For AY 2022–23, assessees can claim marginal relief from the surcharge on income tax to mitigate the effect of the additional tax burden that is over and above the actual marginal addition to their income.
Such relief can be claimed where the surcharge gets attracted or where the surcharge rate gets increased with a marginal increase in income.
Surcharge is actually a tax on tax, i.e., additional tax on the income tax amount, based on slabs of the assessee’s taxable income. The marginal increase in income from a slab where no or a lower rate of surcharge is applicable to a slab where surcharge is applicable or applicable at a higher rate may increase the assessee’s additional tax liability, sometimes even more than the increase in marginal taxable income due to the application of surcharge or a higher rate of surcharge.
Marginal relief is basically meant to provide relief or relaxation from the levy of the surcharge where the taxable income of a taxpayer marginally crosses the threshold limit.
In cases where the net incremental or marginal amount payable as “income-tax plus surcharge” exceeds the net incremental or marginal amount of “total income” above the threshold limit, such excess amount of additional tax burden shall be allowed as marginal relief in surcharge, i.e., the amount of surcharge shall be reduced to the extent of the excess increase in total liability of tax over the increase in total income above the threshold limit.
Marginal Relief from Surcharge for Individuals/ HUFs/ AOPs/ BOIs/ AJPs
Individuals, HUFs, AOPs, BOIs, AJPs, and other taxpayers can get some relief from the surcharge if their total income is just a little bit higher than Rs. 50 lacs, Rs. 1 crore, Rs. 2 crores, or Rs. 5 crores. This means that these taxpayers can get some relief from the surcharge if their total income is just a little bit higher than these thresholds and their additional tax liability is more than their additional income.
Marginal relief from surcharge is available in such a manner that the net incremental or marginal amount payable as “income-tax plus surcharge” shall not exceed the net incremental or marginal amount of “total income” that exceeds any of such threshold limits. So in all such cases, we need to compare the addition of tax liability, including the surcharge, for the income level “above” and “upto” the threshold limit of Rs. 50 lacs, Rs. 1 crore, Rs. 2 crores, or Rs. 5 crores.
In all of these situations, if the net incremental or marginal amount payable as “income tax plus surcharge” is more than the net incremental or marginal amount of “total income” that exceeds any of these threshold limits, this excess amount of additional tax burden shall be allowed as marginal relief in surcharge, which means that the amount of surcharge shall be reduced by the amount of the excess increase in total liability of tax over the increase in total income.
Marginal Relief from Surcharge for Firms, Co-operative Societies and Local Authorities
Marginal relief is allowed to provide relaxation from the application of the surcharge to firms, cooperative societies, local authorities, etc. taxpayers where the total income exceeds marginally above Rs. 1 crore in the aforesaid manner.
In the case of every firm, cooperative society, and local authority having total income exceeding one crore rupees, the total amount payable as income-tax and surcharge on such income shall not exceed the total amount payable as income tax on a total income of one crore rupees by more than the amount of income that exceeds one crore rupees.
Marginal Relief from Surcharge for Domestic/ Foreign Companies
Marginal relief is allowed to provide relaxation from the application of the surcharge to domestic and foreign companies where the total income exceeds marginally Rs. 1 crore or Rs. 10 crore in the aforesaid manner.
In the case of every company having a total income exceeding one crore rupees but not exceeding ten crore rupees, the total amount payable as income-tax and surcharge on such income shall not exceed the total amount payable as income tax on a total income of one crore rupees by more than the amount of income that exceeds one crore rupees.
Further, in the case of every company having a total income exceeding ten crore rupees, the total amount payable as income-tax and surcharge on such income shall not exceed the total amount payable as income tax and surcharge on a total income of ten crore rupees by more than the amount of income that exceeds ten crore rupees.
Related Posts: >> Finance Act, 2022 >> Finance Act, 2023 >>