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

Last updated: 08 March 2023

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This article clarifies the surcharge rates applicable to Individuals, HUFs, AOPs, BOIs, and Artificial Juridical Persons under Income Tax Law. It outlines different surcharge tiers based on total income, from nil for incomes up to Rs. 50 lakhs to 37% for incomes over Rs. 5 crores. Crucially, it explains that if total income includes dividend income or capital gains taxed under sections 111A and 112A, the surcharge on this 'special income' is capped at 15%. Several case studies illustrate how these rules apply in practice, particularly when special income is combined with other income.

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).

Surcharge Rates for Individuals and HUFs Explained

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.