Surcharge on Income Tax 2025-26 — Rates, Calculation & Marginal Relief

Updated: 3 June 2026 | FY 2025-26 (AY 2026-27) | Budget 2023 Cap Applied | Income-tax Act, 2025

Income tax surcharge FY 2025-26 (individuals): ₹50L–₹1Cr: 10% surcharge on income tax; ₹1–2Cr: 15%; ₹2–5Cr: 25%; above ₹5Cr: 25% (capped — Budget 2023 reduced this from 37%). Surcharge is on the tax amount, not income. Cess (4%) is applied on tax + surcharge. LTCG/STCG surcharge is capped at 15% regardless of income. Marginal relief applies near thresholds to prevent cliff-edge tax effects.

25%

Maximum surcharge rate for individuals — capped at 25% from Budget 2023 (was 37%).
Surcharge on capital gains (LTCG/STCG) separately capped at 15% for all income levels.

Surcharge Rates for Individuals (FY 2025-26)

Total Income Range	Surcharge Rate	Marginal Relief
Up to ₹50 lakh	Nil	N/A
₹50 lakh – ₹1 crore	10%	Yes — near ₹50L threshold
₹1 crore – ₹2 crore	15%	Yes — near ₹1Cr threshold
₹2 crore – ₹5 crore	25%	Yes — near ₹2Cr threshold
Above ₹5 crore	25% (capped from 37%)	Yes — near ₹5Cr threshold
LTCG / STCG (any income)	Max 15% (capped)	N/A

Surcharge Rates for Companies, Firms & Others (FY 2025-26)

Taxpayer Type	Income Range	Surcharge Rate
Domestic company (old regime)	₹1Cr – ₹10Cr	7%
Domestic company (old regime)	Above ₹10Cr	12%
Domestic company (new regime — Sec 115BAA)	Any	10% (flat)
Foreign company	₹1Cr – ₹10Cr	2%
Foreign company	Above ₹10Cr	5%
Partnership firm / LLP	Above ₹1Cr	12%
Co-operative society (new regime — Sec 115BAD)	Any	10% (flat)

Marginal Relief — How It Works

Marginal relief prevents a situation where earning a rupee more above a surcharge threshold results in paying more than a rupee in additional tax. It is an adjustment that limits the net additional tax (including surcharge) to the amount of income exceeding the threshold.

Example: Income = ₹51 lakh (₹1L above the ₹50L threshold). Without marginal relief: Surcharge at 10% on tax would add a significant amount. With marginal relief: the net tax increase caused by the surcharge is capped at ₹1L (the amount by which income exceeds ₹50L). The taxpayer gets a surcharge reduction so the total additional tax does not exceed ₹1L.

Marginal relief is available at each surcharge threshold: ₹50L, ₹1Cr, ₹2Cr, and ₹5Cr for individuals.

Frequently Asked Questions

What is surcharge on income tax?

Surcharge is an additional tax levied on the income tax payable when a taxpayer's income exceeds specified thresholds. It is calculated as a percentage of the income tax (not of income). For individuals, surcharge applies when income exceeds ₹50 lakh. For companies, surcharge applies when income exceeds ₹1 crore. Surcharge is added to the base income tax before the Health & Education Cess (4%) is calculated. The purpose of surcharge is to collect higher tax from higher-income taxpayers.

What is the income tax surcharge rate for ₹1 crore income?

For an individual with total income between ₹1 crore and ₹2 crore (FY 2025-26), the surcharge rate is 15% on the income tax payable. For example: if income tax on ₹1.2Cr income = ₹30L, surcharge = 15% × ₹30L = ₹4.5L. Plus cess at 4% on ₹34.5L = ₹1.38L. Total tax = ₹35.88L. Note: Marginal relief applies to prevent the net additional tax from exceeding the income increase above the ₹1Cr threshold.

Is surcharge different under new tax regime and old tax regime?

The surcharge rates for individuals are the same under both new and old tax regimes — 10% for ₹50L-₹1Cr, 15% for ₹1Cr-₹2Cr, 25% for ₹2Cr-₹5Cr, 25% for above ₹5Cr (capped in Budget 2023 from earlier 37%). The base income tax rates differ between regimes (new regime slabs vs old regime slabs), so the actual surcharge amount differs, but the percentage rates are the same. Capital gains (LTCG/STCG) have a separate surcharge cap of 15% regardless of income level.

Is surcharge on LTCG/STCG capped at 15%?

Yes. For special rate income like LTCG under Section 112A (equity shares/MF), STCG under Section 111A, and other capital gains, the surcharge is capped at 15% regardless of the taxpayer's total income. So even if a taxpayer's income exceeds ₹5 crore (where the 25% surcharge applies on regular income), the surcharge on the capital gains portion remains at a maximum of 15%. This was introduced to encourage capital market participation.

What is marginal relief in surcharge?

Marginal relief ensures that the additional tax+surcharge payable does not exceed the additional income earned above the surcharge threshold. Example: If income is ₹51L (just above ₹50L threshold), without marginal relief, the surcharge at 10% would result in a higher net tax than someone earning exactly ₹50L. Marginal relief limits the net additional tax to the amount by which income exceeds ₹50L. So if excess income is ₹1L, net additional tax (including surcharge) cannot exceed ₹1L. This prevents a cliff-edge tax effect.

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