HNI Tax Planning & Surcharge Management

Income tax surcharge for individuals: 10% for income ₹50L–₹1Cr; 15% for ₹1Cr–₹2Cr; 25% for ₹2Cr–₹5Cr; 37% for above ₹5Cr (reduced to 25% for LTCG/STCG on equity under Finance Act 2023). Health and Education Cess: 4% on tax + surcharge. Marginal relief applies at each threshold — the incremental tax on income crossing the slab cannot exceed the incremental income above the slab. Calculate this before year-end gifting or deferral decisions.

AMT under Section 115JC applies to non-corporate assessees (LLPs, AOP, individuals) who claim deductions under Sections 80H–80RRB, 10AA, or 35AD. AMT is levied at 18.5% (plus surcharge and cess) on adjusted total income — income before these deductions. AMT credit is available for 15 years under Section 115JD. HNIs running family trusts or investment LLPs should check AMT applicability when deploying Section 35AD or 10AA deductions.

Section 17(2)(vi): perquisite value of ESOP at exercise date is taxed as salary in the year of exercise. For unlisted company ESOPs, tax is deferred to the earlier of: (a) 5 years from exercise, (b) sale of shares, or (c) cessation of employment — Sec 192(1C), IT Act 1961 (≡ §392, IT Act 2025). Tax on the deferred amount is at the applicable slab rate in the year of taxable event. Post-exercise, the FMV at exercise is the cost basis for capital gains. Timing of exercise relative to listing events is critical.

Legitimate structures: (1) HUF — separate taxable entity, ₹3L basic exemption (new regime), eligible for Section 80C independently; (2) family partnership firm — partner remuneration splitting income to lower-slab family members under Section 40(b); (3) family trust — for estate planning and ring-fencing, not income splitting (income of a revocable trust assessed in the settlor's hands under Section 61); (4) family investment company — dividend (taxable), but useful for asset protection. Each has different tax and FEMA implications.

Old regime advantages for HNIs: Section 80C (₹1.5L), 80D (up to ₹75K for family + senior parents), 80CCD(1B) (₹50K NPS), 24(b) (₹2L housing loan interest), HRA exemption, LTA, standard deduction ₹50K — deductions can easily reach ₹6–8L. New regime: flat rate without most deductions, 30% above ₹15L. Break-even: approximately ₹4–5L in deductions makes old regime advantageous for income above ₹15L. Run a comparative computation before filing.