What’s Health & Education Cess In Income Tax? Does It Impact You? | EXPLAINED

• November 26, 2022
• CA Chandan Agarwal's Office

Health and education cess was introduced by late Finance Minister Arun Jaitley in Union Budget 2018 replacing the earlier secondary and higher education cess of 3 per cent.

Whether you like it or not, income tax is an integral part of our professional lives. And health & education cess is an integral part of the income tax you pay every year. A cess is a form of tax levied by the government for the development of a particular service or sector. It’s charged over and above direct and indirect taxes.

Health and education cess was introduced by late Finance Minister Arun Jaitley in Union Budget 2018 replacing the earlier secondary and higher education cess of 3 per cent.

“Health and Education Cess is levied at the rate of 4% on the amount of income-tax plus surcharge.

Note: A resident individual (whose net income does not exceed Rs. 5,00,000) can avail rebate under section 87A. It is deductible from income-tax before calculating education cess. The amount of rebate is 100 per cent of income-tax or Rs. 12,500, whichever is less,” according to Income Tax website.

As the name suggests, health and education cess is collected by the government of India with an aim to improve the healthcare and educational facilities in the deprived areas of rural and semi-urban India.

According to FISDOM, the government uses these funds to:

• Raise the standard of primary as well as higher education in India, with particular focus on rural and semi-urban areas.
• Run a mid – day meal scheme in schools, which has proved to be effective, especially in rural areas by checking the dropout rate in primary schools.
• To enhance the quality and access to education by providing seamless internet connectivity.
• Ensure online and digital connectivity to schools and colleges even in remote areas.
• To provide funds for salaries of teaching and allied staff.
• To fund special schemes like “Rashtriya Madhyamik Shiksha Abhiyan”.
• Create world-class infrastructure and opportunities by opening higher education institutes of national importance like IITs, IIMs, AIIMS across more states.

If the cess amount collected in a year remains unutilized for that financial year, it can be carried forward to the next year under the same head.

Source: https://www.india.com/business/whats-health-education-cess-in-income-tax-does-it-impact-you-explained-5764388/