What is the Health and Education Cess?
The Health and Education Cess is an additional tax which is levied on the income tax and surcharge payable by individuals, companies, and other taxpayers in India. The revenue generated from this cess is utilized to fund health and education initiatives in the country.
What is the Rate of Cess for AY 2024-25?
The Health and Education Cess is levied at 4% on the aggregate amount of income tax and surcharge (if applicable) for all taxpayers in AY 2024-25. This means that after calculating your income tax and any applicable surcharge, you will need to add 4% of that amount as Health and Education Cess to arrive at total tax liability of income tax.
Here’s a simple illustration:
Suppose your income tax payable is Rs 50,000 and the surcharge is Rs 5,000. The cess liability will be 4% of Rs 55,000 (50,000+5,000), i.e. Rs 2,200. Therefore, your total tax liability including cess would be Rs 55,000 + Rs 2,200 = Rs 57,200.
Who is Subject to the Cess?
The Cess applies to all taxpayers, including:
i) Individuals
ii) Companies (Domestic/Foreign)
iii) Partnership Firms (including LLPs)
iv) HUF
v) AOP/BOI
vi) AJP
vii) Cooperative Societies
viii) Local Bodies/Authorities
Applicability Across Taxation Schemes
The Cess is applicable across all types of taxation schemes, including:
i) Normal tax rates
ii) Special tax rates
iii) New and old regimes
iv) Tax payable under MAT and AMT
Marginal Relief
Unlike the surcharge, the Health and Education Cess does not allow for marginal relief.
History of the Cess
The 4% Health and Education Cess was introduced in AY 2019-20 by Finance Minister Arun Jaitley in the 2018 Budget. It replaced the 2% Education Cess and 1% Secondary and Higher Education Cess levied up to AY 2018-19.
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