Marginal Tax relief

Dear All, Please let me know as to how should we calculate marginal tax relief on surcharge for the financial year 2008-09 on the income over Rs 10,00,000. Please explain with an example. With regards, Mukunda
Replies (2)

 

Please click the following link

https://www.taxguru.in/income-tax/marginal-relief-for-borderline-cases-from-an-additional-tax-liability-that-goes-beyond-the-income-in-excess-of-rs-10-lakh.html

hi, plz see the following eg.

suppose, the taxable income for the f/y 2008-09 is rs. 10,30000. then, for the purpose of calculating marginal relief with regard to excess of income over rs. 10,00000 i. e. rs. 30,000 in the given case, the following steps shud be applied.

STEP I

rs 10,30000 (including surcharge)=

on first Rs.150000=nil

on next rs.150000 @ 10%+=15000

on next rs200000 @ 20%=40000

on balance Rs530000 i.e.(1030000-500000) @ 30%=159000

total tax payable=214000

Add:surcharge @ 10%on Rs214000=21400

total tax payable (including surcharge)=235400

STEP II

tax on rs. 10,00000 (excluding surcharge*)

on first Rs.150000=nil

on next rs.150000 @ 10%+=15000

on next rs200000 @ 20%=40000

on balance Rs50000 i.e.(1000000-500000) @ 30%=150000

total tax payable (excluding surcharge)=205000.

 now STEPI-STEPII=235400-205000=30400.

 EXCESS OF INCOME OVER RS. 1000000 IS ONLY 30000

SO, THE TAX ON EXCESS INCOME OVER RS. 1000000 CANT EXCEED THE AMOUNT BY WHICH THE INCOME EXCEEDS RS.1000000.

 THEREFORE, THE RELIEF i.e. THE MARGINAL RELIEF FOR SURCHARGE WILL BE FOR RS 400. (30400-30000)

 & THE TAX PAYABLE FOR THE FINANCIAL YEAR 2008-2009 SHALL BE 235400-400=Rs.235000.

REMEBER NO MARGINAL RELIEF IS GIVEN IN RESPECT OF SECONDARY & HIGHER EDUCATION CESS.

 *: SURCHARGE IS APPLICABLE ONLY IF THE TOTAL INCOME EXCEEDS RS. 1000000.

 

 

 

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