10% Surcharge on Income above 50L?

My uncle retired 2 months ago.

He exercised most of ESOP & majority of MF portfolio last month. He made 48L as LT Cap gain. 2L as salary income this year, 4L as ST Cap Gain, 4L as Dividend. 2L as rental income. No other income.

Is he liable to pay 10% surcharge as his total income exceeds 50L? My take was that as LT Cap Gain & Dividends are tax-free, they are not included in the calculation of Total Income and therefore he need not pay surcharge. Pls clarify.

The reason for the question is that he needs to plan ahead. For now he is looking to park 60% of his money in FD and invest the remaining 40% in stocks / MF directly via Zerodha. He is planning to take it forward based on the tax treatment (whether he is liable to pay surcharge or not)

Cheers

The Surcharge will be payable in case of Taxable income after deduction is more than Rs 50 Lacs.

No need to pay the 10% surcharge as taxable income (excluding long term capital gain, deductions etc) is much lesser than 50lks.

Thanks so much. That helps :slight_smile:

Surcharges increase to 37% for Individuals with income above 10 Cr ?

Hey @ATDES

There has been no change in the rate of the surcharge as per the Union Budget 2021 announcements. Below mentioned are the rates of surcharge levied on the total income as per the Income Tax Department:

Range of Income Rate of Surcharge
INR 50 Lakhs to INR 1 Cr 10%
INR 1 Cr to INR 2 Cr 15%
INR 2 Cr to INR 5 Cr 25%
INR 5 Cr to INR 10 Cr 37%
Exceeding INR 10 Cr 37%

Hope this helps!

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I was reading blog about income tax on gift.

I want to know can we deduct gift amount from income tax ?

Doesn’t it become dual taxation if someone has already paid tax on money and if he/she give that money as gift to someone. They have to pay tax on that.

Hey @ATDES

The sender of a gift is not liable to pay any tax on the gift since it is not treated as a transfer as per the Income Tax Act. The receiver of the gift is not liable to pay tax if a gift is received from a relative or is less than INR 50,000.

You can read more about taxation on gifts here - Tax on Gift: Rules and Exemptions As per Income Tax Act in India

Hope this helps!

The Surcharge is payable on Taxable Income(excluding deductions).
In your case, it is not payable as the taxable income is much less.

I already mention this link.

Suppose I have earned 12 crore this year. and I have to pay 30% tax and surcharges on this income.

If I give 2 crore to my cousin. Do I have to pay income tax on 12 cr or can I deduct this 2 crore and pay income tax on 10 crore.

Hope you understand my query now.

You have to pay tax on 12 Crore.

And after paying 2 cr gift to cousin. They have to pay tax again on that money.

Doesn’t this become dual taxation ?

@ATDES

Monetary gift received by an individual will be charged to tax if total value of such sum of money exceeds Rs 50K in a year. However it will not be charged to tax

1] If the gift is received from the relatives.

Definition of relative is as follows:

AA] Spouse of the individual;
BB] Brother or sister of the individual;
CC] Brother or sister of the spouse of the individual;
DD] Brother or sister of either of the parents of the individual;
EE] Any lineal ascendant or descendent of the individual;
FF] Any lineal ascendant or descendent of the spouse of the individual;
GG] Spouse of the persons referred to in (BB) to (FF)

If gift is received from non-relatives; it is charged to tax under the Income from other sources (leading to dual taxation). This is done to prevent malpractices and money routing purposes.

2] If the gift is received on the occasion of the marriage of the Individual
3] If the gift is received by way of inheritance or will.

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Hey @ATDES

You need to pay income tax on 12 crores since that is your income. If you gift 2 crores to your cousin, it is a separate transaction and your cousin must report it as income and pay tax on it since gift in excess of 50,000 is taxable as IFOS income.

This is not double taxation. Both of these are separate transactions. As per the Income Tax Act, whenever an income arises, the taxpayer must pay tax on the same. While one transaction is an income earned by you, another is an income of your cousin. These are incomes of two different taxpayers and they must individually pay tax on the same.

Hope this helps!

The transactions are defined to suit the tax collectors.