Tax surcharge slabs

A tax surcharge slab is one band of the income-tax surcharge: a range of total taxable income and the surcharge rate charged on the tax when an employee's income falls in it. You enter the bands once per regime and financial year, next to the other salary-tax rule tables. Every time xMatix projects an employee's salary tax, it picks the band that matches the employee's projected taxable income, adds the surcharge to the tax and applies marginal relief at the band's threshold. That projection drives the monthly TDS deduction in the payroll run and the annual salary details of the TDS return.

Overview

Surcharge is the part of the income-tax computation that only applies to high incomes. It sits between the slab tax and the cess: xMatix works out the slab tax from the Salary Tax Slabs, takes off any rebate, adds the surcharge from these bands, and then charges cess on the total (see Income tax on salary).

Each band holds:

• its Regime (Old or New) and Financial Year,
• the income range (From Income to To Income) and the Rate,
• an Is Active switch and, optionally, the company it applies to (Partner Account),
• a Name and an optional Label for your own reference.

No surcharge bands are supplied with the product. You type in the bands from the current Finance Act for each regime and each financial year. A regime and year with no bands simply attracts no surcharge.

When to use it

• Before the first payroll run of a financial year, together with that year's Tax Regime Rules and Salary Tax Slabs, if any employee's annual taxable income could cross the lowest surcharge threshold.
• When the Budget changes the surcharge thresholds, rates or the cap for a regime.
• When an employee's projected tax looks wrong at high income. The bands, and the Surcharge Max Rate on the Tax Regime Rule, are the places to check.

How xMatix handles it

Surcharge is worked out wherever xMatix computes salary tax: the monthly TDS projection (run by Project TDS and by Calculate on a payroll run) and the employee rows of a Q4 salary TDS return. Each time, for each regime it computes, xMatix:

1. Collects the bands. It takes every band whose Regime is exactly the regime being computed, whose Financial Year is exactly the year being computed (for example 2026-27), and whose Partner Account is blank or is the payroll company. Bands with Is Active unticked and deleted bands are left out. A blank Is Active counts as active.
2. Works out the taxable income and the tax. It takes the total taxable income (rounded to the Tax Regime Rule's Rounding Unit), the slab tax on it, and the tax left after the rebate and the rebate's marginal relief.
3. Chooses the band. A band matches when the taxable income is more than From Income and no more than To Income (a blank To Income means no upper limit). If several bands match, the one with the highest From Income wins. If none matches, the surcharge is 0.
4. Applies the regime cap. If the band's Rate is higher than the Surcharge Max Rate on the regime's Tax Regime Rule, the cap is used instead. A blank Surcharge Max Rate means no cap.
5. Charges the surcharge at that rate on the tax after rebate.
6. Applies marginal relief. The surcharge may not raise the tax by more than the income above a threshold. For every band's From Income that the income exceeds, xMatix compares the tax plus surcharge with the tax plus surcharge at that threshold exactly, plus the income above it. The largest excess is taken off the surcharge, but never more than the surcharge itself.
7. Adds cess at the Tax Regime Rule's Cess Rate on the tax after rebate plus the surcharge after relief, and rounds the total to the Rounding Unit.

Because both regimes are always computed for the comparison on the Monthly TDS Projection, you need bands for both the Old and the New regime of each year.

Prerequisites

• A Tax Regime Rule for each regime and financial year, with the Surcharge Max Rate you want as the cap. Without a Tax Regime Rule nothing is projected at all, whatever bands you enter.
• The Salary Tax Slabs for the same regime and year, because the surcharge is a percentage of the slab tax.
• Your profile can open the Payroll Settings area and create Tax Surcharge Slab records (see Permissions).

Procedure

Step 1 — Open the surcharge band list

Open the App Launcher, search for Payroll and select the app. Choose Settings, then under Salary Tax (TDS) choose Tax Surcharge Slabs. The All Tax Surcharge Slab view lists every band with its Name, Partner Account, Regime, Financial Year, From Income, To Income, Rate and Created On.

Step 2 — Check the regime cap

Under Salary Tax (TDS), open the Tax Regime Rule for the regime and year and check Surcharge Max Rate. A band's rate above this figure is cut down to it. Leave it blank only if the regime has no cap. If an employee has special-rate income, Special Rate Surcharge Cap limits the rate on that part of the tax. Payroll does not pass special-rate income into the computation, so in practice this field has no effect on salary TDS.

Step 3 — Create one record per band

Select New. At the top of the form, enter:

• Name, for example NEW-2026-27-50L. It is required, there is no numbering series, and names do not have to be unique, so make each one descriptive.
• Label, optional.
• Regime: Old Regime or New Regime. The form starts on New Regime.
• Financial Year, typed exactly as 2026-27.

On the Band tab, enter From Income, To Income and Rate. Enter the rate as a plain number: 10 for 10 percent. Leave To Income blank on the top band.

On the Scope tab, leave Is Active on. Leave Partner Account blank for a band that applies to every company, or choose a company (see Business rules before you mix the two).

Select Save. The band opens on its record page. Repeat for every band of the regime, then for the other regime.

Enter From Income as the statutory threshold itself, not a rounded figure: it is both where the band starts and where marginal relief is tested. Because From Income is exclusive, an income of exactly the threshold pays the lower band's rate. Make each band's To Income the next band's From Income, or leave To Income blank on every band. The band with the highest matching From Income wins, so open-ended bands still resolve correctly.

Step 4 — Check the result on a projection

Run Project TDS (or Calculate) on a payroll run of the year, then open the Monthly TDS Projection of an employee whose projected taxable income is above the lowest threshold. Projected Annual Tax now includes the surcharge after marginal relief, plus cess. See Monthly TDS projections for reading the record.

Step 5 — Revise or retire a band

To change a band, open it and select Edit in the record page header. To retire a band, untick Is Active on the Scope tab and save. To remove a band entirely, delete it from the list (row action Delete, or select rows and use Delete in the selection bar).

A change affects only projections computed afterwards. Run Project TDS or Calculate again on any unposted run of the year. A posted run keeps the TDS it was calculated with, and the next month's projection spreads any difference over the remaining months of the year.

Step 6 — Set up the next financial year

The bands are matched on the exact Financial Year, so last year's bands do nothing for the new year. Before the first April run, create the new year's bands for both regimes, even if the rates have not changed, together with the new year's Tax Regime Rules and Salary Tax Slabs.

Fields

The record page header shows Regime, Financial Year, From Income, To Income, Rate and Is Active. The Details tab groups the fields into Identification (Name, Label, Regime, Financial Year), Band (From Income, To Income, Rate) and Scope (Is Active, Partner Account).

Business rules

• No validation. xMatix does not check that From Income is below To Income, that the rate is sensible or that bands do not overlap or repeat. Check the list after every change.
• Exact matching. Regime and Financial Year must match exactly. A missing or misspelt year gives no surcharge, with no warning.
• Shared and company bands are combined. For a company, the computation uses the shared bands (blank Partner Account) and that company's own bands together. A company band does not replace a shared one. If both have the same From Income, either can be picked. To give one company different rates, give every company its own bands and keep no shared ones.
• A blank Partner Account may not stay blank. If the user who creates a band has a default company in Company Access, a blank Partner Account is filled with that company when the band is saved, and the band then applies to that company only. Check the Partner Account column after saving. To create shared bands, use an account that has no default company.
• The cap comes from the Tax Regime Rule. Surcharge Max Rate limits whatever rate a band carries. This is how a regime with a lower top rate is kept below the higher rate of the other regime.
• Marginal relief is automatic. It is tested at every band's From Income above 0. There is no field to switch it off.
• Age band does not apply. Unlike Salary Tax Slabs, surcharge bands have no age band.
• Where it is used. The surcharge feeds the Monthly TDS Projection (and through it the TDS deduction in the payroll run) and the employee rows of the Q4 salary TDS return. On the return's employee rows, Surcharge is shown before marginal relief, while Total Tax Liability is after it.

Example

A payroll administrator prepares the New regime surcharge for 2026-27. The Tax Regime Rule for the New regime has Surcharge Max Rate 25 and Cess Rate 4. The administrator creates three shared bands, with figures taken from the Finance Act:

A senior engineer's projected taxable income for the year is 50,50,000. With the company's New regime Salary Tax Slabs, the slab tax is 10,95,000 on that income and 10,80,000 on exactly 50,00,000. No rebate applies at this income.

• The first band matches, so the surcharge is 10 percent of 10,95,000 = 1,09,500.
• Marginal relief at 50,00,000: tax plus surcharge is 12,04,500. At the threshold it would be 10,80,000 with no surcharge, plus the 50,000 of income above it, which is 11,30,000. The relief is 74,500, so the surcharge after relief is 35,000.
• Cess is 4 percent of 11,30,000 = 45,200. The annual tax is 11,75,200.

A colleague with a projected income of 52,00,000 has a slab tax of 11,40,000 and a surcharge of 1,14,000. At the threshold the comparison is 10,80,000 plus 2,00,000 of extra income, which is more than the 12,54,000 of tax plus surcharge, so no relief applies. With cess, the annual tax is 13,04,160.

The administrator then enters the Old regime bands for the same year, including a 37 percent band above 5,00,00,000, with the Old regime's Tax Regime Rule carrying its own Surcharge Max Rate.

Training

Practice exercise

In a sandbox with a Tax Regime Rule and Salary Tax Slabs for the New regime of the current year:

1. Create a shared surcharge band for the New regime and the current year with From Income 50,00,000, To Income blank and Rate 10.
2. Give a test employee on the New regime a compensation high enough to project above 50,00,000 a year.
3. Run Project TDS on an unposted payroll run of that year and open the employee's Monthly TDS Projection.

Expected result: Projected Annual Tax is higher than before the band existed. Now untick Is Active on the band and run Project TDS again. Projected Annual Tax drops back, because no active band matches.

Quick reference

• Path: Payroll → Settings → Salary Tax (TDS) → Tax Surcharge Slabs.
• One record per band, per regime, per financial year (2026-27).
• From Income is exclusive and is also the marginal-relief threshold.
• Rate is a plain number (10 = 10 percent) on the tax, not on income.
• The regime's Tax Regime Rule caps the rate (Surcharge Max Rate).
• Shared and company bands are combined, never one instead of the other.
• No bands, or a misspelt year = no surcharge, with no warning.
• Re-run Project TDS or Calculate on unposted runs after a change.

Permissions

Access follows the Tax Surcharge Slab entity permissions in each security profile:

• See, create, edit and delete. These need read, create, edit and delete on Tax Surcharge Slab. The seeded System Admin, Standard User and Sales Executive profiles have full access, including the Delete actions.
• Reach the list. The bands are in the Payroll Settings area. Of the seeded profiles, only System Admin has that settings app, so other users find the bands only through the App Launcher search, if their profile can read the entity.

Because the bands change the tax deducted from high earners, restrict create, edit and delete to payroll administrators in your own profiles.

Configuration

Common problems

Surcharge is zero for a high earner

Check these in order:

• There are active bands for the employee's regime with the Financial Year typed exactly as the period's year, for example 2026-27.
• The bands' Regime is filled in. A band with no regime is never used.
• The bands are shared or belong to the run's company.
• The employee's projected taxable income is above the lowest From Income. Income of exactly the threshold pays no surcharge.

Correct the cause and run Project TDS again.

The rate charged is lower than the band says

The band's rate is above the Surcharge Max Rate on the regime's Tax Regime Rule, so the cap was used. Change the cap if it is wrong for that regime and year.

The surcharge is much smaller than the rate suggests

Marginal relief applied. Just above a threshold, the surcharge is reduced so that the tax rises by no more than the income above the threshold. As income rises further, the relief shrinks and disappears.

Surcharge stopped after 1 April

The new financial year has no bands. Bands match one year exactly, so create the new year's bands for both regimes.

One company's bands are ignored or mixed up

Shared bands and the company's bands are combined, and when two bands have the same From Income either can be picked. Keep either shared bands only, or company bands only for every company.

A band I created as shared applies to one company only

Your user has a default company in Company Access, so the blank Partner Account was filled with it on save. Create shared bands from an account without a default company, or create the band for each company.

The TDS return shows a surcharge that does not match the total

On the return's employee rows, Surcharge is the amount before marginal relief, and Total Tax Liability is after relief and rounding. The two are expected to differ just above a threshold.

Common questions

Do I need surcharge bands at all?

Only if any employee's annual taxable income can go above the lowest surcharge threshold. Without bands, xMatix charges no surcharge and shows no warning, so a high earner's TDS is too low. Enter the bands for every year you run payroll in, for both regimes, because the projection always computes both regimes to compare them. A tenant whose payroll stays well below the thresholds can leave the table empty.

Is the surcharge a percentage of income or of tax?

Of tax. The Rate is applied to the tax left after the rebate, not to the income. The income only decides which band applies and where marginal relief is tested. This is why the bands are separate from Salary Tax Slabs, whose rates are percentages of income within each slab.

Can different companies have different surcharge rates?

Yes, but only if no shared bands exist for that regime and year. A company's computation always includes the shared bands as well as its own, so a company band cannot override a shared one. Give each company its own full set of bands, and leave no band with a blank Partner Account.

Does changing a band change TDS already deducted?

No. Runs that are posted keep their TDS. The next projection uses the new bands for the whole year's tax, and the difference between that and the TDS already deducted is spread over the remaining months. Re-run Project TDS or Calculate on any unposted run so it uses the new figures.

Related topics

• Income tax on salary
• Monthly TDS projections
• Salary tax slabs
• Tax regime rules
• TDS returns
• Professional tax slabs
• Payroll configuration
• Tax Surcharge Slab reference