There is no respite from cess for Indian taxpayers. In the Union Budget 2018, finance minister Arun Jaitley has proposed to replace the existing 3% education cess on personal income tax and corporation tax with a 4% ‘Health and Education Cess’. This is intended to fund the education and health needs of poor and rural families.
The current 3% cess comprises 2% cess for primary education and 1% for secondary and higher education, which is levied on personal income tax and corporation tax. This was introduced in 2008. Now that has been hiked to 4% with a different nomenclature in Budget 2018. Cess is every finance minister’s favourite route to generate more revenues.
A cess on income tax is a tax on tax, like a surcharge. For instance, you pay a cess of Rs 3,000 on an income tax of Rs 1 lakh on an income of say, Rs 8 lakh. However, in case of indirect taxes, the cess was levied on the value of the service rather than the tax. Unlike a general tax, a cess is meant to be used for a specific activity, such as education. Here’s a glimpse at the surcharges and cesses, past and present.