Surcharge applicable to Individual/HUF/AOP/BOI/Artificial juridical persons

We all well know that surcharge rates applicable to Individual/ HUF/ AOP/ BOI/Artificial juridical persons under Income Tax Law are:

• Up to Rs. 50,00,000  - Nil
• Rs. 50,00,001 to  Rs. 1,00,00,000  - 10%
• Rs. 1,00,00,001 to Rs. 2,00,00,000  - 15%
• Rs. 2,00,00,001 to Rs. 5,00,00,000  - 25%
• More than Rs. 5,00,00,000   - 37% (Budget 2023 - proposed it as 25%)

However, If Total Income Includes dividend income and capital gains chargeable to tax u/s 111A and 112A, then the surcharge rate on such income shall not be more than 15% (Let us consider the above as special Income).

Case 1

Special Income is Rs. 60,00,000 and other Income is Rs.30,00,000 Total Income is Rs. 90,00,000 then applicable surcharge rate is 10%. This is because the Total Income does not exceed Rs. 1,00,00,000. As well as surcharge rate on special income shall not be more than 15% and 10% is less than 15%. Thus the applicable surcharge rate is 10%.

Case 2

Special Income is Rs. 1,50,00,000 and other Income is Rs.40,00,000 Total Income is Rs. 1,90,00,000 then applicable surcharge rate is 15%

Case 3

Special Income is Rs. 1,90,00,000 and other Income is Rs.60,00,000 Total Income is Rs. 2,50,00,000 then applicable surcharge rate is, on Rs. 1,90,00,000 it is 15% and on other income also it is 15%. This is because the other income does not exceed Rs. 2,00,00,000. You may feel that the other income does not exceed Rs. 1,00,00,000 the applicable surcharge rate would be 10%. However, the total income exceeds Rs. 1,00,00,000 and crosses that slab. Thus the applicable surcharge rate is 15% of total Income.

Case 4

Same as Case 3, If  Special Income is Rs. 4,90,00,000 and other Income is Rs.60,00,000 Total Income is Rs. 5,50,00,000 then applicable surcharge rate is, on Rs. 4,90,00,000 it is 15% and on other income, it is 25%. This is because the other income does not exceed Rs. 5,00,00,000.. You may feel that the other income does not exceed Rs. 1,00,00,000 the applicable surcharge rate would be 10%. However, the total income exceeds Rs. 2,00,00,000 and crosses that slab. Thus the applicable surcharge rate is 15% on Special Income and 25% on other income.

These cases are not exhaustive.

Additionally, it can be mentioned that dividend income is chargeable to tax at normal rates and tax on such income is to be calculated along with other income. Then an issue will arise while computing the surcharge like in case-4. 

Then Proportionate tax on Dividend Income is to be arrived to compute the surcharge.