Surcharge on Income Tax —
Rates & Marginal Relief
How the income-tax surcharge works for high earners — the slab-wise rates, why the new regime caps it at 25%, the 15% cap on capital gains, and how marginal relief stops a cliff-edge tax jump.
Surcharge is an additional tax charged on your income tax — not on your income. For individuals and HUFs it applies once total income crosses Rs 50 lakh: 10% above Rs 50L, 15% above Rs 1 crore, 25% above Rs 2 crore and 37% above Rs 5 crore. The new tax regime caps the maximum surcharge at 25% (the 37% slab is removed). A 4% Health & Education Cess is then levied on (tax + surcharge), and marginal relief softens the jump just after each threshold.
The order of calculation is fixed: compute income tax on your slab income, add surcharge as a percentage of that tax, then add 4% cess on (tax + surcharge). Surcharge goes to the Consolidated Fund of India; cess is earmarked for health and education. Neither can be reduced by any deduction or exemption.
Surcharge Rates for Individuals — FY 2025-26
Rates apply to total income (after deductions). The new regime is the default and its ceiling is 25%; the 37% rate exists only in the old regime. See the exact income-tax slabs that apply before surcharge.
| Total Income | New Regime | Old Regime |
|---|---|---|
| Up to Rs 50 lakh | Nil | Nil |
| Rs 50 lakh – Rs 1 crore | 10% | 10% |
| Rs 1 crore – Rs 2 crore | 15% | 15% |
| Rs 2 crore – Rs 5 crore | 25% | 25% |
| Above Rs 5 crore | 25% capped | 37% |
Capital gains under Sec 111A / 112A / 112 and dividend income carry a maximum surcharge of 15%, whatever the total income. Cess of 4% applies on (tax + surcharge) in every row.
New Regime Caps Surcharge at 25%
From FY 2023-24, the highest surcharge slab of 37% was removed under the new tax regime. So an ultra-high earner (above Rs 5 crore) faces a maximum 25% surcharge in the new regime versus 37% in the old — a meaningful cut in the effective top rate.
Old regime — up to 37%
- 10% / 15% / 25% / 37% by income band
- 37% surcharge above Rs 5 crore
- Highest effective rate about 42.7%
- Retains 80C, 80D and other deductions
New regime (default) — max 25%
- 10% / 15% / 25% only — no 37% band
- Surcharge capped at 25% above Rs 5 crore
- Highest effective rate about 39%
- Fewer deductions but lower top rate
For long-term and short-term capital gains taxed under Sections 112A, 111A and 112, and for dividend income, the surcharge is capped at 15% — even if your total income runs into crores. When such income is present, the surcharge on the balance income can still be 25%, so the ITR utility computes a blended figure. This is a common source of manual-calculation errors.
Not sure which regime lowers your surcharge?
Compare with an expert →Marginal Relief — Worked Example
Marginal relief ensures the extra tax from crossing a surcharge threshold does not exceed the extra income earned above that threshold. It applies at each level — Rs 50 lakh, Rs 1 crore, Rs 2 crore and Rs 5 crore.
Take an individual on the old regime with total income of Rs 51 lakh — just Rs 1 lakh over the Rs 50 lakh line. Without relief, 10% surcharge would apply to the whole tax, adding far more than Rs 1 lakh.
Without marginal relief
With marginal relief
The relief caps the total additional tax (including surcharge) at the Rs 1 lakh of extra income, so the effective surcharge is trimmed to about Rs 30,000. Figures are illustrative old-regime amounts and vary with deductions; use the income-tax calculator for your exact position.
Marginal relief helps when
- Your income is just above Rs 50L / 1cr / 2cr / 5cr
- A small raise or one-off gain pushes you over a threshold
- You want to avoid a disproportionate tax spike
Relief is negligible when
- Your income is well above the threshold
- You are deep into a higher surcharge band
- The ITR utility already applies it automatically
Surcharge on Companies & Firms
Domestic companies, firms and LLPs also pay surcharge on their income tax, at different rates from individuals. See our corporate tax rate guide for the full picture, then add 4% cess.
| Taxpayer | Threshold | Surcharge |
|---|---|---|
| Domestic company (normal) | Income Rs 1cr – Rs 10cr | 7% |
| Domestic company (normal) | Income above Rs 10cr | 12% |
| Company u/s 115BAA / 115BAB | Any income | 10% (flat) |
| Partnership firm / LLP | Income above Rs 1cr | 12% |
Companies opting for the 22% (115BAA) or 15% (115BAB) concessional regime pay a flat 10% surcharge regardless of income. A 4% Health & Education Cess applies on (tax + surcharge) in all cases.
- Compute slab tax on total income first
- Apply surcharge % on that tax, not on income
- Use the 15% cap for capital gains & dividends
- Check marginal relief near each threshold
- Add 4% Health & Education Cess last
- Match the new vs old regime surcharge ceiling
- Let the ITR utility auto-compute relief
- Keep proof of capital-gains bifurcation
High income, capital gains or company tax? Get surcharge computed right.
Get ITR Filing Help →Surcharge on Income Tax — Frequently Asked Questions
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