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Surcharge on Income tax

Updated on July 18, 2023

Surcharge is an additional tax or levy imposed on the existing income tax liability of individuals and businesses in India. It is applicable to individuals with high income levels and certain categories of taxpayers. The surcharge is used by the government to fund various initiatives and programs. It is an additional burden on taxpayers who fall within the specified income brackets, and it contributes to the overall tax revenue of the country.

How is Surcharge calculated?

The surcharge is calculated as a percentage of the income tax payable and is levied over and above the regular tax rates. It is primarily imposed to generate additional revenue for the government and to ensure a progressive tax system where higher-income individuals contribute a higher proportion of their income as tax.

The surcharge rates vary based on the income slab and the taxpayer category. Generally, surcharge rates are higher for individuals with higher income levels. The exact surcharge rates are specified by the government in the annual Union Budget.

For individuals and businesses in India, a surcharge is an additional tax imposed on the income tax liability based on specific income thresholds.

If the total income exceeds Rs. 50 lakh but is below Rs. 1 crore, a surcharge of 10% is levied on the income tax payable.
If the total income exceeds Rs. 1 crore, a higher surcharge of 15% is imposed on the income tax liability.

It is important to note that the surcharge is applicable only on the income tax liability and not on the total income earned. The surcharge amount is calculated separately and added to the regular tax liability to determine the total tax payable. This addition impacts the effective tax rate for the taxpayer.