Surcharge kicks in as a step, not a slope, once your income crosses a threshold like ₹50 lakh or ₹1 crore. Without a safeguard, earning one rupee over that line could theoretically cost you far more than one rupee in extra tax. Marginal relief exists specifically to stop that from happening.

How it works

The rule: the extra tax and surcharge you owe for crossing a threshold cannot exceed the amount of income that actually pushed you over it. Take an income of ₹51,00,000, ₹1,00,000 over the ₹50 lakh surcharge threshold. Without marginal relief, the 10% surcharge applying to the whole tax bill could add roughly ₹1,41,000 in extra tax and cess for that ₹1,00,000 of additional income, an increase larger than the income itself. Marginal relief caps that increase at exactly ₹1,00,000, the actual excess income, cutting roughly ₹41,000 off what would otherwise be owed.

The same logic applies at every surcharge threshold: ₹50 lakh (10%), ₹1 crore (15%), and the higher bands beyond that. Just above each line is where marginal relief actually matters; well above it, the surcharge applies in full and relief no longer changes anything.

Frequently asked questions

Do I need to claim marginal relief separately?

No. It’s built into the tax calculation automatically wherever it applies, including in your employer’s monthly TDS computation once your projected income crosses a threshold.

Does marginal relief apply under both tax regimes?

Yes, though the surcharge rate structure differs slightly, with the new regime capping the top surcharge rate at 25% instead of 37%.

How far above the threshold does marginal relief matter?

Only in a narrow band just above each threshold. Once income is comfortably above the line, the surcharge applies at its full rate and relief has already tapered to zero.

See the full calculation, surcharge and marginal relief included, with the Income Tax Calculator.