Surcharge on Income Tax – Latest Rates A.Y. 2018-19 & A.Y. 2017-18

Surcharge is one of the key areas while determining payable income tax for individuals and companies. As per the guidelines issued by the IT-Department, the rate of surcharge affects entities whose income is more than INR 50,00,000 in a financial year after the Budget 2017. The rate of surcharge witnessed a hike in the Finance Act 2017 and from Financial year 2017-18, surcharge on income tax would be computed as below:

Income Surcharge
Less than INR 50, 00, 000 Nil
INR 50, 00, 000 to INR 1, 00, 00, 000 10%
Above INR 1, 00, 00, 000 15%

*Please note that the above-mentioned table is only applicable to individuals, HUF and similar categories of tax payers i.e Associate of Persons (AOP) and Body of Individuals (BOI).

Check Latest Income Tax Slab A.Y. 2018-19, A.Y.2017-18 & Previous Years

Surcharge for Firms, Local Authorities & Companies

Surcharge on Income Tax has a different rate for firms, local authorities and companies. For this purpose, the tax payer needs to comply with the following:

Firms, Local Authorities and Co-operative Societies.

Income Surcharge
Less than INR 1, 00, 00, 000 Nil
Above INR 1, 00, 00, 000 12%

 Domestic Company

Income Surcharge
Less than INR 1, 00, 00, 000 Nil
 INR 1, 00, 00, 000 to INR 10, 00, 00, 000 7%
Above INR 10, 00, 00, 000 12%

 Foreign Company

Income Surcharge
Less than INR 1, 00, 00, 000 Nil
 INR 1, 00, 00, 000 to INR 10, 00, 00, 000 2%
Above INR 10, 00, 00, 000 5%

The reason of less rate of surcharge on domestic and foreign companies is that the domestic and foreign companies are already been charged a higher rate of income tax as compared to individuals, firms etc.

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
Surcharge@ 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.

SIGN UP FOR FREE NEWSLETTER
Daily Updates by email
Don’t forget to click on the confirmation link in your email Inbox!

1 Comment

Add a Comment
  1. Dear Sir,
    Thanks for your published.

Leave a Reply

Your email address will not be published. Required fields are marked *

CutMyTax © 2017 About CutMyTax | Contact | Privacy Policy | Disclaimer | Copyright Policy | Sitemap