According to Budget 2023, the maximum surcharge that can be levied on an individual’s income has been restricted to 25 per cent if you opt for the new tax regime. Read on to find out more details about the surcharge on income tax.
If you fall into the higher income tax bracket, such as 30 per cent, you may be liable to pay an additional surcharge on your Income Tax liability over some limit. Put simply, this surcharge is an additional tax for people earning a higher income i.e. beyond a certain limit.
Our government makes sure that through the surcharge rule, wealthy individuals contribute to the income taxes more than the poor. Moreover, it offers a relief on the surcharge for a certain class of taxpayers. Now, let's delve into the specifics of these provisions.
For total income up to Rs 50 lakh, the rate of surcharge applicable is nil for both old and new tax regimes.
For total income above Rs 50 lakh and up to Rs 1 crore, the rate of surcharge applicable is 10 per cent for both the old and new tax regimes.
For above Rs 1 crore and up to Rs 2 crore, the rate of surcharge applicable is 15 per cent for both the old and new tax regime.
For above Rs 2 crore and up to Rs 5 crore, the rate of surcharge applicable is 25 per cent for both the old and new tax regime.
For above Rs 5 crore, the rate of surcharge applicable is 37 per cent for the old tax regime, and 25 per cent for the new tax regime.
Calculation Of Surcharge: To determine the Gross Total Income (GTI), incomes from five different sources are totalled. Then, various deductions under Chapter VI A are subtracted from GTI to obtain the Net Total Income, the income on which tax is calculated. The tax rate varies depending on whether the assessee is an individual, firm, domestic company, etc. After calculating the tax, the rate of surcharge is applied to this amount of tax. Therefore, the surcharge is calculated based on the total Income Tax, not the income. The income amount is only used to determine the applicability of the surcharge. Once the total income is computed, the surcharge is calculated on the income tax and not income.
Taxable Income Rs 49 Lakh: If a person's taxable income is Rs 49 lakh, in such case since the total taxable income is less than the minimum threshold limit of Rs 50 lakh, their tax will be calculated based on the applicable slab rates
Taxable Income Rs 53 Lakh: If someone's taxable income is Rs 53 lakh, they are between the Rs 50 lakh to Rs 1 crore range, he will have to pay a surcharge at a rate of 10 per cent. The income tax on Rs 53 lakh follows the normal slab rate, which amounts to Rs 12,75,000. With a 10 per cent surcharge, the surcharge amount would be Rs 1,27,500. Thus, the total income tax payable (inclusive of surcharge would be Rs 14,02,500 (Rs 12,75,000 + Rs .1,27,500).
Taxable Income Rs 1.1 Crore: If someone's taxable income exceeds Rs 1 crore, he is liable to pay a surcharge at a rate of 15 per cent. For instance, on an income of Rs 1.1 crore, the income tax is to be calculated as per the normal slab rate, which amounts to Rs 29,85,000. With a 15 per cent surcharge, the amount surcharge would be 15 per cent of Rs 29,85,000 which is Rs 4,47,750.
The tax calculation mentioned above is based on the new tax regime, since generally lesser tax needs to be paid for higher incomes when compared to the old regime.