What is Surcharge under Income tax in India?


The surcharge is an additional tax levied upon a person or entity if the income or turnover exceeds the prescribed limits. It is a progressive levy which means it helps in taking higher taxes from the rich who are earning above certain financial limits. It is a direct source of revenue for the central government and is not distributed amongst the state treasuries.


One of the important point to be noted here is that the surcharge is levied as a percentage of taxes and not of income whereas taxes are levied on income earned. Basically, we can say that surcharge is a tax on tax.


For the Financial Year 2018-19 (AY 2019-20), surcharge needs to be paid by the different assessees under the income tax Act 1961 as under



Individuals

For individual irrespective of their age and the tax slab, the surcharge is applicable if


The total income exceeds Rs 50 Lakhs

At 10% of Income Tax

The total income exceeds Rs 1 Crore

At 15% of Income Tax


Cooperative Society

For a cooperative society, the surcharge shall apply as


The total income is below Rs 1 Crore

NIL

The total income exceeds Rs 1 Crore

At 12% of Income Tax


Partnership / LLP

For a Partnership Firm and Limited Liability Partnership, the surcharge shall apply as


The total income is below Rs 1 Crore

NIL

The total income exceeds Rs 1 Crore

At 12% of Income Tax


Indian Company

For a Domestic company, the surcharge shall apply as


The total income is below Rs 1 Crore

NIL

The total income is above Rs 1 Crore but upto Rs 10 Cr

At 7% of Income Tax

The total income exceeds Rs 10 Crore

At 12% of Income Tax



Other Companies

For companies other than Domestic company, the surcharge shall apply as


The total income is below Rs 1 Crore

NIL

The total income is above Rs 1 Crore but upto Rs 10 Cr

At 2% of Income Tax

The total income exceeds Rs 10 Crore

At 5% of Income Tax



What is the difference between Surcharge and Cess?

Surcharge and cess are both extra levies over and above income tax. But, the basic difference between surcharge and cess lies in their revenue sharing, rates, and calculation. On the basis of both, we can evaluate the said terms as


Revenue Sharing

Unlike Surcharge, the revenue of Cess is shared amongst both Central and State Governments

Calculation

The surcharge is calculated on income tax and cess is applicable to income tax + Surcharge

Rates

The surcharge is calculated as per differential rates as explained above in case of individuals, companies and other assessees whereas Health and Education Cess is applicable at a standard rate 4% for the Financial Year 2018-19in case of all assessees.


Surcharge Under Income Tax In India

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Author


Team Tax2Win