TaxFinancial Glossary
Surcharge (Tax)
Definition
An additional tax levied on individuals whose taxable income exceeds specified thresholds. Under the new regime, surcharge rates are 10% for income between Rs 50 lakh and Rs 1 crore, 15% for Rs 1-2 crore, and 25% for income above Rs 2 crore (capped at 25% in new regime). Surcharge is calculated on the tax amount, not on income.
Why It Matters
Surcharge creates a marginal tax rate of 34.3% (30% tax + 10% surcharge + 4% cess) for incomes above Rs 50 lakh, and even higher for higher brackets. For HNIs realizing large capital gains, the surcharge can add lakhs to the tax bill. Plan your income recognition and capital gains realization across financial years when possible.