Surcharge on income tax: rates, caps and marginal relief for 2026
Surcharge is an extra tax on tax, charged once income crosses ₹50 lakh for individuals or ₹1 crore for firms and companies. It is where most of the gap between the headline 30 percent rate and the effective rate of 35 to 39 percent comes from.
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Quick answer
Individuals pay surcharge of 10% on income tax above ₹50 lakh, 15% above ₹1 crore, 25% above ₹2 crore and 37% above ₹5 crore in the old regime; the new regime caps it at 25%. Surcharge on dividends and capital gains is capped at 15%, and 4% cess applies on top.
- Top effective rate: 39% (new regime), 42.74% (old)
- Companies: 7% or 12%; 10% flat in the 22% regime
- Marginal relief at every threshold
Surcharge rates for individuals, HUFs and trusts
| Total income | Old regime | New regime |
|---|---|---|
| Up to ₹50 lakh | Nil | Nil |
| ₹50 lakh to ₹1 crore | 10% | 10% |
| ₹1 crore to ₹2 crore | 15% | 15% |
| ₹2 crore to ₹5 crore | 25% | 25% |
| Above ₹5 crore | 37% | 25% (capped) |
Health and education cess of 4% is then charged on tax plus surcharge. The top effective rate is 42.74% in the old regime and 39% in the new regime.
The 15 percent cap on gains and dividends
For individuals, HUFs and similar taxpayers, surcharge on the following income is capped at 15%, even if total income crosses ₹2 crore or ₹5 crore:
- dividends;
- short-term gains on listed shares and equity funds;
- long-term capital gains of every kind.
So a person with ₹3 crore of salary and ₹1 crore of long-term gains pays 25% surcharge (new regime) on the salary tax but only 15% on the tax on gains. Property sellers with large one-off gains benefit from this; use our capital gains calculator for the base tax.
Firms, LLPs and companies
| Taxpayer | Income band | Surcharge |
|---|---|---|
| Partnership firm or LLP | Above ₹1 crore | 12% |
| Domestic company, normal rates | ₹1 crore to ₹10 crore | 7% |
| Domestic company, normal rates | Above ₹10 crore | 12% |
| Domestic company in the 22% concessional regime | Any income | 10% flat |
| Foreign company | ₹1 crore to ₹10 crore / above | 2% / 5% |
This is why the effective rate for a company in the 22% regime is 25.168% (22% plus 10% surcharge plus 4% cess). For a comparison of company and LLP tax, see our Pvt Ltd vs LLP vs OPC guide.
Marginal relief
Crossing a surcharge threshold by a small amount should not cost more than the extra income itself. Marginal relief limits the increase in tax plus surcharge to the income above the threshold.
Example (new regime). Taxable income of ₹50,50,000. Tax at slab rates is ₹10,95,000. With 10% surcharge it would be ₹12,04,500. Tax on exactly ₹50 lakh is ₹10,80,000, so the most payable is ₹10,80,000 + ₹50,000 = ₹11,30,000. Surcharge is reduced to ₹35,000. Cess of 4% is added after.
The same test applies at each threshold: ₹1 crore, ₹2 crore and ₹5 crore, and for firms and companies at theirs.
Planning points
- Regime choice matters most above ₹5 crore, where the old regime’s 37% surcharge makes the new regime almost always cheaper.
- Timing a large gain into a year of lower other income can keep total income below a threshold.
- Advance tax must include surcharge and cess; interest runs on shortfalls. See our advance tax guide.
- Non-residents pay the same surcharge on Indian income, which is why TDS on NRI property sales often exceeds the base rate; see our NRI tax guide.
Effective tax rates at a glance
| Total income (individual) | Top marginal rate, new regime | Top marginal rate, old regime |
|---|---|---|
| Up to ₹50 lakh | 31.2% | 31.2% |
| ₹50 lakh to ₹1 crore | 34.32% | 34.32% |
| ₹1 crore to ₹2 crore | 35.88% | 35.88% |
| ₹2 crore to ₹5 crore | 39% | 39% |
| Above ₹5 crore | 39% | 42.744% |
These are marginal rates on slab income: 30% plus surcharge plus 4% cess. Capital gains and dividends never carry more than 15% surcharge, so their top effective rates are lower, for example 14.95% on long-term gains taxed at 12.5%.
Frequently asked questions
What is the surcharge rate for income above 50 lakh?
10% of the income tax for income between ₹50 lakh and ₹1 crore, rising to 15% above ₹1 crore and 25% above ₹2 crore. Above ₹5 crore it is 37% in the old regime and capped at 25% in the new regime.
Is surcharge charged on capital gains?
Yes, but for individuals it is capped at 15% on tax on dividends, short-term gains on listed equity and all long-term capital gains.
What is marginal relief on surcharge?
It limits the extra tax and surcharge from crossing a threshold to the income above that threshold, so a small increase in income never causes a larger increase in tax.
What is the surcharge for companies?
7% for domestic companies with income between ₹1 crore and ₹10 crore, 12% above ₹10 crore, and a flat 10% for companies in the 22% concessional regime.
High income, capital gains or a large one-off receipt?
A FilingBase CA models regime, surcharge and marginal relief before you pay advance tax.
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Read guide→Official references
The statutory sources behind this page. We keep our guidance aligned to them — verify anything time-sensitive directly.
- Ministry of Corporate AffairsCompanies Act filings, forms and fee schedules
- Income Tax DepartmentReturns, forms, rates and e-filing utilities
- GST PortalRegistration, returns and rate notifications
Facts on this page are checked against these sources; the date of the last check is shown at the top of the page. It is general guidance, not advice on your specific facts. How we write and check our guides.