tax on: STCG of 50 lakhs chargeable to tax u/s 111A, LTCG of 65 lakhs chargeable to tax u/s 112A. Surcharge@37% would be leviable on income-tax computed on other income of 6 crores included in total income |
| (v) | Where total income (including income under section 111A and 112A) exceeds 2 crores in cases not covered under (iii) and (iv) above. | 15% | -STCG u/s 111A 60 lakhs -LTCG u/s 112A 55 lakhs -Other income 1.10 crore | Surcharge would be levied@15% on income-tax computed on total income of 2.25 crore. |
The author of the above article is Aditya Kishore.
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