Surcharge

Tax & Deductions

Surcharge is an additional tax levied on the income tax amount (not on income) for high-income earners. It is a "tax on tax." In India, surcharge applies progressively above Rs 50 lakh annual income.

In detail

Surcharge rates (FY 2024-25, new regime):nIncome Rs 50L-1 Cr: 10% of income taxnIncome Rs 1-2 Cr: 15% of income taxnIncome Rs 2-5 Cr: 25% of income taxnAbove Rs 5 Cr: 25% of income tax (reduced from 37% in Budget 2023)nnMarginal relief: prevents situations where earning Rs 1 more pushes total tax higher than the income increase. Applicable near threshold boundaries.nnIncluding cess and surcharge, effective tax rate for income above Rs 5 Cr: 39% (vs stated 30% slab rate).

Formula

Tax with surcharge = Income tax x (1 + surcharge %)nAt Rs 2 Cr income: Income tax approximately Rs 54L, surcharge 25% = Rs 13.5L, cess 4% on both = Rs 2.7L. Total: Rs 70.2L (35.1% effective)

Real-life example

🇮🇳 India example

Priya earns Rs 1.5 Cr in a year from salary + capital gains. Income tax: Rs 39L. Surcharge (15% since income is in Rs 1-2 Cr band): Rs 5.85L. Cess 4% on (Rs 39L + Rs 5.85L): Rs 1.79L. Total tax: Rs 46.64L (31% effective rate).

Frequently asked questions

Does surcharge apply to LTCG from equity? ▼

Post-Budget 2023: LTCG from equity is subject to 15% surcharge regardless of total income (capped). This reduces the effective LTCG rate from the pre-2023 scenario where high-income investors faced very high effective LTCG rates from 37% surcharge.