Surcharge on Income Tax —
Rates, Marginal Relief & Cap
What surcharge is, the FY 2025-26 rates for individuals and companies, why the 37% rate is gone under the new regime, the 15% cap on capital gains, and how marginal relief stops the cliff-edge.
Surcharge is an extra levy charged as a percentage of your income tax (not of income) once total income crosses set thresholds. For individuals in FY 2025-26 it is 10% above Rs 50 lakh, 15% above Rs 1 crore, 25% above Rs 2 crore, and — in the old regime only — 37% above Rs 5 crore. The new regime caps surcharge at 25%. Surcharge on capital gains and dividends is capped at 15% for everyone. The 4% Health & Education Cess is then applied on tax + surcharge, and marginal relief softens each threshold.
The order is fixed: first compute income tax on your slabs, then add surcharge as a percentage of that tax, then add 4% Health & Education Cess on (tax + surcharge). Surcharge never applies to income directly — it magnifies the tax figure only.
Surcharge Rates for Individuals (FY 2025-26)
Rates apply on the income-tax amount once total income exceeds each threshold. See our income-tax slabs for the base tax the surcharge sits on top of.
| Total income | Surcharge | New regime | Old regime |
|---|---|---|---|
| Up to Rs 50 lakh | Nil | Nil | Nil |
| Rs 50 lakh – Rs 1 crore | 10% | 10% | 10% |
| Rs 1 crore – Rs 2 crore | 15% | 15% | 15% |
| Rs 2 crore – Rs 5 crore | 25% | 25% | 25% |
| Above Rs 5 crore | 25% / 37% | 25% (cap) | 37% |
| Capital gains / dividends | Max 15% | 15% cap | 15% cap |
The 37% slab survives only in the old regime; the new (default) regime caps surcharge at 25% for all income levels. Surcharge on 112A LTCG, 111A STCG and dividend income is capped at 15% regardless of total income.
Surcharge Under the New vs Old Regime
The percentage rates for the first three bands are identical in both regimes. The only difference is at the very top: the new tax regime (the default) drops the 37% rate and caps surcharge at 25%, so the maximum effective tax rate falls for those earning above Rs 5 crore. The old regime still applies 37% above Rs 5 crore.
New regime — surcharge capped
- Max surcharge 25%, even above Rs 5 crore
- Lower effective peak tax rate (~39%)
- Slabs to 30% + 25% surcharge + 4% cess
- Best for very-high-income earners
Old regime — 37% top band
- 37% surcharge above Rs 5 crore
- Higher effective peak tax rate (~42.7%)
- Needed only if old-regime deductions win
- Compare total tax before choosing
Even if your total income is above Rs 5 crore, the surcharge on Section 112A long-term capital gains, Section 111A short-term capital gains and dividend income is capped at 15%. Your salary/business income may carry 25% or 37% surcharge while the capital-gains slice is billed at 15% — the return computes each part separately.
Not sure which regime lowers your surcharge?
Compare regimes →Marginal Relief — Stopping the Cliff Edge
Without relief, crossing a surcharge threshold by even Rs 1 could add far more than Rs 1 in tax. Marginal relief caps the extra (tax + surcharge) so it never exceeds the income earned above the threshold. It is available at each step: Rs 50 lakh, Rs 1 crore, Rs 2 crore and Rs 5 crore.
Rs 1 cr income · 15% surcharge
Near Rs 50L · marginal relief
The figures above are illustrative and rounded — use our income-tax calculator for your exact liability, since the base tax depends on your regime and deductions.
The relief is built into the tax computation, but errors are common when income sits just above a threshold or mixes normal and capital-gains income. If you are close to Rs 50 lakh, Rs 1 crore, Rs 2 crore or Rs 5 crore, have the surcharge and relief reviewed before filing.
Surcharge for Companies, Firms & Others
Surcharge also applies to companies, firms and other entities, at different rates and thresholds. Domestic companies under the concessional 115BAA / 115BAB regimes pay a flat 10% surcharge irrespective of income.
| Taxpayer | Income range | Surcharge |
|---|---|---|
| Domestic company (normal — 25%/30%) | Rs 1 cr – Rs 10 cr | 7% |
| Domestic company (normal — 25%/30%) | Above Rs 10 cr | 12% |
| Domestic company — 115BAA / 115BAB | Any income | 10% (flat) |
| Foreign company | Rs 1 cr – Rs 10 cr | 2% |
| Foreign company | Above Rs 10 cr | 5% |
| Firm / LLP / local authority | Above Rs 1 cr | 12% |
| Co-operative society — 115BAD | Any income | 10% (flat) |
Health & Education Cess of 4% applies on income tax + surcharge for all taxpayers. Marginal relief applies at each company threshold too.
- Compute base income tax on your slabs / rate first
- Apply the surcharge % for your income band
- Add 4% Health & Education Cess on tax + surcharge
- Check marginal relief if near a threshold
- Split capital gains / dividends at the 15% surcharge cap
- Confirm new vs old regime (37% vs 25% at the top)
High income or capital gains this year? Get your surcharge and relief computed correctly.
Get ITR Filing Help →Surcharge on Income Tax — Frequently Asked Questions
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