Here are the latest rules & full details about surcharge in India (for AY 2025-26 / FY 2024-25) — how it works, what the thresholds are, which incomes it applies to, plus some ideas to reduce/optimize surcharge. Let me know if you want a simplified checklist for your case.

🔹 What is Surcharge

• Surcharge is an additional charge over the income tax (i.e. it is not a separate tax on income, but on the tax you owe).
• It applies when your taxable income exceeds certain thresholds.
• After surcharge, there is also Health & Education Cess at 4% on (Tax + Surcharge). (Income Tax India)

🔹 Current Surcharge Rates (AY 2025-26 / FY 2024-25)

For individuals / HUF / AOP etc.:

Special for “special income heads”: For incomes taxed under Sections 111A, 112, 112A (and some others like certain capital gains, etc.), the surcharge is capped at 15%, even if your total income is very large. You cannot be forced above 15% surcharge for those gain heads.

For the new tax regime, some surcharge rates differ slightly, particularly for incomes above large thresholds. But generally these thresholds and caps remain.

🔹 Marginal Relief

• When your income just crosses a surcharge threshold, surcharge may push your tax liability up sharply. To avoid unreasonably large jumps, the law provides marginal relief. You don’t automatically pay full surcharge if your taxable income is only slightly above a threshold. (Income Tax India)
• The relief ensures that “Tax + Surcharge” does not exceed what it would be if your income were exactly at the threshold, plus the excess income above that threshold. (So the surcharge burden is gradual rather than abrupt.) (Income Tax India)

🔹 Which Incomes Surcharge Applies to / Caps for Some Incomes

• Applies to most incomes including salary, business, capital gains, dividends (unless otherwise exempt), etc., once you cross threshold. (Income Tax India)
• But for incomes under special sections like STCG on equity shares / mutual funds (that pay STT) under section 111A, or LTCG under 112A, the surcharge is capped at 15%, even if your total income is much higher.
• Similar caps apply for certain non-resident incomes, etc. (Income Tax India)

🔹 Latest Changes / Updates

• The highest surcharge rate (37%) is for incomes above ₹5 crore. (ClearTax)
• In the new tax regime, the surcharge rate for incomes above ₹5 crore has been capped at 25% for individuals. (I.e. the “37%” doesn’t apply in the same way under the new regime for those incomes).
• Also, for capital gains under 111A/112A etc., the 15% surcharge cap continues. (ClearTax)

🔹 What Should be Done / Planning to Avoid or Minimize Surcharge

Here are some legal/legitimate strategies to reduce or avoid paying too much surcharge:

1. Stay just under the threshold (if possible)
   • If your income is borderline, see if you can reduce taxable income via deductions, investments, declaring exemptions, so that you don’t cross into the next surcharge slab.
2. Shift some income heads
   • If possible, restructure income so that some income is under heads that have surcharge caps (e.g. transfer more into income taxed under 111A/112A), where surcharge is capped at 15%.
3. Use deductions wisely
   • Use all allowed deductions (80C, 80D, etc.) and exemptions to reduce your net taxable income.
4. Timing of income / gains
   • If you have flexibility on when to do capital gains, you might try to do them in a year where your total income is not exceeding surcharge slab.
5. Opting for new vs old regime
   • Compare the regimes. Sometimes, in new regime you may end up with lower surcharge because slabs or rates differ.
6. Marginal Relief awareness
   • If you just cross a threshold, ensure marginal relief is being correctly computed, else you will get a much bigger jump in tax.

🔹 Example / Summary

• Suppose your taxable income = ₹1.05 crore
  • Base tax on ₹1.05 crore (without surcharge) = X
  • Because you crossed ₹1 crore threshold → surcharge rate = 15% on tax payable X
  • But since your income only exceeds threshold by ₹5 lakh, marginal relief might reduce how much surcharge you pay so it doesn’t penalize small excess disproportionately.

here’s a clear “Cheat Sheet” on surcharge (latest rules, AY 2025-26), with quick calculations and planning angles:

🔹 Surcharge Rates for Individuals (AY 2025-26)

👉 For STCG (111A) and LTCG (112A) → surcharge is capped at 15%, even if your income is more than ₹2 Cr or ₹5 Cr.

🔹 Your Case Example

• Income: ~₹3.14 Cr (STCG u/s 111A) + salary
• Base STCG tax @15% (till 22 July) / 20% (after 23 July)
• Surcharge: 15% (capped for 111A gains)
• Cess: 4% on (Tax + Surcharge)

That’s why your effective tax rate looks like ~27% on STCG, not 15% — surcharge + cess inflate it.

🔹 Marginal Relief

• Prevents tax + surcharge from exceeding the tax on threshold income + excess income over threshold.
• Example: Income = ₹1.01 Cr
  • Without relief, surcharge = full 15%
  • With relief, excess tax is limited to just the extra ₹1 lakh income.

🔹 How to Reduce or Avoid High Surcharge

✅ 1. Time your capital gains

• If you can shift sales to a year where total income < ₹1 Cr, you avoid surcharge entirely.
• Or below ₹2 Cr, surcharge is capped lower.

✅ 2. Optimize deductions

• Use 80C, 80D, NPS, HRA, housing loan interest, etc. (in old regime) to bring total income under a threshold.

✅ 3. Split income across years/family

• Gift or transfer assets (with planning) so gains fall in different hands/years.

✅ 4. Use exempt categories

• Some incomes (like agricultural income, PF withdrawals) don’t add to surcharge base.

✅ 5. New Regime Check

• Incomes above ₹5 Cr in new regime → surcharge max 25% (not 37%). For high earners, new regime may reduce surcharge.

🔹 Summary Formula

\text{Final Tax} = \text{Tax on Income} + \text{Surcharge (as % of Tax)} + \text{Cess @4%}

• Threshold check is on income
• Levy is on tax

✅ For you:

• STCG u/s 111A → taxed at 15% (before 23 Jul) / 20% (after 23 Jul).
• Surcharge = 15% of tax (capped).
• Cess = 4% on tax + surcharge.