What is marginal relief and how is it calculated?

• The surcharge levied is subject to marginal relief to ensure the payable amount does not exceed the income which is in excess of the threshold.

• Individuals with a total taxable income between ₹50 lakh to ₹1 cr will pay a surcharge of 10%, those with an income between ₹1 cr to ₹2 cr will pay 15%, those with an income between ₹2 cr to ₹5 cr will pay 25% & those with an income above ₹5 cr will pay 37%.

• Surcharge rate on Long term capital gain (112) is same as above but income tax rate on Long term capital gain is 20%. Long term capital gain will be included in total income for surcharge rate imposition.

• However, the actual surcharge levied is subject to marginal relief to ensure the payable amount does not exceed the income which is in excess of the threshold. But what exactly is marginal relief and how is it calculated?

Marginal relief

According to the Income-tax Act, 1961, a marginal relief is given to individuals whose taxable income is beyond the threshold limit after which surcharge is payable, but the net income above the threshold is less than the surcharge.

Examples

With the help of few cases we will see different rates of surcharge applicable when long term capital gain (112) & other income is earned. In our examples we will take different income combination on which surcharge is applicable.

Different Rates of Surcharge Applicable When Long Term Capital Gain (112) & Other Income Is Earned