Health & Education Cess for [AY 2019-20/FY 2018-19]

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Education Cess is an essential part of our taxation system. The Government of India has levied education cess with a view to foster the child education in India. No matter what product or service we buy or avail, there is a small amount that we pay to Government in form of education cess. Before we move ahead towards the tax implications of education cess, let us first understand its true meaning.

What is Education Cess?

Education Cess is a form of additional tax levied by the Government of India in order to facilitate education and its related facilities in India. The concerned tax is applied on the total taxable amount of any product or service. Prior to Budget 2018, Health & Education cess was 3%. Post budget the same figure has been revised to 4%.

The tax collected by the Government of India under this policy is used to fund books, mid-day meals and other essentials to students who cannot afford the same.

Computation of Cess for AY 2019-20

Now let’s take some more examples to determine increase in cess of individuals belonging to various income groups:

Taxable Income (in ₹)Cess in FY 17-18 AY 2018-19
3%
Cess in FY 18-19 AY 2019-20
4%
Net Impact
5 lakhs
Tax Calculate by Income Tax Calculator
Tax = 12500

Health & Education Cess = 375

Tax = 12500

Health & Education Cess = 500

Increase by 125
8 lakhsTax = 72500

Health & Education Cess= 2175

Tax = 72500

Health & Education Cess = 2900

Increase by 725
25 lakhsTax = 562500

Health & Education Cess= 16875

Tax = 562500

Health & Education Cess = 22500

Increase by 5625

 Thus, we find that the Government of India has increased the previous cess from 3% to 4% and now the same will result in a greater tax liability for tax years. The provision is also applicable to Corporates, HUF and other forms of business across India unless explicitly exempted.

 

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