According to the Income Tax Act of India, you are liable to pay tax if your annual income exceeds Rs. 2.5 Lakhs. Your tax rate depends on the income tax slab you fit in. The income tax slab rates alter annually. If your income falls under the high-income tax bracket, you are liable to pay a surcharge on your income tax.
In simpler terms, a surcharge on income tax is an additional tax for your income above the limit set by the government. It came into existence so that the rich contribute more to income taxes than the poor. But to ensure balance, the government also provides marginal relief on the surcharge.
This write-up will provide you with income tax surcharge for AY 2023-24.
What is Surcharge?
You need to pay an additional tax or fee to the government, known as a surcharge. You are liable to pay this additional fee if your annual income exceeds Rs.50 Lakhs. It comes into existence to provide equality among the people. A surcharge is an additional tax added to an existing tax and is not part of the initial tax.
What Is the Surcharge Rate on Income Tax?
The surcharge rate on income tax varies for people according to their income. The different surcharge rates on income tax are,
| Type of Taxpayer | Income Limit | Surcharge Rate on Income Tax |
| Individual/HUF/AOP/BOI/ Artificial Judicial Person | Less than Rs 50 Lakhs | Nil |
| Individual/HUF/AOP/BOI/ Artificial Judicial Person | Rs.50 Lakhs to Rs. 1 Crore | 10% |
| Individual/HUF/AOP/BOI/ Artificial Judicial Person | Rs.1 Crore to Rs 2 crore | 15% |
| Individual/HUF/AOP/BOI/ Artificial Judicial Person | Rs.2 Crore to Rs 5 crore | 25%* |
| Individual/HUF/AOP/BOI/ Artificial Judicial Person | More than Rs.5 Crore | 37%* |
| Firm/LLP/Local authorities/Co-operative Society | More than Rs.1 Crore | 12% |
| Domestic Company | Rs.1 Crore to Rs.10 Crore | 7% |
| Domestic Company | More than Rs.10 Crores | 12% |
| Foreign Company | Rs.1 Crore to Rs. 10 Crore | 2% |
| Foreign Company | More than Rs.10 Crore | 5% |
However, you can get a marginal relief if your income exceeds Rs.50 lakhs. The Marginal relief is the difference between the additional tax payable (including your surcharge) and the amount exceeding Rs.50 Lakhs.
What Are the Income Tax Rates for 2023-24?
The following table gives the Income Tax Rates for 2023-24. The new tax regime slabs are as below-
| Tax Slab | Rates |
| Up to Rs. 3,00,000 | NIL |
| Rs. 300,000 to Rs. 6,00,000 | 5% on income which exceeds Rs 3,00,000 |
| Rs. 6,00,000 to Rs. 900,000 | Rs 15,000 + 10% on income more than Rs 6,00,000 |
| Rs. 9,00,000 to Rs. 12,00,000 | Rs 45,000 + 15% on income more than Rs 9,00,000 |
| Rs. 12,00,000 to Rs. 1500,000 | Rs 90,000 + 20% on income more than Rs 12,00,000 |
| Above Rs. 15,00,000 | Rs 150,000 + 30% on income more than Rs 15,00,000 |
What Are the Surcharge Rates in the New Tax Regime for FY 2023-24?
As per the new tax regime, the government revised the surcharge rate for FY 2023-24. The new surcharge rate is as follows:
(A) Your income above Rs 50 lakhs – 10%
(B) Your income above Rs 1 crore – 15%
(C) Your income above Rs 2 crore – 25%.
How Is a Surcharge on Income Tax Calculated?
The surcharge is an additional tax on your income tax. For example, if your income tax is Rs 30. Then, a surcharge of 10 per cent on Rs 30 is Rs 3. So, the total effective payability would be Rs 30 + Rs 3 = Rs 33. Thus, a surcharge is the tax amount on your income tax and not on your total income.
The surcharge is the additional charge you should pay on your higher income. You should pay a surcharge on the tax payable and not on your income.
For example, if your income is Rs. 1 crore on which the tax is Rs. 3,00,000, the surcharge would be 10% of Rs. 3,00,000 or Rs. 30,000. In India, you should pay a surcharge if your income is more than Rs. 50 lakh, which varies with your high-income bracket.
However, according to Budget 2023, the maximum surcharge you should pay is restricted to 25% if you opt for the new tax regime.
What Is Surcharge and Cess on Income Tax?
The income tax department levies both cess and surcharge based on your eligibility concerning your income. The cess rate is fixed at 4%, while the surcharge rate varies between 10%, 15%, 25%, and 37%, depending on your total income.
Cess is levied on your surcharge and the total tax. A surcharge is calculated on your total tax amount only.
The government levies a tax on every person, while you should pay a surcharge only if you earn a higher income.
The government uses cess for a particular purpose only and cannot use it for any invalid reason. A surcharge, on the other hand, can be used for any reason. The reason for this does not have to be specified.
Cess aims to raise funds for a notable cause. A surcharge places a tax burden on you if your income is beyond Rs. 50 lakhs.
This gives a notable difference between cess and surcharge.
FAQs: Income tax surcharge for AY 2023-24
1. What is the income tax surcharge above 50 lakhs?
If your income is more than Rs.50 Lakhs but does not exceed Rs.1 crore, you have to pay a surcharge of 10% on your income tax.
2. What is the 15 surcharge on income tax?
Under sections 111A,112A and 115AD, the maximum surcharge you should pay is limited to 15%. It can come by any way of income suggested in these sections and that of dividends.
However, in the new tax regime, the maximum surcharge rate is 25% of your tax payable (as per Budget 2023).
3. Should I pay the surcharge mandatorily?
Yes, if your annual income exceeds Rs. 50 lakhs, you are liable to pay a surcharge over and above the tax payable.
4. Can I claim marginal relief?
Yes, you can claim marginal relief if a surcharge applies to you.
5. What is the new income tax surcharge rate for FY 2023-2024?
The surcharge rates for FY 2023-2024 are the same as FY 2022-2023. However, if you opt for the new tax regime and your taxable income is more than Rs. 5 crores, the maximum surcharge that you should pay reduces to 25% instead of the earlier 37%.
Bottom line
Thus, from the above article, you might know about surcharge facts and rates. It is an additional tax on your higher income. It comes into effect to maintain equality in paying taxes among people. Hope it helps. Let us know if you have any queries regarding the income tax surcharge for AY 2023-24.