Complianto Consulting

  • START BUSINESS
    • Private Limited Company
    • Limited Liability Partnership
    • Section 8 Company
    • Startup India Registration
    • One Person Company(OPC) Registration
    • Trust/NGO/Society Registration
    • Digital Signature (DSC)
  • LICENSES
    • GST Registration
    • MSME Registration
    • FSSAI Registration
    • Gem Portal Registration
    • CSR-1 Registration For NGOs
    • Shop and Establishment
    • ISO Certification (ISO)
  • TRADEMARK & IP
    • Trademark Registration
    • Trademark Objection Reply
  • Income Tax
    • Income Tax
      • Income Tax Return
    • 12A
      • Online 12A and 80G Registration
  • COMPLIANCES
    • Bookkeeping And Accounting
    • PVT LTD Compliances AMC
    • LLP Compliance AMC
    • OPC Compliances AMC
  • LABOUR COMPLIANCES
    • PF Registration And Compliances
    • ESI Registration And Compliances
  • DIGITAL MARKETING
    • Digital Marketing and Services
  • Contact Us
  • Home
  • Blog
  • Income Tax
  • Concept of marginal relief under Income Tax Act

Concept of marginal relief under Income Tax Act

Monday, 20 December 2021 / Published in Income Tax

Concept of marginal relief under Income Tax Act

The concept of marginal relief is designed to provide relaxation from levy of surcharge to a taxpayer where the total income exceeds marginally above Rs. 50 lakh, Rs. 1 crore, Rs. 2 crore, Rs. 5 crore or Rs. 10 crore, as the case may be.

Thus, while computing surcharge, in case of taxpayers (i.e. Individuals/HUF/AOP/BOI/artificial juridical person) having total income of more than Rs. 50 lakh marginal relief shall be available in such a manner that the net amount payable as income-tax and surcharge shall not exceed the total amount payable as income-tax on total income of Rs. 50 lakh by more than the amount of income that exceeds Rs. 50 lakh.

In case of a company, surcharge is levied @ 7% (2% in case of foreign company) on the amount of income-tax if the total income exceeds Rs. 1 crore but does not exceed Rs. 10 crore and @ 12% (5% in case of foreign company) on the amount of income-tax if total income exceeds Rs. 10 crore. Hence, in case of company whose total income exceeds Rs. 1 crore but does not exceeds Rs. 10 crore, marginal relief will be computed as discussed above, but in the case of company having total income above Rs. 10 crore marginal relief is available in such a manner that the net amount payable as income-tax and surcharge shall not exceed the total amount payable as income-tax and surcharge on total income of Rs. 10 crore by more than the amount of income that exceeds Rs. 10 crore.

Illustration for better understanding

Mr. Mukesh is salaried employee (age 40 years). His total income from salary for the year 2021-22 amount to Rs. 51,00,000. Will he liable to pay surcharge, if yes, then how much and will he get the benefit of margin relief?

**



Surcharge is additional tax levied on the amount of income-tax. In case of taxpayers (i.e. Individuals/HUF/AOP/BOI/artificial juridical person), surcharge is levied @ 10% on the amount of income-tax where the total income of the taxpayer exceeds Rs. 50 lakh. In this case, total income of Mr. Mukesh exceeds Rs. 50 lakh and hence he will be liable to pay surcharge. Marginal relief is available in cases where the total income is slightly above Rs. 50 Lakh. The Computation of normal tax liability (i.e. liability without marginal relief) and tax liability under marginal relief (i.e. liability after marginal relief) will be as follows:

(1)    Normal tax liability (i.e. without marginal relief)

 Tax on total income before surcharge (*) 13,42,500
Add: Surcharge (@10% on the amount of income-tax of Rs. 13,42,500 1,34,250
Tax liability after surcharge (i.e., normal tax liability) 14,76,750

 

(*) The normal tax rates for the financial year 2021-22 applicable to an individual below the age of 60 years are as follows:

  • Nil upto income of Rs. 2,50,000
  • 5% for income above Rs. 2,50,000 but upto Rs. 5,00,000
  • 20% for income above Rs. 5,00,000 but upto Rs. 10,00,000
  • 30% for income above Rs. 10,00,000.

Apart from above rates, cess will be computed separately.

 

(2)    Tax liability under marginal relief (i.e. after marginal relief)

 

Tax on Rs. 50 lakh (at the above discussed rates) 13,12,500
Add: Income above Rs. 50 lakh 1,00,000
Tax liability under marginal relief 14,12,500

 

Conclusion

Normal tax liability (i.e. without marginal relief) comes to Rs. 14,76,750 and tax liability under marginal relief comes to Rs. 14,12,500. It can be observed that tax liability under marginal relief is lower and, hence, Rs. 14,12,500 will be the tax liability before cess. Total tax liability will be computed as follows:

  Rs.
Tax liability after marginal relief (*) 14,12,500
Add: Health & education cess @ 4% 56,500
Tax liability 14,69,000

 

(*) In this case, surcharge paid by Mr. Mukesh will be Rs. 70,000 computed as follows:

 

  Rs.
Tax liability (before cess) on Rs. 51,00,000 after considering the provisions of marginal relief 14,12,500
Tax liability (before cess) at normal rates on Rs. 51,00,000 if surcharge is not levied 13,42,500
Surcharge (i.e. increase in tax liability) 70,000

 

Illustration for better understanding

Mr. Raja is businessman (age 35 years). His total income for the year 2021-22 amounted to Rs. 1,02,00,000. Will he be liable to pay surcharge, if yes, then how much and will he get the benefit of marginal relief?

**

Surcharge is additional tax levied on the amount of income-tax. In case of taxpayers (i.e. Individuals/HUF/AOP/BOI/artificial juridical person), surcharge is levied @ 10% on the amount of income-tax where the total income of the taxpayer exceeds Rs. 1 crore. In this case, total income of Mr. Raja exceeds Rs. 1 crore and hence he will be liable to pay surcharge. Marginal relief is available in cases where the total income is slightly above Rs. 1 crore. The Computation of normal tax liability (i.e. liability without marginal relief) and tax liability under marginal relief (i.e. liability after marginal relief) will be as follows:

(1)    Normal tax liability (i.e. without marginal relief)

Tax on total income before surcharge (*) 28,72,500
Add: Surcharge (@15% on the amount of income-tax of Rs. 28,72,500 ) 4,30,875
Tax liability after surcharge (i.e., normal tax liability) 33,03,375

 

(*) The normal tax rates for the financial year 2021-22 applicable to an individual below the age of 60 years are as follows:

  • Nil upto income of Rs. 2,50,000
  • 5% for income above Rs. 2,50,000 but upto Rs. 5,00,000
  • 20% for income above Rs. 5,00,000 but upto Rs. 10,00,000
  • 30% for income above Rs. 10,00,000.

Apart from above rates, cess will be computed separately.

 

(2)    Tax liability under marginal relief (i.e. after marginal relief)

 

Tax on Rs. 1 crore (at the above discussed rates) 28,12,500
Add: Surcharge on income-tax @ 10% (if income is Rs. 1 crore) 2,81,250
Add: Income above Rs. 1 crore 2,00,000
Tax liability under marginal relief 32,93,750

 

Conclusion

Normal tax liability (i.e. without marginal relief) comes to Rs. 33,03,375 and tax liability under marginal relief comes to Rs. 32,93,750. It can be observed that tax liability under marginal relief is lower and, hence, Rs. 32,93,750 will be the tax liability before cess. Total tax liability will be computed as follows:

  Rs.
Tax liability after marginal relief (*) 32,93,750
Add: Health & education cess @ 4% 1,31,750
Tax liability 34,25,500

 

Illustration for better understanding

Mr. Karan is a businessman (age 35 years). His total income for the year 2021-22 amounted to Rs. 1,07,00,000. Will he be liable to pay surcharge, if yes, then how much and will he get the benefit of marginal relief?

**

Surcharge is additional tax levied on the amount of income-tax. In case of taxpayers (i.e. Individuals/HUF/AOP/BOI/artificial juridical person) surcharge is levied @ 15% on the amount of income-tax where the total income of the taxpayer exceeds Rs. 1 crore. In this case, total income of Mr. Karan exceeds Rs. 1 crore and hence he will be liable to pay surcharge. Marginal relief is available in cases where the total income is slightly above Rs. 1 crore. The computation of normal tax liability (i.e. liability without marginal relief) and tax liability under marginal relief (i.e. liability after marginal relief) will be as follows :

 

(1)    Normal tax liability (i.e. without marginal relief)

Tax on total income before surcharge (*) 30,22,500
Add: Surcharge (@15% on the amount of income-tax of Rs. 30,22,500) 4,53,375
Tax liability after surcharge (i.e., normal tax liability) 34,75,875

 

(*) Tax rates are discussed in previous illustration.

(2)    Tax liability under marginal relief (i.e. after marginal relief)

 

Tax on Rs. 1 crore (at the rates discussed in previous illustration) 28,12,500
Add: Income above Rs. 1 crore 7,00,000
Tax liability under marginal relief 35,12,500

 

Conclusion

Normal tax liability (i.e. without marginal relief) comes to Rs. 34,75,875 and tax liability under marginal relief comes to Rs. 35,12,500. It can be observed that normal tax liability (i.e. without marginal relief) is lower and, hence, Rs. 34,75,875 will be the tax liability before cess. Total tax liability will be computed as follows:

  Rs.
Normal tax liability i.e. tax liability after surcharge of

 

Rs. 4,53,375

34,75,875
Add: Health & education cess @ 4% 1,39,035
Tax liability 36,14,910

 

Tagged under: Article, Income Tax

What you can read next

Advance Ruling under Income Tax Act, 1961
CBDT amends the conditions for eligible investment u/s 9A(8A)
CBDT extends the timelines to complete the various compliances

Search for posts

Recent Posts

  • Compliance Calendar for June 2025

    0 comments
  • 9039

    0 comments
  • Compliance Calendar for April 2024

    0 comments

Recent Comments

    We support the Startup India initiative that aims
    to accelerate enterpreneurship in the
    country and create startup


    We support the Digital India initiative that aims
    to transform India into a digitally empowered society
    and knowledge economy

    We support the Make in India initiative that aims
    to promote India as the most
    preferred global manufacturing destination

    You manage business, we manage your compliances

    Our team is constantly working towards the highest level of compliance solutions for you.

    GET A QUOTE

    GET FREE CONSULTATION

    Our team is instrumental in ensuring 24*7 that Indian startups and MSMEs are fully compliant in this complex legal environment.

    We are continuously increasing our umbrella of services to provide one shop solution and therefore our services are ranging from registration then compliances to website development and digital marketing.

    Our Services

    • Private Limited Company
    • Trademark Registration
    • GST Registration
    • FSSAI Registration
    • Bookkeeping And Accounting
    • Limited Liability Partnership
    • MSME Registration
    • Startup India Registration
    • GST Returns
    • Income Tax Return

    Useful Links

    • About Us
    • Blog
    • Contact Us
    • Privacy and Refund Policy
    • Terms and Conditions

    COMPANY INFO

    COMPLIANTO CONSULTING

    Mon - Sat 10:30am - 7:30pm

    +91-78273-55027

    services@compliantoconsulting.com

    Ist floor, Shivaji Enclave, GN-9, Pocket GA, Rajouri Garden, Tagore Garden Extension, New Delhi, Delhi, 110027

    WE'RE SOCIAL

    Copyright @ Complianto Consulting LLP. All rights reserved

    TOP
    Close

    Get Free Consultation 

    Close the CTA
    Close

    Get Free Consultation 

    Offer

    WhatsApp us