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The Surcharge is levied on the income above INR 1.0 crores. And the Rate of Surcharge remains same for any amount above INR 1.0 crores.

This Surcharge is levied not on the Income of the Assessee, but one on the total IT of the Assessee. Therefore, to calculate Surcharge, the IT should be first computed.

To understand the computation of Surcharge, let us take the example of two Assessees Anand and Rahul. The Income of Anand is under INR 1.0 crores and hence Surcharge is not applicable on his IT. But Rahul earns more than INR 1.0 crores thereby attracting Surcharge on his IT. The separate IT computation is given below:

 

Sl. No.	Particulars	Anand (Amount in INR)	Rahul (Amount in INR)
1	Total Taxable Income	9500000	12000000
2	Total Tax payable as per IT Slab	2675000	3425000
3	Surcharge at 10% (on row 2)	0	342500
4	Total Tax payable (inclusive of Surcharge i.e., 2 + 3)	2675000	3767500
5	Education Cess at 3% (on row 4)	80250	113025
6	Total tax Payable After the cess	2755250	3880525
7	Net Take home

 

We can see that because of the Surcharge, the total payable IT of Rahul has increased significantly. Rahul is earning INR 25.0 Lacs more than Anand, but his IT liability is more than INR 11.15 Lacs. Because of the Surcharge, the increase in the IT liability is more than 30% of the increased income.

Thus even Rahul has an increase of INR 25.0 Lacs, increment is in his net is just INR 13.75 Lacs due to this Surcharge.

 

Because of Surcharge, the IT liability has increased more than the Income.

The total IT liability on the Income of INR 1.0 Crores would be around INR 28.0 Lacs.

The IT liability on INR 1.01 Crores would be around INR 31.5 Lacs.

We can see that even though the Income rose just by INR 1.0 Lacs, the IT liability has shot up by around INR 3.2 Lacs.

It seems unjust; to make it fair, there is a provision of Marginal Relief.

The Marginal Relief ensures that IT liability does not increase more than the Income.