What is Surcharge?
A surcharge on income tax is an additional tax levied on top of the regular income tax for taxpayers in higher income brackets. It's a way for the government to collect more tax revenue from those who can afford to pay more. It is calculated as a specific percentage of normal tax liability.
When does an individual have to pay the surcharge?
For individuals, if income exceeds Rs. 50 lakh, they have to pay a surcharge over and above their normal tax liability.
What is the rate of surcharge?
The rate of surcharge varies according to the tax regime opted by you. Following is the rate of surcharge under different tax regimes.
Income Level | Surcharge Rate as per Old Tax Regime | Surcharge Rate as per New Tax Regime |
Total income is more than ₹50 lakhs | 10% | 10% |
Total income is more than ₹1 crore | 15% | 15% |
Total income is more than ₹2 crores | 25% | 25% |
Total income is more than ₹5 crores | 37% | 25% |
Note: The maximum surcharge rate on tax payable on dividend income or capital gain referred to in Section 111A, Section 112, Section 112A, or Section 115AD shall be 15%.
How surcharge is calculated?
- First, your tax on normal income is calculated.
- Then additional tax is calculated depending upon your level of Income.
For example: Let's say you're an individual with a taxable income of ₹ 75 lakh and opt for the old tax regime. Here's a simplified calculation of how the surcharge might apply.
Your normal tax liability of 75 lacs is ₹20,62,500 and the applicable surcharge rate is 10%. So the surcharge will be 10% of ₹20,62,500, equal to ₹2,06,250.
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