What is surcharge on income tax in India?

Surcharge is an additional tax levied on the income tax payable by high-income taxpayers. It is computed as a percentage of base income tax, not on income itself. For individuals, it ranges from 10% (income above Rs 50 lakh) to 37% (above Rs 5 crore under old regime) or maximum 25% under new tax regime. Partnership firms and LLPs pay 12% surcharge on income above Rs 1 crore. Domestic companies pay 7% for income between Rs 1–10 crore and 12% above Rs 10 crore.

What is the maximum surcharge for individuals under new tax regime?

Under the New Tax Regime, the maximum surcharge for individuals is capped at 25% even for incomes above Rs 5 crore. Under the Old Tax Regime, the maximum surcharge is 37% for income above Rs 5 crore. The surcharge thresholds are 10% for income Rs 50L-1Cr, 15% for Rs 1-2Cr, 25% for Rs 2-5Cr, and above Rs 5Cr: 25% (new) or 37% (old).

What is marginal relief in income tax surcharge?

Marginal relief ensures that the additional tax payable (including surcharge) when income marginally crosses a surcharge threshold does not exceed the additional income earned over that threshold. It prevents disproportionate tax burden at threshold boundaries. Marginal relief is available at each surcharge threshold for all taxpayer categories.

Is surcharge on capital gains capped?

Yes. Surcharge on income from capital gains under Sections 111A (STCG), 112 (LTCG), and 112A (equity LTCG) as well as dividend income is capped at 15% regardless of total income level. Even if total income is above Rs 5 crore attracting 25% or 37% surcharge on normal income, the surcharge on capital gains and dividend income is restricted to 15%.

What is the surcharge rate for partnership firms and LLPs?

Partnership firms including LLPs are taxed at a flat 30% income tax rate. Surcharge is NIL for income up to Rs 1 crore. Surcharge is 12% on income tax payable if total income exceeds Rs 1 crore. Marginal relief is available when income marginally crosses Rs 1 crore. Health and Education Cess of 4% applies on tax plus surcharge.

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Surcharge & Cess Calculator
India FY 2026-27
with Marginal Relief

Q: What is Health and Education Cess?

Health and Education Cess is levied at a flat 4% on the total of income tax plus surcharge. It applies to all taxpayers — individuals, companies, firms, AOP — without any threshold or exemption. Formula: Cess = (Base Tax + Surcharge) x 4%. It replaced Education Cess (2%) and Secondary Higher Education Cess (1%) from FY 2018-19.

Calculate exact surcharge on income tax and 4% Health & Education Cess for all taxpayer types — individuals, companies, LLPs, firms, AOP/BOI. Includes marginal relief computation, effective tax rate, and capital gains surcharge cap (15%). FY 2026-27 rates. Free, instant, CA-verified.

H&E Cess (All)

Individual — Max (New)

25%

Individual — Max (Old)

37%

Firm / LLP Surcharge

12%

CG Surcharge Cap

15%

All Taxpayer Categories

Marginal Relief Auto-Computed

Capital Gains 15% Cap

Effective Tax Rate Shown

New + Old Regime

Free Calculator

Surcharge & Health Education Cess Calculator — FY 2026-27

Select your taxpayer type, enter income and base tax. The calculator computes applicable surcharge rate, marginal relief (if any), Health & Education Cess at 4%, and effective total tax rate — with a full step-by-step breakdown.

Surcharge & Cess Calculator — All Taxpayer Types

Individual / HUF · New or Old Regime · Marginal relief auto-applied

Tax Regime

Total Annual Income (₹) *

₹

Enter total taxable income for the financial year

Base Income Tax (Before Surcharge) (₹) *

₹

Tax computed on taxable income at applicable slab rate — before surcharge/cess

Capital Gains Tax Component (₹)

₹

STCG (20%) + LTCG (12.5%) + property LTCG — surcharge capped at 15% on this portion

Dividend Income Tax Component (₹)

₹

Tax on dividend income — surcharge capped at 15% on this portion

📊 Surcharge & Cess Breakdown — FY 2026-27

Surcharge Rate

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Surcharge Amount

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Cess Rate

Cess Amount

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Total Tax Payable

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Effective Tax Rate

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Tax as % of Income

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Marginal Relief

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Step	Component	Basis	Rate	Amount (₹)

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⚠️ Indicative. Marginal relief calculation may vary in edge cases. Consult a CA for final computation. Capital gains surcharge cap of 15% applies to Sections 111A, 112, 112A income and dividend income.

Rate Reference Tables

Surcharge Rates — All Taxpayer Categories FY 2026-27

Complete surcharge rate tables for all taxpayer types. Health & Education Cess of 4% applies to (income tax + surcharge) universally for all taxpayer categories.

1. Individual / HUF / AOP / BOI / AJP

Total Income Range	Surcharge Rate (New Regime)	Surcharge Rate (Old Regime)	Marginal Relief	Note
Up to ₹50 Lakh	NIL	NIL	N/A	No surcharge applicable
₹50L to ₹1 Crore	10%	10%	✅ Yes	Same in both regimes
₹1 Crore to ₹2 Crore	15%	15%	✅ Yes	Same in both regimes
₹2 Crore to ₹5 Crore	25%	25%	✅ Yes	Same in both regimes
Above ₹5 Crore	25% Capped	37%	✅ Yes	New regime capped at 25% max

⚠️ Critical Surcharge Rules for Individuals

✅ Capital Gains (Sec 111A/112/112A) + Dividends: Surcharge capped at 15% regardless of total income level — even if income is above ₹5 crore. The enhanced surcharge (25%/37%) is NOT levied on these income types.

✅ New Regime Cap: Under new tax regime, maximum surcharge is capped at 25% even for incomes above ₹5 crore (was 37% under old regime). This was a key Budget 2023 relief for very high income earners.

✅ Marginal Relief: Available at every surcharge threshold (₹50L, ₹1Cr, ₹2Cr, ₹5Cr). Tax + surcharge cannot exceed tax at previous threshold + (income − threshold). Prevents cliff-edge tax jumps.

✅ AOP with Company Members: Surcharge capped at 15% for AOPs whose members are all companies. This is applicable from AY 2023-24 onwards and continues in FY 2026-27.

2. Partnership Firm / LLP / Local Authority

Total Income	Tax Rate	Surcharge	H&E Cess	Note
Any income up to ₹1 Crore	30%	NIL	4%	No surcharge below ₹1 Cr
Income above ₹1 Crore	30%	12%	4%	Marginal relief available · 12% flat

3. Domestic Company

Company Type / Section	Tax Rate	Income ≤₹1 Cr	₹1–10 Crore	Above ₹10 Crore	H&E Cess
Turnover ≤₹400 Cr (Section 115BA)	25%	NIL	7%	12%	4%
Turnover >₹400 Cr (Normal)	30%	NIL	7%	12%	4%
Section 115BAA — New Regime (22%)	22%	Flat 10% surcharge regardless of income level			4%
Section 115BAB — New Manufacturing (15%)	15%	Flat 10% surcharge regardless of income level			4%

4. Foreign Company

Income Type	Tax Rate	Income ≤₹1 Cr	₹1–10 Crore	Above ₹10 Crore	H&E Cess
Royalty / Technical Fees from Govt/Indian concern	10%	NIL	2%	5%	4%
All Other Income	40%	NIL	2%	5%	4%

🏥 Health & Education Cess — Universal 4%

Health & Education Cess is levied at a flat 4% on the total of (Income Tax + Surcharge) — for every taxpayer category without exception. It replaced the earlier Education Cess (2%) and Secondary & Higher Education Cess (1%) from FY 2018-19. It is used to fund government health and education initiatives. Cess is not included in taxable income — it's an add-on on top of tax. Note: Cess is computed on (base tax + surcharge), not on income directly. Formula: Cess = (Base Tax + Surcharge) × 4%.

Key Concepts

Surcharge, Cess & Marginal Relief — Everything Explained

💰

What is Surcharge?

Surcharge is an additional tax levied on the income tax payable (not on income itself) by high-income taxpayers. It follows progressive taxation — richer taxpayers contribute proportionally more. It is calculated as a percentage of base tax, applies when income crosses specified thresholds (₹50L for individuals, ₹1Cr for companies), and is NOT the same as cess.

🏥

What is Health & Education Cess?

Cess is a dedicated levy at 4% on (income tax + surcharge), applicable to all taxpayers regardless of income level. Introduced to fund government health and education programmes. It replaced Education Cess (2%) + SHEC (1%) from April 2018. Formula: Cess = (IT + Surcharge) × 4%. Cannot be deducted as business expense.

🛡️

What is Marginal Relief?

Marginal relief prevents a cliff-edge situation where earning slightly above a surcharge threshold causes disproportionately higher tax. It ensures additional tax paid (including surcharge) cannot exceed additional income earned over the threshold. Example: if income is ₹51L and surcharge causes extra ₹80,000 tax on just ₹1L additional income, marginal relief caps that extra tax at ₹1L.

📈

Capital Gains Surcharge Cap (15%)

For income from capital gains (Sections 111A STCG, 112 LTCG, 112A LTCG) and dividend income — surcharge is capped at 15% regardless of total income level. Even if a person's total income is above ₹5 crore (attracting 25%/37% surcharge on normal income), the surcharge on capital gains and dividend income is restricted to 15%.

⚡

New Regime — 25% Max Cap

Under the New Tax Regime, the maximum surcharge rate for individuals is capped at 25% even for incomes above ₹5 crore. Under the Old Regime, surcharge goes up to 37% for incomes above ₹5 crore. This 12% difference makes the new regime significantly more attractive for ultra-high-income taxpayers.

🏢

Company Surcharge — Flat 10%

Companies opting for concessional rates under Section 115BAA (22%) or Section 115BAB (15%) pay a flat 10% surcharge regardless of income level — not the normal 7%/12% graduated structure. This predictability is one advantage of the concessional company tax regimes. Normal rate companies pay 7% surcharge for ₹1–10Cr and 12% above ₹10Cr.

📐 Marginal Relief — Worked Examples

Example 1 — Income ₹51 Lakhs (Individual, Old Regime)

Tax at ₹50L = ₹13,12,500
Tax at ₹51L = ₹13,62,500 + 10% surcharge = ₹14,98,750
Extra tax due to crossing threshold = ₹1,86,250
But extra income earned = ₹1,00,000 only
Marginal relief = ₹1,86,250 − ₹1,00,000 = ₹86,250
Final tax = ₹14,98,750 − ₹86,250 = ₹14,12,500 (+ 4% cess)

Example 2 — Income ₹1.01 Crore (Firm/LLP)

Tax at ₹1 Cr = ₹30,00,000 (30%)
Tax at ₹1.01 Cr = ₹30,30,000 + 12% surcharge = ₹33,93,600
Extra tax due to crossing threshold = ₹3,93,600
But extra income earned = ₹1,00,000 only
Marginal relief = ₹3,93,600 − ₹1,00,000 = ₹2,93,600
Final tax = ₹33,93,600 − ₹2,93,600 = ₹31,00,000 (+ 4% cess)

Complete Guide

Surcharge & Cess on Income Tax — FY 2026-27 Complete Guide

Surcharge is an additional tax imposed on the income tax payable by high-income taxpayers in India. It is computed as a percentage of the base income tax — not on total income — and applies only when total income exceeds prescribed thresholds. For individuals, HUFs, AOPs, and BOIs, surcharge is 10% on income between ₹50L–₹1Cr, 15% for ₹1–2Cr, 25% for ₹2–5Cr. Under the old regime, it goes to 37% above ₹5Cr; under the new regime, it is capped at 25%. This cap is one of the most significant advantages of the new tax regime for very high-income earners.

The Health & Education Cess of 4% is levied on every rupee of (income tax + surcharge) for all taxpayers — individual, company, firm, AOP — without any exemption or threshold. It is not an income-based levy but a universal add-on. Two critical exceptions govern surcharge calculation: (1) Capital gains income under Sections 111A (STCG), 112 (LTCG), and 112A (LTCG equity) as well as dividend income is subject to a maximum 15% surcharge cap regardless of total income level; (2) Marginal relief ensures that the additional tax (including surcharge) from crossing a threshold cannot exceed the additional income earned. TAXAJ's CA team handles surcharge computation, marginal relief application, and ITR filing for all taxpayer categories including high-income individuals, companies, and LLPs.

FAQ

Surcharge & Cess — Most Asked Questions

Surcharge is an additional tax levied on the income tax amount (not on income itself) by taxpayers with high incomes. It follows progressive taxation principles — higher income earners pay proportionally more. For individuals, it ranges from 10% (income above ₹50L) to 37% (income above ₹5Cr under old regime) or 25% maximum under new regime. For partnership firms and LLPs, it's 12% on income above ₹1 crore. For domestic companies, it's 7% for income between ₹1–10Cr and 12% above ₹10Cr. Surcharge rates remained unchanged in Budget 2025 and Budget 2026.

Health & Education Cess is levied at a flat 4% on the total of (income tax + surcharge), applicable to all taxpayers — individuals, companies, firms, AOP — without any threshold or exemption. Formula: Cess = (Base Tax + Surcharge) × 4%. It was introduced in FY 2018-19 replacing the earlier Education Cess (2%) and Secondary & Higher Education Cess (1%). Cess is not deductible as a business expense and cannot be claimed as a credit against income tax. The final tax payable is: Base Tax + Surcharge + Cess = Base Tax × (1 + surcharge rate) × 1.04.

For individuals in FY 2026-27: New Tax Regime: maximum 25% surcharge (for income above ₹5 crore — same rate as ₹2–5Cr range). Old Tax Regime: maximum 37% surcharge (for income above ₹5 crore). At ₹2–5Cr range, both regimes have 25% surcharge. The cap at 25% under the new regime is a significant benefit for ultra-high-income individuals — saving 12 percentage points of surcharge on high tax liabilities. Note: even with 37% surcharge, capital gains and dividend income surcharge is capped at 15%.

Marginal relief prevents a disproportionate tax burden when income just crosses a surcharge threshold. Without marginal relief, earning ₹1 more above a threshold could trigger a surcharge that costs more than the extra income earned. Marginal relief ensures: Additional tax (including surcharge) ≤ Additional income earned over the threshold. It is available at each threshold — ₹50L, ₹1Cr, ₹2Cr, and ₹5Cr for individuals; ₹1Cr for firms and companies. Marginal relief is automatically calculated in TAXAJ's Surcharge & Cess Calculator above — select your taxpayer type and enter income and base tax.

Yes, but with a crucial cap. Surcharge on income from capital gains under Sections 111A (STCG on equity, 20%), 112 (LTCG, 12.5%), and 112A (LTCG on equity/MF, 12.5%) as well as dividend income is capped at 15% regardless of total income level. So even if a person's total income is ₹10 crore (which would attract 25%/37% surcharge on normal income), the surcharge on capital gains and dividend portions is restricted to 15%. The calculator above handles this split computation automatically when you enter capital gains tax separately.

For FY 2026-27, partnership firms (including LLPs) are taxed at a flat 30% income tax rate. Surcharge is NIL if total income is ₹1 crore or below. Surcharge is 12% on the income tax payable if total income exceeds ₹1 crore. There is only one surcharge rate for firms — no graduated structure like individuals. Marginal relief is available when income marginally crosses ₹1 crore. Health & Education Cess of 4% applies on (tax + surcharge). TAXAJ handles LLP tax compliance and ITR filing.

Domestic companies opting for the concessional tax rate under Section 115BAA (22%) or Section 115BAB (15% for new manufacturing companies) pay a flat 10% surcharge on their income tax — regardless of total income level. This is different from the normal company surcharge structure (7% for ₹1–10Cr, 12% above ₹10Cr). The flat 10% surcharge under 115BAA/115BAB provides predictability for planning purposes. These companies also cannot claim MAT credit or carry forward AMT credit. The effective tax rate under 115BAA is: 22% + 10% surcharge + 4% cess = 25.168% approximately.

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Surcharge & Cess CalculatorIndia FY 2026-27with Marginal Relief

Surcharge & Health Education Cess Calculator — FY 2026-27

Surcharge & Cess Calculator — All Taxpayer Types

Surcharge Rates — All Taxpayer Categories FY 2026-27

1. Individual / HUF / AOP / BOI / AJP

⚠️ Critical Surcharge Rules for Individuals

2. Partnership Firm / LLP / Local Authority

3. Domestic Company

4. Foreign Company

🏥 Health & Education Cess — Universal 4%

Surcharge, Cess & Marginal Relief — Everything Explained

What is Surcharge?

What is Health & Education Cess?

What is Marginal Relief?

Capital Gains Surcharge Cap (15%)

New Regime — 25% Max Cap

Company Surcharge — Flat 10%

📐 Marginal Relief — Worked Examples

Surcharge & Cess on Income Tax — FY 2026-27 Complete Guide

Surcharge & Cess — Most Asked Questions

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Surcharge & Cess Calculator
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with Marginal Relief