Surcharge

What is Surcharge?

A Surcharge is an additional tax levied on the income tax payable by individuals or entities earning above specified income thresholds. It is calculated as a percentage of the total tax, not of income.

Key Features:

• Applicability: High-income individuals, HUFs, firms, and companies.
• Rates (as of FY 2025–26):
• 10% for income ₹50 lakh–₹1 crore.
• 15% for ₹1–2 crore.
• 25% for ₹2–5 crore.
• 37% for above ₹5 crore (capped at 25% under new regime).
• Calculation: Applied on computed tax before cess.

Example

If taxable income = ₹1.5 crore and tax = ₹30 lakh, surcharge = 15% of ₹30 lakh = ₹4.5 lakh.

Why Surcharge Matters:

It ensures progressive taxation, where higher-income earners contribute more to the national revenue.