Surcharge under maximum marginal rate is slab-based, not a flat highest levy, under the Finance Act structure.

Surcharge under the income-tax scheme is part of the Finance Act rate structure and not an independent flat levy. For an assessee taxed at the maximum marginal rate, Section 2(29C) was read as referring to the surcharge applicable under the relevant slab and threshold scheme, not as requiring automatic application of the highest surcharge rate in every case. Because Sections 164 and 167B do not prescribe surcharge, the surcharge component must follow the graded rates and income thresholds in the Finance Act and First Schedule. A uniform highest surcharge irrespective of income would be inconsistent with that structure.

---

---

Issues: Whether, in the case of an assessee taxed at the maximum marginal rate, surcharge is to be computed at the highest flat rate or according to the slab-wise surcharge structure prescribed in the relevant Finance Act.

Analysis: The surcharge under the income-tax scheme is not an independent flat levy but part of the rate structure laid down in the Finance Act. The expression in Section 2(29C) describing the maximum marginal rate, including surcharge on income-tax, if any, was read as referring to the surcharge applicable under the relevant slab and threshold scheme, not as mandating automatic application of the highest surcharge rate in every case. Since Sections 164 and 167B do not themselves prescribe surcharge, the surcharge component has to follow the graded rates and income thresholds provided in the Finance Act and the First Schedule. A uniform highest surcharge irrespective of income would be inconsistent with that structure.

Conclusion: Surcharge must be computed on a slab-wise basis under the relevant Finance Act, and not at a flat highest rate. The assessee was therefore correct in applying surcharge at 10% for A.Y. 2021-22 and 25% for A.Y. 2022-23.

---