Applicability of Education Cess and Secondary and Higher Education Cess -Double Taxation Avoidance Agreement


Under the Income-tax Act, 1961, Education cess and Secondary and Higher education cess are imposed on account of the provisions contained in sub-section (12) of Chapter III of the Annual Finance Act which provides the rates of income-tax. The education cess is to be calculated on the amount of income-tax as specified in subsections (1) to (10) of the said Chapter. However, none of these sub-sections deal with the rate specified in DTAA, which becomes leviable by virtue of the provisions of section 90A(2).Therefore, the moot issue is whether the Education cess and Secondary and Higher education cess would be applicable where the rates specified in  the respective DTAA becomes applicable by virtue of the beneficial provisions contained in section 90A(2).

It may be noted that at the time when a Double taxation avoidance agreement is entered, the intention is to arrive at an all inclusive fixed rate of tax.


Appropriate amendment in the Act as well as ITR forms may be made to clarify that EC & SHEC should not be applicable on the rates specified under DTAA.


Source-  ICAI Pre-Budget Memorandum–2018 (Direct Taxes and International Tax)

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