Maginal Relief from Surcharge under Income Tax

[umeshkumar jhawar]

Dear Experts

I have total Income of Rs. 2,35,00,000.00 in which Income u/s 111A/112/112A is Rs. 15,00,000/- and Income From Salary Rs. 220,00,000/-

Now Marginal relief from surcharge is 15% on Income u/s 111A/112/112A and other that that 25%.

Now How to calculate Marginal Relief.

While Calculating Marginal Relief for Change in Surcharge Rate whether we need to consider Total Income Rs. 2,35,00,000/- or 2,20,00,000/-.

[YAGAY andSUN]

With reference to the computation of surcharge and marginal relief in the given case, it is pertinent to note that the applicability of surcharge under the Finance Act is determined with reference to the Total Income of the assessee and not with reference to individual components of income.

In the present case, the Total Income amounts to Rs. 2,35,00,000, comprising Salary Income of Rs. 2,20,00,000 and income chargeable under sections 111A/112/112A amounting to Rs. 15,00,000.

Where the total income exceeds Rs. 2 crore but does not exceed Rs. 5 crore, surcharge is generally leviable at 25%. However, in terms of the proviso to the relevant surcharge provisions, the rate of surcharge on tax payable in respect of income chargeable under sections 111A, 112 and 112A is restricted to a maximum of 15%. Accordingly, while computing the tax liability, surcharge shall be applied @25% on the tax attributable to salary income and @15% on the tax attributable to income under sections 111A/112/112A.

For the purpose of marginal relief, the comparison is required to be made with reference to the Total Income. Accordingly, the tax payable (including surcharge) on the total income of Rs. 2,35,00,000 should not exceed the aggregate of:

(a) the tax payable (including applicable surcharge) on a total income of Rs. 2,00,00,000, and

(b) the amount by which the total income exceeds Rs. 2,00,00,000.

Therefore, the marginal relief test must be carried out with reference to the total income of Rs. 2,35,00,000 and not Rs. 2,20,00,000, even though the surcharge on income chargeable under sections 111A/112/112A is capped at 15%.

AI Summary

Marginal relief from surcharge: compare total-income tax (including surcharge) with threshold tax plus excess income to limit surcharge. Surcharge liability is determined with reference to the Total Income and not individual components. Tax computation must allocate tax to each income component and apply the appropriate surcharge rate, with a statutory cap limiting surcharge on certain specified income categories. For marginal relief the tax (including surcharge) on the actual Total Income must be compared to the sum of tax (including surcharge) on the threshold total income and the excess of Total Income over that threshold; thus the Total Income is used in the marginal relief test.