Surcharge is a percentage added to income tax once total income crosses ₹50 lakh. It is not added to your salary. Two people in the same 30% slab can have different bills once one of them crosses that line.
In the new regime the bands are 10% of the tax when income is above ₹50 lakh, 15% above ₹1 crore, and 25% above ₹2 crore. There is no 37% band. The old regime uses the same 10%, 15% and 25% steps, and adds 37% above ₹5 crore.
Near each threshold, marginal relief stops tax plus surcharge from rising by more than the income that crossed the line. The income tax calculator applies that relief. Cess is worked out after surcharge. The Finance Bill 2026 memorandum says cess has no marginal relief, so a relief that trims the surcharge does not also trim the cess.
On tax under sections 196, 197 and 198, the surcharge on that part of the tax stops at 15% even when your other income would attract 25% or 37%. A large long-term gain on shares is not surcharged at 25% just because the gain is large. The cap is in the Finance Act, 2026. The rest of your slab tax can still sit in a higher surcharge band.
A worked example
Salary of ₹60,00,000, new regime, marked as salary. The standard deduction brings taxable income to ₹59,25,000, which is above ₹50 lakh and below ₹1 crore, so the surcharge rate on the slab tax is 10%.
Slab tax is ₹13,57,500. Surcharge is ₹1,35,750. Cess is ₹59,730, which is 4% of the tax plus the surcharge. The bill is ₹15,52,980. On a salary of ₹15,00,000 the same engine shows surcharge of ₹0, because that income never reaches ₹50 lakh.
Read the surcharge line on the income tax calculator before you compare two job offers above ₹50 lakh. The slab guide keeps the slab rates and the surcharge bands on separate lines so they are not added together by mistake.
Mistakes people make
- Adding 10% to the slab rate and calling the total “40% tax” without looking at which slice of income is actually in that band.
- Paying 25% surcharge on a section 198 gain. The cap on that tax is 15%.
- Forgetting the old regime’s 37% band above ₹5 crore.
- Expecting cess to shrink when surcharge relief applies.
- Comparing a pre-cess, pre-surcharge quote from an employer with the calculator’s final bill.
The section
Surcharge rates are in the Finance Act, 2026, not in a single slab section. The 15% cap on sections 196, 197 and 198 is in that Act. Marginal relief on the income thresholds is applied in the tax engine the regime calculator shares.
Questions
Is surcharge a percentage of my salary?
No. It is a percentage of the income tax. On taxable income of ₹59,25,000, slab tax is ₹13,57,500 and surcharge is ₹1,35,750, which is 10% of that tax, not 10% of the salary.
Does a large share sale attract 25% surcharge?
Not on the special-rate tax itself. The Finance Act, 2026 caps surcharge on tax under sections 196, 197 and 198 at 15%, even when the rest of your income would attract 25% or 37%.
Is there marginal relief on surcharge?
Yes, near each income threshold, so the tax plus surcharge does not rise by more than the income that crossed the line. Cess has no such relief. The income tax calculator applies the surcharge relief and then adds cess.
Sources
Figures checked 28 Oct 2026.