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Rates of Surcharge in case of Individual, HUF, AOP, BOI and Artificial Juridical Persons(AJPs) and Surcharge on Dividend Income and Income under section 111A/112A ( AY 22-23)

If you fall on the privilege side of the society and in high income group , You are liable to pay additional tax on the tax you are paying.

Law makers have coined the term “Surcharge” for this additional tax on the tax. In simple words, Government wants to charge the rich section of society at higher rate.

The question may pops in the curious minds as to why not add an additional slab rate in the existing slab rate?

The reason could be – So that it doesn’t feel burdensome or that the very purpose of shifting the burden onto only the rich section of society will get defeated as every individual falling in that tax bracket will have to bear the burn or that the certain benefit of exemption limit can be availed that way.

This article is confined to the applicable rates of surcharge in various scenarios for Individual/HUF/AOP/BOI/Artificial Juridical Persons.

Rates of Surcharge in case of Individual , AOP, BOI and Artificial Juridical Person for AY 22-23 ( PY 21-22)

Here Net taxable income ( i.e Gross total income as reduced by all or any deduction under chapter – VIA of Income Tax Act) is being denoted as NTI.

NTI upto ₹ 50Lakhs – NIL

NTI More than ₹ 50 Lakhs upto ₹1 Crore – 10%

NTI More than ₹1 Crore upto ₹ 2 Crore – 15%

NTI More than ₹2 Crore upto ₹ 5 Crore – 25%

NTI More than ₹5 Crore – 37%

Points to remember

1. Surcharge on any income included in NTI relating to following will never be more than 15%

a) Section 112A (Capital Gain)

b) Section 111A (Capital Gain)

c) Dividend Income

2. Also , If assessee has fallen in the bracket of income attracting surcharge at the rate 25% or 37% merely because of the income relating to the above mentioned items ( In other words, if the remaining income other than the above items is not more than ₹ 2 crore or ₹5 crore as the case may be), Surcharge of 25% or 37% respectively, will not be levied

For better understanding lets have a look at some examples:

Case 1: NTI = ₹ 95 Lakhs, section 112A/111A/Dividend Income  = ₹45 Lakhs , Remaining income = ₹ 50 Lakhs.

Rates of Surcharge in case of Individual, HUF, AOP, BOI and Artificial Juridical Persons and Surcharge on Dividend Income and Income under section 111A112A ( AY 22-23)

In the above case as the total income is more than ₹ 50Lakhs , Thus assessee will be hit by surcharge @ 10% irrespective of whether the income is from capital gain under section 112A/111A/ Dividend Income or the remaining income

Case 2: NTI = ₹1.10 crore, section 112A/111A/Dividend Income  = ₹45 Lakhs , Remaining income = ₹65 Lakhs .

In the above case as the total income is more than ₹ 1 Crore , thus assessee will be hit by surcharge @ 15% irrespective of whether the income is from capital gain under section 112A/111A/ Dividend Income or the remaining income

Case 3: NTI = ₹ 2.10 crore, section 112A/111A/Dividend Income  = ₹5 Lakhs , Remaining income = ₹2.05 Crore.

In the above case as the remaining income itself is more than ₹ 2 Crore , Thus it will attract Surcharge @25% . Dividend income will attract the surcharge @15%.

Case 4 : NTI = ₹2.10 crore, section 112A/111A/Dividend Income = ₹50 Lakhs , Remaining income = ₹1.60 Crore.

In the above case as the remaining income itself is NOT more than ₹ 2 Crore , Thus it will NOT attract surcharge @25% AND both Dividend income (₹50 Lakhs) and the other income ( ₹1.60 crore ) will attract the surcharge @15%.

Now lets make it a little more interesting

Case 5 : NTI = ₹2.10 crore, Income under section 112A/111A/Dividend Income = ₹ 1.60 Crore, Remaining income = ₹ 50 Lakhs.
In the above case as the remaining income itself is NOT more than ₹ 2 Crore. But Its not more than ₹ 50 Lakhs as well. To levy surcharge income should be above ₹50 Lakhs. Will the surcharge be levied?

YES!! It will be levied. Surcharge will be levied @15 % on both the specified income ( ₹1.60 crore) and Other Income ( ₹50 Lakhs) as then also income is atleast more than ₹ 1 crore.

Lets take the example where income exceeds 5 crore.

Case 6 : NTI = ₹ 6.45 crore, Income under section 112A/111A/Dividend Income = ₹ 6 Crore, Remaining income = ₹ 45 Lakhs.

In the above case as the remaining income itself is NOT more than ₹ 5 Crore. But Its not more than ₹ 50 Lakhs as well. Still as it is atleast above ₹1 Crore, Surcharge will be levied @15 % on both the specified income ( ₹6 crore) and Other Income ( ₹ 45 Lakhs) as then also income is atleast more than ₹1 crore.

Here,

Surcharge @37% will not be levied as the other income in itself is not more than ₹5 crore.

Surcharge @25% will not be levied as the other income in itself is not more than ₹2 Crore.

But surcharge @ 15% will be levied as the total income is more than ₹1 Crore.

Lets take some more examples for Surcharge @37%

Case 7 : NTI = ₹7.10 crore, section 112A/111A/Dividend Income  = ₹ 1.10 Crore, Remaining income = ₹ 6 Crore.

In the above case as the remaining income itself is more than ₹ 5 Crore , Thus it will attract Surcharge @37% , While section 112A/111A/Dividend income will attract the surcharge @15%.

Case 8 : NTI = ₹7.10 crore, section 112A/111A/Dividend Income  = ₹ 6 Crore, Remaining income = ₹ 1.10 Crore.

In the above case as the remaining income itself is NOT more than ₹ 5 Crore or ₹2Crore Thus both the  section 112A/111A/Dividend income ( ₹6 crore) and the remaining income (₹1.10 Crore) will attract the surcharge @15%.

Case 9 : NTI = ₹7.10 crore, section 112A/111A/Dividend Income  = ₹ 3 Crore, Remaining income = ₹ 4.10 Crore.

In the above case as the remaining income itself is NOT more than ₹ 5 Crore but is more than ₹2Crore,  thus while the  section 112A/111A/Dividend income ( ₹3 crore) will be charged @ 15% , the remaining income (₹4.10 Crore) will attract the surcharge @25%.

Practice the above scenarios in a table form for better understanding.

Conclusion

1. In simple words, Surcharge @37% and 25% will not be levied merely because of the income under section 111A/112A/ Dividend income pushing the total income into exceeding ₹2 Crore or ₹ 5 Crore as the case may be.

2. But if the total income is exceeding ₹1Crore, irrespective  of whether the remaining income ( i.e Income other than income under section 111A/112A/ Dividend income) is exceeding ₹ 50 Lakhs or not, assessee will always be hit by surcharge @15%.

3. Surcharge in case of income under section 111A/112A/ Dividend income will not be more than 15%.

Disclaimer : This article is solely for educational purpose and cannot be construed as legal and professional opinion. It is based on the interpretation of the author and are not binding on any tax authority. Author is not responsible for any loss occurred to any person acting or refraining from acting as a result of any material in this article.

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Location: Patna, Bihar, India
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