In general terms, a surcharge is an extra amount charged over and above the original monetary value of a product or a service.
In terms of taxation, a surcharge amount is the added sum levied on the tax payable by an entity.
Table of Contents
What Is a Surcharge on Income Tax?
A surcharge on income tax is essentially a tax charged on the tax. This is not levied on the amount generated from income. Income tax surcharges are additional taxes imposed on income earned by certain taxpayers. These surcharges are usually imposed at a higher rate than the regular income tax rate and are designed to target certain types of income earners.
Therefore, if an individual or an organisation falls under the higher tax slab of 30%, this entity will be under the purview of a surcharge on income tax.
To further elaborate, this fee will be levied on a person if he or she is earning more than Rs 50 lakhs per annum. On the other hand, when it comes to a corporation, this charge will be applicable if it is earning Rs 1 crore annually.
What Is the Rate of Surcharge on Income Tax?
The rate might vary significantly based on the entity on whom this surcharge is getting levied. The different rates for individuals and different companies had been discussed below.
|LIMIT OF INCOME||RATE OF SURCHARGE ON INCOME TAX|
|Below 50 lakhs||Zero|
|50 Lakh – 1 Crore||10%|
|1 Crore – 2 Crore||15%|
|2 Crore – 5 Crore||25%|
|Above 5 Crore||37%|
|TYPE OF COMPANY||LIMIT OF INCOME||SURCHARGE RATE|
|Firm/LLP/Local authorities/Co-operative Society||Above the limit of ₹1 Crore||12%|
|Domestic Company||₹1 – 10 Crore||7%|
|Domestic Company||10 Crore +||12%|
|Foreign Organisation||₹1 – 10 Crore||2%|
|Foreign Organisation||Above 10 Crore||5%|
Interestingly, companies in the Indian start-up sector are showing an increasing interest in neo-banking facilities for tax compliance measures regarding employee payroll management.
For instance, with RazorpayX payroll, it is easier for your employees to make their tax declarations via this platform’s self-serve portal. The software enables you to calculate payroll and disburse salary in just a few clicks. RazorpayX also enables automated Tax payments from a single dashboard.
What Is Marginal Relief in Surcharge on Income Tax?
According to the rules and regulations of the Income Tax Act of India, an entity can be eligible for marginal relief if the generated income is above Rs 50 Lakh per annum. This relief amount is calculated as per the difference between the sum beyond the Rs 50L limit, and the excess tax and surcharge on income tax payable by this concerned authority.
To better elaborate, a specific example is considered. Suppose a business firm is paying a surcharge on income tax at the rate of 12% for earning Rs 1.01 Crore annually. In such an instance, two factors are considered:
- For an earning of Rs 1 Crore, the payable tax amount would have been Rs 3120000.
- However, including the surcharge, this tax amount would be Rs 3224000.
Therefore, the firm may be subjected to pay off a subtotal of Rs104300 for turning in an extra income of Rs 100000. Such regulations can lead to a financial burden for an organisation. That is why it will be granted a marginal relief as:
Relief amount: Rs 104000 – Rs 100000 = Rs 4000/-
How Can RazorpayX Help Taxpayers?
RazorpayX, one of the leading neo-banking solution providers in this country, has been highly effective for the Indian start-up sector. For instance, with its advanced tax payments feature, your business can get done with its diverse tax payments in a matter of a few clicks.
The platform provides a top-of-the-range dashboard that can automate different compliances of your business, such as paying its:
- RazorpayX allows business owners to open current accounts, pay taxes, schedule payments, pay vendors seamlessly and check invoices from a single dashboard. This saves valuable time and effort.
- It is an accounting and banking platform that fills the gap between advanced banking solutions and finance professionals. It allows easy accounting software integration.
- With RazorpayX Payroll, businesses can automate salary payments and provide insurance policies to their employees
Frequently Asked Questions
When was the surcharge on income tax introduced in India?
The Finance Act of 2013 introduced the concept of a surcharge on income tax in India.
How can a small business avoid paying higher taxes?
A small business can avoid paying the higher amount as income tax by adhering to certain procedures such as:
1. Paying for employee health insurance
2. Applying for Qualified Business Income [QBI] deduction
3. Being thorough about depreciation expenses, etc.
Can you pay all of your TDS/TCS payments at once via RazorpayX Tax Payments software?
Multiple TDS entries can be paid off via RazorpayX in a single sequence with the usage of a One Time Password [OTP].