Income Tax Surcharge & Marginal Relief Calculation A.Y.2023-24: There is an additional charge on income tax called an income tax surcharge. As per the guidelines issued by the IT Department, the rate of surcharge affects entities whose income is more than Rs. 50 Lakh in a financial year.
The surcharge is subject to marginal relief. We will discuss the marginal relief for ay 2023-24 in detail. Please read the complete article and example below. So, it means if you are earning above 50 lakh you will have to pay extra income tax which is called a surcharge.
The surcharge will be applicable at different rates for different income ranges as given below. You will find here the complete guidance over income tax surcharge and marginal relief applicable for A.Y. 2023-24
Income Range When Marginal Relief is Applicable
Income Range When Marginal Relief is Applicable: The following table shows which income brackets/ranges are eligible for marginal relief. The marginal relief is not applicable after this income range. Using the marginal relief calculator below, you can also check whether marginal relief is applicable to you.
| Assessee Status | Income Range for Marginal Relief Applicability |
|---|---|
| Resident Senior Citizen | Rs.50 Lakh to Rs.51.9552 Lakh Rs.100 Lakh to Rs.102.145 Lakh Rs.200 Lakh to Rs.209.296 Lakh Rs.500 Lakh to Rs.530.173 Lakh |
| Resident Super Senior Citizen | Rs.50 Lakh to Rs.51.9402 Lakh Rs.100 Lakh to Rs.102.1374 Lakh Rs.200 Lakh to Rs.209.28 Lakh Rs.500 Lakh to Rs.530.1528 Lakh |
| Any other Resident Individual, Any Non-Resident Individual, Any HUF or AOP/BOI | Rs.50 Lakh to Rs.51.9589 Lakh Rs.100 Lakh to Rs.102.1469 Lakh Rs.200 Lakh to Rs.209.30 Lakh Rs.500 Lakh to Rs.530.1782 Lakh |
| Firm | Rs.100 Lakh to Rs.105.4216 Lakh |
| Co-operative Society | Rs.100 Lakh to Rs.105.4162 Lakh |
| Domestic Company (Tax Rate 25%) | Rs.100 Lakh to Rs.102.389 Lakh Rs.1000 Lakh to Rs.1017.3611Lakh |
| Domestic Company (Tax Rate 30%) | Rs.100 Lakh to Rs.103.0927 Lakh Rs.1000 Lakh to Rs.1022.59030 Lakh |
| Foreign Company | Rs.100 Lakh to Rs.101.3513 Lakh Rs.1000 Lakh to Rs.1020.6896 Lakh |
Note: The above net income ranges will remain valid only if the assessee does not have any income which is chargeable to tax at the special rate of tax e.g., long-term capital gains, short-term capital gains under section 11A, lottery income etc.
Surcharge on Income Tax
The surcharge is applicable to the following income range. The following table shows which income ranges are eligible for a surcharge on income tax. But you must keep in mind that the above income range is eligible also for marginal relief. So calculate surcharge as per marginal relief applicability. If you found any difficulty to calculate marginal relief then you should use our Marginal Relief Calculator for A.Y.2023.4.
| Assessee Status | Net Income Range | Surcharge % on Income Tax |
|---|---|---|
| Individuals/HUF/AOP/BOI/Artificial Juridical Person | 0 Rs.50 Lakh | Nil |
| Rs.50 Lakh to Rs.1 Crore | 10% | |
| Rs.1 Crore to Rs.2 Crore | 15% | |
| Rs.2 Crore to Rs.5 Crore | 25% | |
| Above Rs.5 Crore | 37% | |
| Firm/Local Authority | 0 to Rs.1 Crore | Nil |
| Above Rs.1 Crore | 12% | |
| Co-operative Society (A.Y. 2022-23) | 0 to Rs.1 Crore | Nil |
| Above Rs.1 Crore | 12% | |
| Co-operative Society (A.Y. 2023-24) | 0 to Rs.1 Crore | Nil |
| Rs.1 Crore to Rs.10 Crore | 7% | |
| Above Rs.10 Crore | 12% | |
| Domestic Company | 0 to Rs.1 Crore | Nil |
| Rs.1 Crore to Rs.10 Crore | 7% | |
| Above Rs.10 Crore | 12% | |
| Foreign Company | 0 to Rs.1 Crore | Nil |
| Rs.1 Crore to Rs.10 Crore | 2% | |
| Above Rs.10 Crore | 5% |
From Assessment Year 2023-24 onwards:
- The maximum rate of surcharge on tax payable on dividend income or capital gain referred to in Section 112, shall be 15%.
- The surcharge rate for AOP with all members as a company shall be capped at 15%.
How to compute Surcharge on Income Tax?
For the purpose of computing Surcharge on Income Tax, every tax payer should take a note of the following chart:
| Taxpayer | Income Tax |
| Individuals & HUF | As per Income Tax Slab |
| Firms & Local Authority | Flat 30% |
| Domestic Company – Pvt. Ltd | Flat 25% |
| Domestic Company – Public | Flat 30% |
| Foreign Company | Flat 40% |
Note: The surcharge is levied on the income tax calculated not on the income on the person. The system of Rs.50 lakh and Rs.1 Crore is just to check whether the surcharge will be levied or not. Never forget that the surcharge is to be calculated on the amount of tax liability not on income.
Income is calculated by aggregating the income from all 5 heads and considering the deductions allowed to the person.
Concept of Marginal Relief in Surcharge
This concept needs to understand as there are chances that increase in the income tax is more than the increase in the income from prescribed limit as discussed above. To illustrate this let’s have an example where Surcharge on Income Tax is calculated:
The tax payers are assumed to be individuals.
| Particulars | Taxpayer Rakesh | Taxpayer Aman |
| Computed Income Tax | 49, 00, 000 | 51, 00, 000 |
| Tax as per Slab | 12, 82, 500 | 13, 42, 500 |
| Surcharge | No | Yes |
| [email protected] 10% | – | 1, 34, 250 |
| Less: Marginal Relief (W. Note 1)* | – | (34,250) |
| Total Tax Due before EC & SHEC | 12, 82, 500 | 14, 42, 500 |
| Edu Cess @ 2% & SHEC @ 1% | 38,475 | 43,275 |
| Total Tax Payable | 13, 20, 975 | 14, 85, 775 |
*W. Note: 1
Surcharge payable: Rs.1,34,250
Increase in Income: Rs.1,00,000
Marginal Relief: Rs.34,250 (1,34,250- 1,00,000)
All of the above calculations are made according to the rules as per Budget 2017 i.e.
- Slab Rate of 5% for the income from Rs.2.5 lakh to Rs.5 lakh
- Applicability of surcharge for the income above Rs.50 lakh.
In the above example, we can see that the increase in income is Rs.1 lakh whereas the surcharge levied due that income is Rs.1,34,250 that is more than the increase in income. As per the provisions of income tax act there would be marginal relief for this case for the increase in tax more than the income.
Crux
Thus, we find that computation on surcharge is simple enough for any common man to understand. When it comes to understanding the whole scenario at a basic level just remember that if you an individual then your rate of surcharge is 10% if your income is in between INR 50 lakhs to INR 1 Crore. If the income exceeds INR 1 Crore, the rate of surcharge gets revised to 15% i.e. for just the further increase in the income above Rs.1 crore.
Have questions? Feel free to use the comment section and place your queries there. We would be glad to help you learn about Surcharge and its applicability!
About the Author
Arpit Goyal is pursuing CA and B.com & also working as an article assistant in Gurgaon. He has an immense interest in Taxation. He loves to use technology to spread knowledge about taxation & accounts.
Dear Sir,
Thanks for your published.