# Surcharge & Marginal Relief — Individual/HUF/AOP/BOI/AJP

## A. Surcharge rates

Surcharge is a percentage of basic income tax, triggered when total income crosses thresholds. The rates differ depending on whether the income includes dividend and capital gains u/s 111A, 112, 112A.

### When total income INCLUDES dividend & CG u/s 111A/112/112A

Total income	Up to	DTR	OTR
> ₹50 lakh	₹1 crore	10%	10%
> ₹1 crore	₹2 crore	15%	15%
> ₹2 crore (not in other rows)	—	15%	15%

### When total income EXCLUDES dividend & CG u/s 111A/112/112A

Total income	Up to	DTR	OTR
> ₹2 crore	₹5 crore	25%	25%
> ₹5 crore	—	25%	37%

### Key capping rule

Surcharge on tax relating to dividend and CG u/s 111A, 112, 112A cannot exceed 15% (i.e., 10% or 15% as applicable).
All other incomes (incl. lottery & casual incomes) bear surcharge at 10 / 15 / 25 / 37 as applicable.
Under the DTR (115BAC), the maximum surcharge is capped at 25% — the 37% rate does not apply.

## B. Marginal Relief

Marginal relief ensures the extra tax (incl. surcharge) does not exceed the income earned above the threshold.

General method at each threshold:

1. Compute tax on total income + applicable surcharge.

2. Compute tax on the threshold amount (with the lower surcharge of the previous band) PLUS (Total Income − threshold).

3. If (1) > (2), Relief = (1) − (2). If negative, ignore.

Threshold band	Step 1 surcharge	Step 2 comparison base
> ₹50L ≤ ₹1Cr	tax + 10%	tax on ₹50L + (TI − ₹50L)
> ₹1Cr ≤ ₹2Cr	tax + 15%	(tax on ₹1Cr + 10%) + (TI − ₹1Cr)
> ₹2Cr ≤ ₹5Cr	tax + 25%	(tax on ₹2Cr + 15%) + (TI − ₹2Cr)
> ₹5Cr	tax + 37%	(tax on ₹5Cr + 25%) + (TI − ₹5Cr)

> The ₹5 crore (37%) band does not apply under the DTR, since 115BAC caps surcharge at 25%.

Worked example

### Example 1

Example (marginal relief > ₹50 lakh): Total income = ₹51,00,000. Step 1: tax on ₹51L + 10% surcharge. Step 2: tax on ₹50L (no surcharge, since ₹50L doesn't cross the limit) + (₹51L − ₹50L = ₹1,00,000). If Step 1 > Step 2, the difference is given as marginal relief so the additional tax burden does not exceed the ₹1,00,000 of extra income.

### Example 2

Example (surcharge cap on capital gains): An individual with total income of ₹3 crore that includes LTCG u/s 112A. Although income above ₹2 crore otherwise attracts 25% surcharge, the surcharge on the portion of tax attributable to the 112A capital gains is capped at 15%, while other income bears 25%.

### Example 3

Example (DTR cap): An individual under the default regime (115BAC) has total income of ₹6 crore. The 37% surcharge does not apply — surcharge is capped at 25% under 115BAC.

⚠️ Common exam mistakes

Applying the 37% surcharge slab under the default regime — under 115BAC the maximum is 25%.
Charging surcharge above 15% on tax relating to dividend / 111A / 112 / 112A income — it is capped at 15%.
Forgetting that lottery and other casual incomes are NOT capped at 15% — they bear surcharge at the full 10/15/25/37 rates.
In marginal relief, comparing against the wrong base — Step 2 must use the threshold's tax with the previous band's surcharge plus the income above the threshold.
Ignoring marginal relief negative results — if the relief computes negative, it is simply ignored (no relief).

Reference: Section 115BAC (surcharge cap under DTR) — Annual Finance Act / Income-tax Act, 1961

Now that you've read this — what's next?

Move from understanding → mastery in 3 clicks. Each option below picks up from this lesson's topic.

🔥 Drill 5 Qs on this → ✍️ Adaptive practice →

Surcharge rates and marginal relief for Individual/HUF/AOP/BOI/AJP

Worked example

⚠️ Common exam mistakes