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Budget 2023 proposed to reduce the surcharge from 37 percent to 25 percent for those earning more than Rs 5 crore a year under the 'new income tax regime'. This means that, with effect from April 1, 2023, all income above Rs 2 crore would be subject to 25 percent surcharge. This also brings down the highest tax rate from 42.74 percent to 39 percent.
What exactly is this surcharge?
A surcharge is an extra income tax to be paid by the taxpayers earning a higher income i.e., beyond a certain limit. Put simply, this is for high net-worth individuals (HNIs). There are different rates of surcharge applicable to different taxpayers under the Income Tax Act, 1961.
What is the existing rule?
As per the existing rules, a surcharge is applicable at the rate of 10 percent if net taxable income falls between Rs 50 lakh and Rs 1 crore, 15 percent for those with taxable income of between Rs 1 crore and Rs 2 crore. Those earning between Rs 2 crore and Rs 5 crore have to pay 25 percent surcharge, whereas those earning over Rs 5 crore pay 37 percent of the tax amount as surcharge.