Surcharge
An additional charge on the income tax itself, not on income, applicable once total income crosses specified high thresholds, typically starting above ₹50 lakh.
In short
- Surcharge starts at 10% once total income crosses ₹50 lakh, rising to 15%, 25%, and, under the old regime only, 37% at higher thresholds.
- The new tax regime caps surcharge at 25%, even for income above ₹5 crore, where the old regime still charges 37%.
- It's calculated on your income tax, not your income: a 10% surcharge means 10% of your tax bill, not 10% of your income.
- Marginal relief prevents crossing a threshold from increasing your tax by more than the extra income itself.
- Surcharge on capital gains under Sections 111A, 112, and 112A, and on dividends, is capped at 15% regardless of total income.
Surcharge is a tax on tax: it's calculated as a percentage of the income tax already computed, not as a percentage of income itself, and it only kicks in once total income crosses specified thresholds, commonly starting above ₹50 lakh, with higher surcharge rates at higher income slabs. Someone with income just below a threshold and someone just above it can end up with a noticeably different effective tax rate, which is why marginal relief provisions exist to smooth out that jump.
Surcharge rates and thresholds differ somewhat by regime and by the type of income involved, since some capital gains and dividend income are capped differently. It mainly affects high-income taxpayers; the majority of individual filers never encounter it. A full breakdown of the current FY 2026-27 slabs, a worked marginal relief example, and the lower capital gains cap is in our guide to income tax surcharge and cess.
Also referred to as: income tax surcharge, surcharge on income tax.
Frequently asked questions
At what income does surcharge apply?
Once total income crosses ₹50 lakh, under both the old and new tax regimes.
What is the maximum surcharge rate?
37% under the old regime, for income above ₹5 crore. The new regime caps surcharge at 25%, even above that threshold.
Is surcharge the same as cess?
No. Surcharge applies only above specified income thresholds and is added before cess. Health and Education Cess, a flat 4%, applies to every taxpayer and is calculated on tax plus surcharge combined.
Disclaimer
This glossary entry is for general informational purposes only and does not constitute professional tax, legal, or financial advice. Rules and rates change, so consult a qualified Chartered Accountant for advice specific to your situation.