What is surcharge on income tax?

Surcharge is an additional tax levied on the INCOME TAX amount (not income directly) for high-income earners. It is a percentage of the slab tax, applied AFTER the slab calculation and any Section 87A rebate, but BEFORE the 4% Health & Education Cess. Surcharge effectively raises the marginal tax rate for HNI taxpayers. Under the Finance Act 2026 schedule, surcharge applies at 10% above ₹50L of total income, 15% above ₹1Cr, 25% above ₹2Cr, and (old regime only) 37% above ₹5Cr. The new regime under Section 115BAC caps surcharge at 25% even for incomes above ₹5Cr — the 37% slab is disabled.

What is marginal relief?

Marginal relief prevents a tax cliff at each surcharge threshold. Without it, earning ₹50,01,000 instead of ₹50,00,000 would suddenly trigger 10% surcharge on the entire tax — a disproportionate jump for ₹1,000 of extra income. The marginal-relief rule says: the additional tax (tax + surcharge at the higher income) cannot exceed the tax at the threshold PLUS the income excess over the threshold. If the strict computation exceeds this cap, the surcharge is reduced by the difference. The relief is automatically computed at every crossed threshold (₹50L, ₹1Cr, ₹2Cr, ₹5Cr) and the largest benefit is granted to the taxpayer. The Income Tax Department's ITR utility computes this for you when you file.

How does surcharge differ between old and new regime?

The first three tiers are identical in both regimes: 10% above ₹50L, 15% above ₹1Cr, and 25% above ₹2Cr. The difference is at the top: the OLD regime levies a 37% surcharge on incomes above ₹5Cr, while the NEW regime (Section 115BAC) caps surcharge at 25% even above ₹5Cr — there is no 37% tier. For ultra-HNI taxpayers (above ₹5Cr), this can save tens of lakhs in surcharge alone. The new regime also has different slab rates (0/5/10/15/20/25/30% with ₹4L basic exemption), so the underlying baseTax differs too. Use the regime toggle on this calculator to compare side by side.

Why is the 37% surcharge slab not in the new regime?

When Section 115BAC (the new optional regime) was overhauled by the Finance Act 2023 and made the default in FY 2023-24, the maximum surcharge rate was capped at 25% to keep the maximum marginal rate at a more competitive level. Under the old regime, a taxpayer above ₹5Cr faces 30% slab tax + 37% surcharge on that = 41.1% pre-cess + cess = ~42.74% marginal rate. Under the new regime, the same taxpayer faces 30% slab tax + 25% surcharge = 37.5% pre-cess + cess = ~39% marginal rate. This was a deliberate policy choice to encourage HNIs to adopt the new regime, which sacrifices most deductions for a cleaner slab structure. The Finance Act 2026 retains this cap.

How is Health & Education Cess (HEC) calculated?

The 4% Health & Education Cess is computed LAST, on the sum of (baseTax + netSurcharge) — i.e., after any 87A rebate and after marginal relief has been deducted from the surcharge. The cess funds primary education and public health initiatives. The formula is: cess = 0.04 × (baseTax + netSurcharge). For example, if baseTax = ₹31,80,000 and netSurcharge (after relief) = ₹4,77,000, cess = 0.04 × ₹36,57,000 = ₹1,46,280. The cess applies to all taxpayers regardless of regime — there is no exemption for HNIs, senior citizens, or any income band. It is rounded to the nearest rupee on the ITR.

Surcharge & Marginal Relief Calculator

Surcharge + Marginal Relief

💰 Finance⭐ Most Popular

Calculate income tax surcharge for HNI taxpayers (10% above ₹50L, 15% above ₹1Cr, 25% above ₹2Cr, 37% above ₹5Cr under old regime / max 25% under new regime FY26-27) plus marginal relief that caps tax at excess income above the slab boundary.

Reviewed by the CalculatorKosh Editorial TeamUpdated June 2026Free · No sign-up

Your Income Details

Taxable income

₹

₹0₹1000 Cr

Total income after deductions (post 80C / 80D / standard deduction)

Tax regime

The new regime under Sec 115BAC caps surcharge at 25%; the old regime retains the 37% top slab for incomes above ₹5Cr.

Total Tax

~ 38.0 Lakh

(Effective 31.69% · Surcharge 15%)

Base tax

₹31.8 L

Net surcharge

₹4.8 L

Cess (4%)

₹1.5 L

Effective rate

31.69%

Surcharge breakdown — New regime (Sec 115BAC)

Income above	Surcharge %	Surcharge on this baseTax
≤ ₹50L	0%	—
> ₹50,00,000	10%	₹3,18,000
> ₹1,00,00,000	15%	₹4,77,000
> ₹2,00,00,000	25%	₹7,95,000

The highlighted row is your active surcharge tier. Amounts shown are surcharge on your current baseTax — useful for comparing how surcharge scales across tiers.

NOT APPLICABLE

Marginal relief

Marginal relief is not applicable at this income level. Your tax + surcharge does not exceed the threshold cap at any crossed tier — the full slab tax + surcharge accrues.

HOW IT WORKS

How marginal relief works

Tax + Surcharge cannot exceed the threshold tax + the excess income. This prevents a small increase in income from causing a disproportionately large jump in tax. At every surcharge threshold (₹50L, ₹1Cr, ₹2Cr, ₹5Cr), the law caps the additional tax at the marginal income above the threshold — so earning ₹50,01,000 instead of ₹50,00,000 cannot trigger surcharge on the entire tax.

New vs Old regime — total tax comparison

New Regime (current)

₹38,03,280

Surcharge 15% · effective 31.69%

Old Regime

₹40,81,350

Surcharge 15% · effective 34.01%

The new regime is currently the lower of the two for this income.

Related tool

Income Tax Calculator

Full slab-by-slab tax computation with deductions, regime comparison, and HRA / NPS / home loan handling.

Related tool

87A Rebate Calculator

Section 87A rebate up to ₹60K — for incomes ≤ ₹12L (new) or ≤ ₹5L (old) — with marginal-relief band handling.

Effective tax rate by income

New regime (Sec 115BAC) · includes surcharge + marginal relief + 4% cess

How It Works

This calculator computes the surcharge levied on income tax for high-income earners along with the marginal relief that prevents a tax cliff just above each surcharge threshold. The surcharge is a percentage of the income tax (not income directly) and applies after the slab calculation, with the 4% Health & Education Cess added at the end.

Surcharge schedule (Finance Act 2026)

The first three surcharge tiers are identical in both regimes: 10% above ₹50L, 15% above ₹1Cr, and 25% above ₹2Cr. The old regime adds a 37% tier above ₹5Cr; the new regime (Section 115BAC) caps surcharge at 25% even for incomes above ₹5Cr — there is no 37% tier in the new regime.

How marginal relief works

At each surcharge threshold, the law guarantees that (tax + surcharge) cannot exceed (tax at the threshold) + (income excess above the threshold). If the strict computation would exceed this cap, the surcharge is reduced by the difference. The calculator checks the cap at every crossed threshold and applies the largest taxpayer-favourable relief.

Cess applies last

After surcharge and marginal relief are settled, the 4% Health & Education Cess is applied to (baseTax + netSurcharge). The cess funds primary education and public health and applies regardless of regime.

Frequently Asked Questions

Surcharge is an additional tax levied on the income tax amount (not income directly) for high-income earners. It is a percentage of the slab tax, applied AFTER the slab calculation and any Section 87A rebate, but BEFORE the 4% Health & Education Cess. Under the Finance Act 2026 schedule, surcharge applies at 10% above ₹50L, 15% above ₹1Cr, 25% above ₹2Cr, and (old regime only) 37% above ₹5Cr. The new regime under Section 115BAC caps surcharge at 25% even for incomes above ₹5Cr.