The income tax act provides for an income tax surcharge on taxpayers whose income falls below the 30% tax ceiling. If your income falls below the 30% tax limit, you are obliged to pay an additional surcharge on your income tax liability.
The term surcharge means any extra, charge or tax added to the cost of goods or services in addition to the originally advertised price. Additional charges are often in addition to existing taxes and are not included in the listed price of the goods or services.
The surcharge amount varies and may be a fixed amount or a percentage thereof. This addition may be imposed to cover the Governing Body’s need for additional income or the cost of increased commodity prices. In this article, you will get to know about what is surcharge in income tax.
What Is Surcharge in Income Tax with Example
Surcharges are additional charges or taxes added to the purchase price of goods or services. Depending on the product or service, the extra fee can be a flat fee or a percentage of the purchase price. it will be added by the seller or provider of services at the time of purchase. Additional charges are imposed by businesses, governments, service providers, and service providers.
A surcharge is essentially a tax on tax. This is calculated based on taxes payable, not income. For example, adding a 10% premium to an existing tax rate of 30% effectively raises the overall tax rate to 33%.
For example, if your income is 100 rupees and you are taxed at 30%, your total tax due will be 30 rupees. In that case, the 10% surcharge calculated at Rs.30 would be Rs.3. Therefore, the effective payment obligation is Rs 30 + Rs 3 = Rs 33.
Other examples are:
Fuel surcharge
Emergency service charges for landlines and mobile phones
Hazardous Waste Disposal Fees at Veterinary Hospitals
Electronic Disposal and Fees
Minimum transaction fee (usually when using a credit or debit card)
What Is Surcharge on Income above 50 Lakhs
If the total income of the beneficiary exceeds certain limits, a surcharge will be levied on the amount of income tax at the following rates:
| The assessment Year 2022-23 range of Income | Rate of Surcharge |
| Rs. 50 Lakhs to Rs. 1 Crore | 10% |
| Rs. 1 Crore to Rs. 2 Crores | 15% |
| Rs. 2 Crores to Rs. 5 Crores | 25% |
| Rs. 5 crores to Rs. 10 Crores | 37% |
| Exceeding Rs. 10 Crores | 37% |
What Is the Purpose of Surcharge
A surcharge is an additional charge or tax added to the purchase price of goods or services. Depending on the product or service, a surcharge can be a flat fee or a percentage of the purchase price. This is added by the seller or provider of services at the time of purchase. Additional charges are imposed by businesses, governments, service providers, and service providers.
Who Is Responsible for Surcharge
If your net profit exceeds Rs.50 lakh does not exceed Rs. 1 Crore the amount due for income tax and surcharge shall not exceed the amount of income exceeding Rs 50 lakh and the gross amount due for income tax of Rs 50 lakh.
How Do You Calculate Surcharges
Calculating your gross total income (or GTI) is the first step in calculating your extra. GTI is the sum of five revenue streams. Under the Income Tax Act 1961, the deduction is made from the GTI. The total net income surcharge is charged at different rates to individuals and businesses and is based on net income. Here are a few examples that will help you understand the concept better.
Suppose your net income is ₹1.10 Cr, and the income tax payable is ₹31.12 lakhs. then a surcharge of 15% will add to your net income when it has exceeded ₹1 Cr. ₹4.67 lakhs, which is 15% of your current tax payable, is added to the current tax payable of ₹31.12 lakhs, increasing your tax liability to ₹35.79 lakhs.
What Is Difference between Cess and Surcharge
The Union government of India raises revenue by collecting various taxes from its citizens. Cess and Surcharge look very similar to each other when it comes to understanding this management system. Here we discuss and briefly explain the difference between Cess and surcharges based on various factors.
Cess can be understood simply as a tax on taxes imposed by the union government to collect revenue for a specific reason. In India, Cess applies to all citizens of the country who are taxpayers. It is calculated in addition to the taxpayer’s property tax burden.
All taxes collected are first paid to the Indian Consolidated Fund of India which is CFI. Cess must be used for the purposes for which they were collected. The different types of taxes levied in India are
Health cess, education cess, tobacco products, road and infrastructure cess, export duty cess, crude oil cess, swachh Bharat Abhiyan Cess, Krishi Kalyan Cess, motor car infrastructure Cess, clean energy Cess.
The surcharge applies to taxes payable, not gross income. Only taxpayers with an annual income of Rs 50 lakhs or more are required to pay the surcharge.
Surcharge tax is not charged for certain reasons. The union government can properly use the tax money earned from the surcharge. All initial surcharges will be sent to the Indian Consolidation Fund which is CFI. Personal income tax and corporate income tax are two of the main Surcharges levied in India.
Frequently Asked Questions (FAQs):–
Does surcharge include GST?
Surcharges are generally treated as part of the consideration for the basic supply and if the transaction is a taxable supply, GST will also be charged on the surcharge portion.
Are surcharges permanent?
Yes, surcharges are additional charges or taxes imposed on top of existing taxes. Unlike levies, which are designed to generate income on a temporary basis, surcharges are usually permanent in nature. It is levied as a percentage of income tax paid according to the standard tax rate.
Is it mandatory to pay surcharge?
Individuals and businesses earning more than Rs 50 lakh will have to pay a surcharge as an additional fee.
Conclusion
Now you got to know about what is surcharge in income tax. The income tax surcharge is compulsory to be paid to taxpayers whose income exceeds 30% of India’s wealthiest income group. In this case, there is the possibility of slight mitigation, but this only applies to those whose net profit is below the applicable surcharge percentage.