Income Tax Surcharge & Marginal Relief Calculation A.Y.2023-24

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 StatusIncome Range for Marginal Relief Applicability
Resident Senior CitizenRs.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 CitizenRs.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/BOIRs.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
FirmRs.100 Lakh to Rs.105.4216 Lakh
Co-operative SocietyRs.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 CompanyRs.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 StatusNet Income RangeSurcharge % on Income Tax
Individuals/HUF/AOP/BOI/Artificial Juridical Person0 Rs.50 LakhNil
Rs.50 Lakh to Rs.1 Crore10%
Rs.1 Crore to Rs.2 Crore15%
Rs.2 Crore to Rs.5 Crore25%
Above Rs.5 Crore37%
Firm/Local Authority0 to Rs.1 CroreNil
Above Rs.1 Crore12%
Co-operative Society (A.Y. 2022-23)0 to Rs.1 CroreNil
Above Rs.1 Crore12%
Co-operative Society (A.Y. 2023-24)0 to Rs.1 CroreNil
Rs.1 Crore to Rs.10 Crore7%
Above Rs.10 Crore12%
Domestic Company0 to Rs.1 CroreNil
Rs.1 Crore to Rs.10 Crore7%
Above Rs.10 Crore12%
Foreign Company0 to Rs.1 CroreNil
Rs.1 Crore to Rs.10 Crore2%
Above Rs.10 Crore5%

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.

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