Surcharge on Income Tax

The surcharge on income tax is levied on the tax and not the income. There are different tax rates for different income slabs. There are also different categories that have different quantums of surcharge percentage.
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In India, The Finance Act 2013 brought the concept of surcharge on Income Tax for taxpayers on the basis of categorization. The Finance Act 2016 provides for increase in surcharge levies for FY 2016-17. The surcharge rates applicable varies, depending on the various factors such as the holding of the company/individual. Please note the surcharge levied is applicable on the income tax and not the income itself. To compute income tax liability, deduction under various heads would be taken into account before arriving at a figure on the basis of rate slabs.

The table below provides details on tax rates for various income slabs for Assessment Year 2016-17.

  1. Individuals/HUF/Artificial Judicial Person/Association of Persons/Body of Individuals:

    Income Tax Rate
    Up to Rs.2,50,000 Nil
    Rs.2,50,000 to Rs.5,00,000 10%
    Rs.5,00,000 to Rs.10,00,000 20%
    Rs.10,00,000 and above 30%
  2. Domestic or Foreign companies:

    Type of holding Tax Rate (flat)
    Domestic Companies 30%
    Foreign Companies 40%

Surcharge:

If the income exceeds Rs.1 crore, a surcharge at the rate of 12% is applicable on the income tax paid for the popular category of taxpayers, subject to marginal relief. Lets look at the quantum of surcharge percentage applicable for various categories of taxpayers in India. This surcharge will be billed after computation of income tax.

  • Individuals, Partnership Firms, HUF, LLPs: If the income during a specific assessment year is Rs.1 crore or more, the surcharge on income tax is 12 percent.
  • Domestic companies (income more than Rs.1 crore but less than Rs.10 crores): surcharge on income tax is 7 percent.
  • Domestic companies (income more than Rs.10 crores): surcharge on income tax is 12 percent.
  • Foreign companies (income more than Rs.1 crore but less than Rs.10 crores): 2 percent on income tax is billed as surcharge.
  • Foreign companies (income more than Rs.10 crores): 5 percent of income tax is billed as surcharge.

Concept of Marginal Relief on levy of Surcharge:

This provision comes into picture when the increase in income tax liability is more than the actual increase in income. For example, let's take a scenario where a salaried individual who has declared an income of Rs.1 crore 1 lac, which has put him under the surcharge bracket as per the slabs. Due to change in slabs, his income tax liability will be more than the the increase in the income itself, a marginal relief on the surcharge payable kicks in.

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