Income-Tax-Surcharge

Income Tax Surcharge Rate – Assessment Year 2018-19

Income Tax Surcharge Rate – Assessment Year 2018-19

In common parlance, income tax surcharge is an additional charge or payable on income tax. In other words, a surcharge on income tax is an extra tax on taxpayers having higher income brackets. Income tax surcharge is basically levied to ensure that the rich contribute more towards the taxes rather than the poor. There are different rates of surcharge for different classes of taxpayers. In this article, we look at the income tax surcharge rate and the concept of marginal relief in detail.

Income Tax Surcharge Rate

Rates of income tax surcharge are tabulated below:

Taxpayer TypeParticularsSurcharge Rate
IndividualNet income exceeds INR 50
Lakhs but doesn’t exceed INR
1 Crore
 10% on the amount of
income tax
IndividualNet income exceeds INR 1
Crore
 15% on the amount of
income tax
Non-resident IndividualNet income exceeds INR 50
Lakhs but doesn’t exceed INR
1 Crore
10% on the amount of
income tax
 Non-resident IndividualNet income exceeds INR 1
Crore
15% on the amount of
income tax
 Hindu Undivided FamilyNet income exceeds INR 50
Lakhs but doesn’t exceed INR
1 Crore
10% on the amount of
income tax
 Hindu Undivided FamilyNet income exceeds INR 1
Crore
15% on the amount of
income tax
AOP/BOI/Artificial Judicial PersonNet income exceeds INR 50
Lakhs but doesn’t exceed INR
1 Crore
10% on the amount of
income tax
 AOP/BOI/Artificial Judicial PersonNet income exceeds INR 1
Crore
15% on the amount of
income tax
FirmNet income exceeds INR 1 Crore12% on the amount of
income tax
Domestic CompanyNet income exceeds INR 1
Crore but doesn’t exceed INR
10 Crore
7% on the amount of
income tax
Domestic CompanyNet income exceeds INR 10
Crore
12% on the amount of
income tax
Foreign CompanyNet income exceeds INR 1
Crore but doesn’t exceed INR
10 Crore
2% on the amount of
income tax
 Foreign CompanyNet income exceeds INR 10
Crore
5% on the amount of
income tax
C0-operative SocietiesNet income exceeds INR 1
Crore
12% on the amount of
income tax
Local AuthoritiesNet income exceeds INR 1 Crore12% on the amount of
income tax

In cases where surcharge is leviable, it must be noted that education cess would be levied on income tax + surcharge. The most important point to be noted here is that surcharge is levied on total income tax of the respective taxpayers and not on the income of the taxpayer.

Marginal Relief on Surcharge

The marginal relief is aimed to provide relaxation from the levy of surcharge to a taxpayer in case where the amount payable as surcharge exceeds the additional income above INR 50 Lakhs or INR 1 Crore, as the case may be.

In simple terms, the concept of marginal relief provides a relaxation to the taxpayer where total income exceeds marginally above INR 50 Lakhs or INR 1 Crore, as the case may be.

Marginal relief available to taxpayer is the amount payable as income tax and surcharge should not exceed the total amount payable as income tax on total income above INR 50 Lakhs or INR 1 Crore, as the case may be, by more than the amount of income that exceeds INR 50Lakhs or INR 1Crore.

In simpler terms, marginal relief comes into action to ensure that additional income tax and surcharge payable on additional income does not exceed the amount of income. Let us understand the same with an example:

Suppose total taxable income of an individual is INR 51,25,000. Income tax payable on the said income would be INR 13,50,000. Now, since the income is above INR 50,00,000 surcharge would be payable @10% on the income tax i.e. surcharge amount would be INR 1,35,000 (13,50,000×10%). Total tax payable including surcharge would be INR 14,85,000 (INR 13,50,000 + INR 1,35,000).

Total additional income is INR 1,25,000 (i.e. INR 51,25,000 – INR 50,00,000), however, total surcharge payable is INR 1,35,000. Since the surcharge is more than additional income, in such case, marginal relief would come into action and surcharge @10% on income tax will not be applicable.

Surcharge in above case would be payable @70% of additional income (i.e. 70% of 1,25,000) i.e. surcharge payable would be INR 87,500. So total tax payable would be INR 14,37,500 (i.e. INR 13,50,000 + INR 87,500) Marginal relief available to the individual would be INR 37,500 (i.e. INR 1,25,000 – INR 87,500) or (30% of INR 1,25,000).

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