What is Cess and Surcharge

What are Cess and Surcharge?

While calculating income tax, you have to calculate Cess and Surcharge also. Especially for those who are going to file income tax for the first time, the term Cess and Surcharge is a bit of a brainwave.

In this article, we will understand the meaning of Cess and Surcharge. It is also explaining the method of calculation of income tax and also why governments use Cess and Surcharge, it will also be clear from the article.

Why Cess applies?

Governments use Cess to fulfill a particular objective. When the Government wants separate money other than a tax for a particular job, then the application of Cess comes into the picture. For example, Education cess for various expenses on primary education Or Health Cess for various expenses on health services.

सरकारें Cess को सामान्यत: किसी विशेष उद्देश्य (Objective) को पूरा करने के लिए लगाती हैं।

Who has to pay a cess?

In India, the cess is applicable to all taxpayers who pay taxes. Regardless of the amount of tax If any tax is generated on income, then he has to pay a tax on that tax also.

Name of some of the main cess used in India-
Education Cess
Road cess or (fuel Cess)
Infrastructure Cess
Clean Energy Cess
Krishi Kalyan Cess
Swachh Bharat Cess
Education and Health Cess (From FY 2018-19)

Can be spent for the specified purpose only

The amount collected from the Cess can be spent only for that special purpose, for which it has been recovered. If the Cess is charged for education then Govt has to spend only on education, same is the case with health or agriculture.

सिर्फ पहले से तय उद्देश्य पर ही हो सकता है खर्च

Cess may also apply on some special expenditures

It applies to the certain type of expenses of consumers (usually on luxurious items or health costs incurred). Under this, a specified percentage of total cost (Total Value) has to be paid by the way of Cess. Like in India, Swachh Bharat Cess (SBC) is applicable. It is 0.5% of the total service cost received by the customer.

कुछ खास तरह के खर्च पर भी लग सकता है भारत में Swachh Bharat Cess (SBC)। यह ग्राहक को मिली सेवा की कुल कीमत का 0.5% लगता है।

Do not have to share with the states

Another difference is in the Cess and General Tax (in the Indian context) is that the Central Government do not have to share tax State Governments.While all other major taxes have to be shared with states in a fixed proportion.

राज्यों के साथ साझा नहीं करना पड़ता

What is surcharge? Who Pays?

It applies to taxpayers with higher income. The amount recovered in the form of surcharge also reaches the Consolidated Fund of India (CFI), and it can be spent for any purpose, just like the normal tax.

Note: Occasionally, the surcharge is also levied on a certain amount of expenditure. It applies in the form of a percentage on the amount of expenditure.

यह सभी करदाताओं पर न लगकर, एक सीमा से अधिक आमदनी वाले Taxpayers पर ही लगता है। 

Surcharge on Income Tax in India

Individual Taxpayers with more than the annual income of Rs 1 Crore have to pay 15% of their tax liabilities separately in the form of a surcharge.

Similarly, in case of a company, taxpayers with an annual net profit of Rs 1 Crore, 7.5% surcharge applies on their tax liabilities separately in the form of a surcharge.