Cess and Surcharge- the Difference


Ajit Kumar AJIT KUMARWISDOM IAS, New Delhi.

 
Cess is a tax on tax, levied by the govt for a specific purpose. Generally, cess is expected to be levied till the time the govt gets enough money for that purpose. The education cess is meant to finance basic education in the country.

Surcharge is an additional burden to the tax being already levied. Generally, surcharge is levied for a certain period time. For instance, the 15% surcharge being levied on super rich (HNIs) in India for one financial year (2016-17).

Difference

Surcharge and Cess may look the same, but the difference is in the way of charging. For instance, say some tax is 30%, so out of Rs 100 earning, Rs 30 is paid as tax. Now if the govt levies a 10% cess, the total tax will become Rs 33 (30+10% of 30). However, if the govt levies a 10% surcharge, the total tax will become Rs 40.

Another difference is that while surcharge goes to consolidated fund of India and can be used for any purpose, a cess is earmarked for a particular purpose only and goes to Public Account.

Again, cess is imposed on total amount of taxes and surcharge taking together. For example education cess is calculated at the rate of three per cent on income-tax and surcharge. So cess is calculated later than surcharge.


Monday, 29th Feb 2016, 01:42:20 PM

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Krishna
isn't cess calculated on (tax + surcharge) i.e. for above example, cess = 10% of (30 + 10) = Rs. 4. Hence, if the govt levies a 10% cess, the total tax will become Rs 34 ( not 33) ???
Jun 25, 2016 08:20 AM
ANJANI KUMAR ROUSHAN
THANKU SIR............
Jul 27, 2016 06:01 AM
Agam Mittal
I think the calculation in the example given is slightly misplaced. If earning of a person is Rs.100 and tax rate is 30%, then his taxable income becomes = Rs 30. Now Surcharge = 10% of 30 = Rs 3 and finally, cess = 10%(Tax + surcharge) = 10%(30+3)=Rs 3.3 Total tax will become = 30+3+3.3 = Rs 36.3
Feb 23, 2017 03:48 AM
Sai
Cess always need not be a 'tax on tax', in the recent cases of Swach Bharat Cess and Krishi Kalyan Cess, both at 0.5% each, were on 'gross value of services' and not on tax...
Apr 30, 2017 04:29 PM
Satveer batesar
Krishna cess calculate on (ta x +surcharge) 100₹= 30%tax + 10%surcharge on tax(30) totally= 30+3-- ₹33, then cess calculate on ₹33 I.e. cess is .5% then .5% of ₹33 = .165₹ totally tax including surcharge and cess is ₹ 33.165
May 17, 2018 04:54 AM