What Do You Understand By Health And Education Cess?

17.12.2022 Grady A. Lowry 0 Comments

How does it impact Taxpayers? – Although cess is not like normal taxes, for taxpayers, it is as good as any other tax since it increases their tax outflow. While an increase in cess on direct taxes raises the tax outflow, cess on indirect taxes may push up the cost of some products, thereby raising the cost of living. The government’s intent behind introducing education cess has been to provide and finance quality basic education for students who are not able to afford the same. Although the initial objective was to help students complete primary education, the government soon realized the importance of providing access to quality secondary and higher education as well.

To this effect, the Finance Act 2007 introduced an additional secondary and higher education cess of 1%. The education cess rate thus became 2% of the tax payable and secondary and higher education cess totalled 1% of the tax payable. Together, the education cess rate of 3% of the tax payable was charged on all kinds of taxes.

In the Budget 2018, the government proposed replacing the 3% education cess with 4% health and education cess from FY 2018-19. To understand how education cess is calculated, consider the following example: Scenario 1 – Mohit’s net taxable income for Assessment Year 2018-2019 amounted to Rs.5,00,000. Based on this input, the data as shown in the Tax Calculator page of the Income Tax Department are as follows: Income Tax after relief u/s 87A is Rs.12,500 Surcharge is 0 Education Cess is Rs.250 Secondary and higher education cess is Rs.125 Total Tax Liability is Rs.12,875

Scenario 2 – Mohit’s net taxable income for Assessment Year 2019-2020 amounts to Rs.7,00,000 Based on this input, the data as shown in the Tax Calculator page of the Income Tax Department are as follows:

Income Tax after relief u/s 87A is Rs.52,500 Surcharge is 0 Health and Education Cess is Rs.2,100 Total Tax Liability is Rs.54,600 Education cess is collected to help finance the government’s efforts in running education programs and schemes for children from rural and below-poverty-line households. The funds collected are earmarked to meet the following expenses:

To start government-aided schools and colleges Provide students with the mid-day meals. To pay salaries to the staff of the government schools and colleges. To fund special schemes that aim to make education more accessible for children. In case the government plans to expand the number of educational facilities, then the money collected from education cess can be used to fund such initiatives.

What is meant by education cess? Education cess is an additional tax levied on the basic tax liability with the intention to support the government initiatives to finance basic education for children. In the Budget 2018, Finance Minister Arun Jaitley proposed introducing a 4% Health and Education Cess to help take care the education and healthcare needs of below poverty line and rural families.

How is education cess calculated? This 3% cess is made up of 2% education cess and 1% of senior secondary education cess. In the Budget 2018, however, Finance Minister Arun Jaitley proposed discontinuing the 3% education cess on personal income tax and corporation tax, and instead putting into place a 4% Health and Education Cess.

What is education cess tax in India? Prior to the Budget 2018, the education cess applicable was 3%. However, in Budget 2018, Finance Minister Arun Jaitley proposed replacing education cess, including secondary and higher education cess with health and education cess, which is set at 4%.

Is there any education cess on TDS? According to the Income Tax Department, surcharge and education cess are applicable for TDS purposes in case of tax deduction from salary payment to residents or non-residents. Why education cess is levied? Education cess is levied to help finance the government’s efforts in running education programs and schemes for children from rural and below-poverty-line households.

The money collected is earmarked to meet the following expenses:

To start government-aided schools and colleges To pay salaries to the staff of the government schools and colleges To fund special schemes which aim to make education more accessible Provide students with the mid-day meals

What is the full form of cess? The term ‘Cess’ is a shortened form of ‘assess’. What is meant by cess tax? A cess is a government-imposed tax on tax that is levied to raise funds for specific purposes. Generally, cess is expected to be levied when there is a need to meet specific expenditure for public welfare.

Once the government has collected enough funds for that purpose, the respective cess gets discontinued. What is difference between cess and tax? When compared with cess, tax is a broader term. Cess is an amount that is charged as percentage on the tax amount payable. Cess is different from other taxes collected by the government, like income tax, excise duty, goods and services tax, etc.

The money collected from normal tax flows into the Consolidated Fund of India which can be allocated by the government for any purpose they deem fit. However, cess is a different form of tax and while it may initially get credited to the Consolidated Fund of India, but it has to ultimately be used for the purpose for which it has been collected.
View complete answer

Contents

1 How much is health and education cess in India?
2 What is education cess in India?
3 What is the meaning of cess tax?
4 What is the meaning of the word cess?
5 Why do we pay health and education cess?
6 Is health and education cess deducted from salary?
- - 6.0.1 When was education cess introduced?
7 Is health and education cess applicable to all assessees?
- 7.1 Where do I put health and education cess in income tax?
- 7.2 Who will pay cess tax?
8 Who pays cess?
9 Why is it called cess?
10 What is health and education cess Quora?
11 Where is cess used?
12 Can I claim education cess?
- 12.1 How much is education and health cess?
13 What is health and education cess at 4%?
14 How do I remove a health and education cess at 4%?
15 What is the rate of education cess?

How much is health and education cess in India?

Health and Education Cess : Health and Education Cess is levied at the rate of 4% on the amount of income-tax plus surcharge. Note 1: A resident individual (whose net income does not exceed Rs.

Taxable income	Tax Rate
Up to Rs.10,000	10%
Rs.10,000 to Rs.20,000	20%
Above Rs.20,000	30%

View complete answer

What is education cess in India?

An education cess is an additional levy that is applied on the basic tax liability by the Government to generate additional revenue to fund primary, secondary and higher education. Apart from individuals, even corporations are required to pay this cess every year at rates determined during the annual budgets.
View complete answer

What is the meaning of cess tax?

What does cess mean? Cess is a form of tax charged/levied over and above the base tax liability of a taxpayer. A cess is usually imposed additionally when the state or the central government looks to raise funds for specific purposes. Different from the usual taxes and duties like excise and personal income tax, a cess is imposed as an additional tax besides the existing tax (tax on tax). : What does cess mean?
View complete answer

What is the meaning of the word cess?

What is Cess, Cess News, Cess Definition A cess is a form of tax levied by the government on tax with specific purposes till the time the government gets enough money for that purpose. Different from the usual taxes and duties like excise and personal income tax, a cess is imposed as an additional tax besides the existing tax (tax on tax).

For example, the Swachh Bharat cess is levied by the government for cleanliness activities that it is undertaking across India. A cess, generally paid by everyday public, is added to their basic tax liability paid as part of total tax paid. Difference between tax and cess A cess is different from taxes as it is imposed as an additional tax besides the existing tax (tax on tax).

Another difference lies in the way the revenue recovered from cess is maintained. While revenue from taxes like income tax is kept in the Consolidated Fund of India (CFI) and the government can use it for any purposes it deems fit, the revenue coming from cess is first credited to the Consolidated Fund, and the government may then, after due appropriation from Parliament, utilise it for the specified purpose.

Another major difference between central taxes and cess is that the proceeds of a cess may or may not be shared with the state governments, while that of taxes have to be shared. Various types of cesses levied by the government The government levies different cesses on services it provides to the public. Some of them are as follows: Education cess: Collected by the government to provide the mandatory free standard primary education to all citizens. Health cess: Proposed in 2018 by former finance minister Arun Jaitley to meet the health requirements of below-poverty-line families. Road cess or fuel cess: For maintenance of roads and infrastructure. Clean energy cess: Introduced in 2010, it is a carbon tax on the production and import of coal, lignite and peat, operating on the “polluter pays” principle. Krishi Kalyan cess: It was introduced in 2016 to provide additional support to farmers for agricultural activities.

Swachh Bharat cess: Introduced in 2014 with the objective of delivering a clean India, it is levied at 0.5 per cent on all taxable services to fund Swachh Bharat initiatives. : What is Cess, Cess News, Cess Definition
View complete answer

Why do we pay health and education cess?

You might be interested: What Are Catacombs In Elementary School?

How is education cess calculated? This 3% cess is made up of 2% education cess and 1% of senior secondary education cess.
In the Budget 2018, however, Finance Minister Arun Jaitley proposed discontinuing the 3% education cess on personal income tax and corporation tax, and instead putting into place a 4% Health and Education Cess.

Is there any education cess on TDS? According to the Income Tax Department, surcharge and education cess are applicable for TDS purposes in case of tax deduction from salary payment to residents or non-residents. Why education cess is levied? Education cess is levied to help finance the government’s efforts in running education programs and schemes for children from rural and below-poverty-line households.

The money collected is earmarked to meet the following expenses:

Once the government has collected enough funds for that purpose, the respective cess gets discontinued.
What is difference between cess and tax? When compared with cess, tax is a broader term.
Cess is an amount that is charged as percentage on the tax amount payable.
Cess is different from other taxes collected by the government, like income tax, excise duty, goods and services tax, etc.

Is health and education cess deducted from salary?

What is an Education Cess? – This section was tweaked slightly in 2018’s Union Budget. Following is a look at the pre-2018 scenario and then at the current scenario for better understanding. On analysing tax payments over the last decade, individuals will notice that each year, a small amount is taxed over and above their basic tax output.

This amount mostly comprises a number of types of cesses, one of which is an education cess,
Before 2018, this cess had two components: A Primary Education Cess and an additional Secondary and Higher Education Cess,
Both these components were used to make India’s burgeoning education sector robust and modern.

Note that any cess, including education cess, is never deducted from an individual’s salary. It is instead deducted from his or her tax payable. Even corporations have to pay this cess each year at rates determined during the, Therefore, education cess on income tax is an accurate description of this extra outflow.

Also, before 2018, the total education cess was fixed at 3% of an individual’s tax payable. This had been the norm for many years. In 2018, the Central Government increased this cess to 4% of taxes payable for both individuals and corporate. This increased cess was named health and education cess, As is obvious, this extra amount collected would be used for the betterment of both the health and the educational infrastructure of far-flung villages and smaller towns where proper schools were missing.

A health and education cess serve a lot more fields than its predecessor. Surveys have found that the top reason for school drop-outs was a lack of high-quality mid-day meals. It is expected that this 4% cess, introduced throughout India, will have enough firepower to address drop-outs and contribute to improving India’s literacy rate from the present 77.7%.
View complete answer

When was education cess introduced?

The method of calculation of the Secondary and Higher Education cess will be the same as in the case of Education Cess introduced in 2004 budget.
View complete answer

Is health and education cess applicable to all assessees?

Consider Example (A) and (B) – Example : (A) Taxpayer : Mr. Active, 54 years having total income of Rs.50,00,000.

Particulars	Rs.
Tax on Rs.50,00,000 Add: Surcharge Sub-total	13,12,500 Nil
13,12,500

Example : (B) Taxpayer: Mr. Passive, 55 years having total income of Rs.50,50,000.

Particulars	Rs.
Tax on Rs.50,50,000	13,27,500
Add: Surcharge (10%)	1,32,750
Sub-total	14,60,250

Now, as compared to Example (A), in Example (B), income is increased by Rs.50,000, while tax is increased by Rs.1,47,750, therefore, there is a need for marginal relief.

Under marginal relief, tax liability of Rs.50,50,000 is restricted as under :-
Tax on 50,50,000 = Tax on 50,00,000 + (Total Income – Rs.50,00,000)
= Tax on 50,00,000+ (50,50,000-Rs.50,00,000)
= 13,12,500 + 50,000
= 13,62,500
The above tax is increased by health and education cess

J EASY STEPS to compute Final tax liability when total income of Individual ranges between Rs.50,00,001 to Rs.1,00,00,000.

Step 1: Find out regular tax liability + Surcharge (Ignore education cess)
Step 2: Find out tax on 50,00,000 + (Total Income-50,00,000)
Step 3: Step 1 or Step 2 whichever is lower
Step 4: Add Health and Education Cess

1.3	HEALTH AND EDUCATION CESS (HEC)

Health and Education cess (HEC)” is to be calculated at the rate of 4% of income-tax and surcharge. HEC is applicable to all assessees i.e., individuals, HUFs, AOP/BOIs, co-operative societies, firms, LLPs, local authorities and companies. The format of computation of HEC is as under: –

(a) Income Tax

(b) Add: Surcharge on Income Tax (if any)
(c) Sub-Total (a+b)
(d) Health and Education cess @ 4% on (c)
(e) Total Tax payable (c+d)

XXXXX XXXXX

XXXXX

Note: No marginal relief would be available in respect of such cess. : Income Tax Slab rate / Surcharge & Education and Health Cess for AY 2019-20
View complete answer

Where do I put health and education cess in income tax?

Health and Education Cess : Health and Education Cess is levied at the rate of 4% on the amount of income-tax plus surcharge. Note 1: 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.
View complete answer

Who will pay cess tax?

The cess will compensate the states for any revenue loss on account of implementation of GST. This cess will not be payable by exporters and those persons who have opted for compensation levy. The input tax credit of this cess can be only used to pay compensation cess and not the other taxes like CGST, SGCT or IGST.
View complete answer

Who pays cess?

What Is A Cess? –

Different from the usual taxes and duties like excise and personal income tax, a Cess is imposed as an additional tax besides the existing tax (tax on tax) with a purpose of raising funds for a specific task.

For example, the Swachh Bharat cess is levied by the government for cleanliness activities that it is undertaking across India.

The Union government is empowered to raise revenue through a gamut of levies, including taxes (both direct and indirect), surcharges, fees and cess. A cess, generally paid by everyday public, is added to their basic tax liability paid as part of total tax paid. Article 270 of the Constitution allows cess to be excluded from the purview of the divisible pool of taxes that the Union government must share with the States.

Divisible Pool

A divisible pool is a portion of Gross Tax Revenue (GTR) that is distributed between the Centre and the States. It consists of all taxes, except surcharges and cess levied for specific purpose, net of collection charges.

Difference between Cess and Tax
Cess	Tax
A cess is imposed as an additional tax besides the existing tax (tax on tax).	It is a compulsory contribution to state revenue, levied by the government on workers’ income and business profits, or added to the cost of some goods, services, and transactions.
While, the revenue coming from cess is first credited to the Consolidated Fund, and the government may then, after due appropriation from Parliament, utilise it for the specified purpose.	revenue from taxes like income tax is kept in the Consolidated Fund of India (CFI) and the government can use it for any purposes it deems fit.
The proceeds of a cess may or may not be shared with the state governments.	The proceeds of central taxes have to be divided at central and state level and shared.

View complete answer

Why is it called cess?

Q: The other day an Irish friend wished “bad cess” to the bankers responsible for Ireland’s economic woes. Is that “cess” as in “cesspool”? Too bad this is too late for St. Patrick’s Day. Maybe next year. A: Why wait for St. Patrick’s Day to come around again? In fact, tax day (yes, today is the deadline for filing) may be just as appropriate.

More on this later. The Oxford English Dictionary describes “bad cess to” as an Anglo-Irish phrase meaning “bad luck to” or “evil befall.” The OED ‘s first published reference for the usage is from Punch in 1859: “Carlisle and Russell—bad cess to their clan!” But a Google Books search turned up a much earlier example.

In a story published in 1833 in the Dublin University Magazine, a character named Barny O’Reirdon says, “Whist, whist! and bad cess to you both.” And the busy scanners at Google have also provided us with several 19th-century appearances of “good cess,” meaning good luck.

Here’s an 1857 example from Putnam’s Monthly Magazine of American Literature, Science and Art: “Oh, he’s a curious crayther, tho pig, an has his own ways, good cess to him!” How did “cess” come to mean luck or fortune? The etymology here is a question mark, though the OED offers two suggestions: (1) It could be short for “success.” This seems unlikely to us, since “good success” is redundant and “bad success” is an oxymoron.

(2) It could have something to do with taxes—a timely subject today, even if we’re too late for St. Patrick’s Day! A “cess” has meant an assessment, tax, or levy since at least as far back as the 16th century. It’s an aphetic (or shortened) form of “assess.” (While the proper etymological spelling of the shortened term would be “sess,” the word generally appears as “cess.”) “Cess” seems to have been a product of English officialdom.

The OED ‘s first citation is from an act of Henry VIII in 1531 that makes reference to “divers and sundry Cesses, Scots, and Taxes.” (A “scot” is an assessment.) Jonathan Swift in the 18th century refers to a “parish cess,” or church tax. Similar usages spread to other parts of the Empire. In Scotland, for example, a “cess” referred to a land tax in the 17th and 18th centuries.

And in 19th-century India, a journalist wrote of “the road cess, the irrigation cess, the public works cess, and the education cess.” (Today all taxes in India are subject to an education cess of 3 percent.) In Ireland, “cess” is still the official term for a local tax.

But it once had another and more sinister meaning, and we think this is where “bad cess” comes from.
The OED defines this meaning of “cess,” first recorded around 1571, as “the obligation to supply the soldiers and the household of the lord deputy with provisions at prices ‘assessed’ or fixed by government.” In other words, the Irish populace was arbitrarily forced to support the occupying soldiers and the personal needs of the lord deputy.

You might be interested: When Was The Secondary Education Commission Formed?

At any rate, to wish someone “bad cess” would be a curse indeed. A contributor to the Journal of the Royal Historical and Archaeological Association of Ireland had this to say in 1889: “Before barracks were commonly built in Ireland, it was usual to quarter soldiers permanently upon the inhabitants, and this was called ‘cessing’ them.

It was possible that the soldiers thus quartered might be well conducted and respectable men, but if (which was more than probable) they were not very desirable persons to have the run of a man’s house and premises, this might be reasonably called a ‘bad cess’; and a few things can be imagined to have been more disagreeable.” As for “cesspool,” the OED says the word is “of uncertain origin,” though the dictionary offers several theories.

The most likely, in our opinion, is that the English term is somehow related to the Italian word for privy, cesso, which is derived from the Latin secessus, a secluded place. Check out our books about the English language
View complete answer

How many types of cess are there in India?

There are majorly five types of cesses in India.
View complete answer

How cess is calculated?

Method of calculation for type Amount/Unit Factor – For component calculation type as ‘Amount/Unit Factor’ system will consider Cess value based on values defined GST Group Code in fields Cess UOM, Cess Amount Per Unit Factor and Cess Factor Quantity,


Component	Amount
Quantity	2
Unit Amount	5000
GST Base Amount	10000
CGST	900 (10000*9/100)
SGST	900 (10000*9/100)
IGST	1800 (10000*18/100)
CESS	280 (140×2)

/ul>
View complete answer

How much is education and health cess?

As per the provisions of Finance Act, 2011, the amount of income-tax as increased by the applicable surcharge, shall be further increased by an additional surcharge, to be called the ‘Education Cess on income-tax’, calculated at the rate of 2% of such income-tax and surcharge.
View complete answer

What is health and education cess Quora?

Health & Education Cess is a additional levy which for the purpose of Central Government or Union. The rate is 4% on the amount of Tax which is calculated. It is levied after adding surchage, if any. This is levied and collected for the various schemes in the areas of Health & Education convened by Central Government.
View complete answer

Where is cess used?

Cess Look up in Wiktionary, the free dictionary. For the hamlet in Norfolk, England, see, For the railway term, see, Cess is a that is generally levied for promoting services like health and education. Governments often charge cess for the purpose of development in social sectors.

The word is a shortened form of “assess”. The spelling is due to a mistaken connection with census, It was the official term used in when it was part of the but has been superseded by the “”. The term was formerly particularly applied to local taxation. In the, it was applied, with a qualifying prefix, to any taxation, such as irrigation-cess and educational-cess.

They are collectively referred to as “cesses” in government censuses: “land revenue and cesses”.

In modern India, it refers to a tax earmarked for a particular purpose, such as education, and is levied as an additional tax on the basic tax liability.
In, it refers to the that was enacted there in 1665 and continued to be levied until the 18th century.
The term is used by the rubber industry in to refer to rubber export tax, which funds that country’s Office of Rubber Replanting Aid Fund.
It has also been used by the Ministry of Agriculture and Fisheries to denote a tariff on imports.

View complete answer

Can I claim education cess?

Ray+Keshavan Design Associates Private Limited Vs DCIT (ITAT Bangalore) – Kolkata Bench of the Tribunal in the case of Kanoria Chemicals & Industries Ltd Vs. Addl. CIT (ITA No.2184/Kol/2018 dated 26.10.2021) had held that the education cess is an additional surcharge levied on income tax and hence it partakes the character of income tax.

Accordingly it held that the education cess is not allowable as deduction.
The Tribunal also noted the judgment rendered by Hon’ble Bombay High Court in the case of Sesagoa Ltd.117 Taxmann.com 96 and by Hon’ble Rajasthan High Court in the case of Chambal Fertilisers & Chemicals Ltd. Vs.
JCIT (ITA No.52/2018 dated 31.7.2018 ), wherein it was held that the education cess is allowable as deduction.

Srinivasan (supra) shall prevail on this issue and accordingly held that the education cess is not allowable as deduction.
FULL TEXT OF THE ORDER OF ITAT BANGALORE This appeal at the instance of the assessee is directed against CIT(A)’s order dated 16.03.2020.
The relevant assessment year is 2010-2011.2.

The grounds raised read as follows:- “1. On the facts and circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) erred in holding that the reimbursement of expenses of Rs.1,20,013/-to appellant’s associated enterprises was a sum chargeable to tax and hence, inadmissible under section 40(a)(i) of the Act as tax has not been deducted.2.

On the facts and circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) erred in charging write back of excess provisions for salary of Rs.10,00,000/- to tax in as such excess provision has already been charged to tax in assessment year 2009-2010 and hence, resulting into double taxation.3.

On the facts and circumstances of the case and in law, it should be held that the education cess, including secondary and higher education cess (cess) is not inadmissible as per section 40(a)(ii) of the Act and hence, the amount of Rs.9,27,389/- or such other amount as may be determined for the assessment year under reference should be allowed as an admissible deduction in computing the total income.4.

It is humbly prayed that the reliefs as prayed for hereinabove should be granted.5. The appellant craves leave to amend or alter any ground or add a new ground which may be necessary.” We shall adjudicate the above grounds as under:- Disallowance u/s 40(a)(i) of the I.T.Act amounting to Rs.1,20,013 (Ground 1) 3.

The Assessing Officer had disallowed Rs.1,20,013 u/s 40(a)(i) of the I.T. Act. The contentions raised by the assessee and the findings of the A.O. read as follows:- “3. The assessee company has reflected an amount of 1,20,013/- as reimbursement to M/s.Brand Union Worldwide Ltd.

London. During-scrutiny, it was stated vide letter dated 18.01.2012 that this amount represents payment of annual charges against invoices raised for the usage of Lotus Note Email and Abode Photoshop, being reimbursement of proportionate cost incurred by the Brand Union Worldwide Ltd. – London.
It was stated that the said charges are without any mark-up and which in turn are payable by Brand Union Worldwide Ltd.

– London to WPP 2005 Ltd., and are debited under the head printing and stationery. It was further stated that the expenses are re-imbursement in nature and there is no income embedded therein which accrues and arisen in India and consequently the said re-imbursement is not chargeable to tax in India.4.

On consideration of the assessee submission, it is seen that the contention of the assessee that the aforesaid reimbursement is not chargeable to tax in India is not acceptable. First of all, the assessee’s contention that the amounts paid are only re-imbursement of cost without any mark-up is of no consequence, because the actual payment was made in respect of usage of Lotus Note E-mail and Abode Photoshope, which is in the nature of payment for professional serivces.

The assessee had availed the services in India and hence it definitely comes under the purview of section 195 of the Income tax act. Therefore, an amount of Rs.1,20,013/- is disallowed as per the provisions of section 40(a)(ia) of the income tax act and added back to the return income of the assessee.” 3.1 The CIT(A) confirmed the view taken by the Assessing Officer.

The relevant finding of the CIT(A) reads as follows:- “12. I find that the appellant has paid the amount of Rs.1,20,013/- to M/s.Brand Union Worldwide Ltd London. The amount is given by the appellant to M/s.Brand Union Worldwide Ltd London for using Lotus Note E-mail and Adobe Photoshop. The services provided by both the software are like sending emails, making notes and editing the images respectively.

These kinds of services are professional in natures and the assessee has availed these services in India. Hence all the provisions of the IT Act apply and the TDS is to be made on these payments.13. Further the appellant has paid the total charges for all its subsidiaries, but the appellant has not distinguished that the amount paid was irrespective of utilization.

There is no evidence that the assessee has specifically utilized that technology.” 3.2 Aggrieved, the assessee raised this issue before the Tribunal. The learned AR submitted that the issue in question is squarely covered in favour of the assessee by the order of the Tribunal in assessee’s own case for assessment year 2011-2012 in ITA No.723/Bang/2020 (order dated 04.04.2022).3.3 The learned Departmental Representative was unable to controvert the above assertion of the learned AR.3.4 We have heard rival submissions and perused the material on record.

The Tribunal in assessee’s own case for assessment year 2011-2012 (supra) on identical facts had held that license fees has been paid for the use of software. It was further held by the Tribunal that the assessee’s holding company procures software from third party and shared the cost with the assessee along with other group companies on a proportionate basis without any mark up.

Therefore, it was concluded by the ITAT that the reimbursement of such expenses by the assessee cannot be held liable for TDS. The relevant finding of the Tribunal in assessee’s own case for assessment year 2011-2012 (supra) reads as follows:- “We have perused submissions advanced by both sides in light of records placed before us.8.

We note that, the payment made by the assessee is towards license fee in respect of the use of software. The said issue is no Page 6 of 9 ITA No.723/Bang/2020 more res integra by the decision of Hon’ble Supreme Court in case of Engineering Analysis Centre of Excellence Pvt.Ltd.

vs CIT reported in (2012) 432 ITR 471. It is not the case of revenue that there is a transfer of right to use in respect of these software is owned by Brand Union worldwide Ltd. It is also not disputed by the revenue that, these software are developed by the parent company. Instead we note that Brand Union worldwide Ltd., has been procured these software and has allotted to the group companies, against which, cost have been allocated.

Such an allocation cannot be held to be ‘royalty’ in order to be subjected to TDS provisions.9. As Brand Worldwide Ltd., procures these software from somewhere else and is shared to the assessee along with other group companies against a proportionate cost, without any markup, the reimbursement of such expenses by assessee cannot be held liable for TDS.” 3.5 In view of the Co-ordinate Bench order of the ITAT in assessee’s own case for assessment year 2011-2012 (supra), which is identical to the facts of the instant case, we hold that the assessee is not liable for TDS in respect of payment to M/s.Brand Union Worldwide Limited, London.

Therefore, the expenditure cannot be disallowed by invoking the provisions of section 40(a)(ia) of the I.T.Act.
It is ordered accordingly.3.6 In the result, ground 1 is allowed.
Write back of excess provision towards additional salary of Rs.10,00,000 (Ground 2) 4.
The assessee had provided an amount of Rs.10 lakh towards additional salary and as it was only a provision, the same was disallowed by the A.O.

and added back to the income of the assessee for assessment year 2009-2010. For the current assessment year the assessee did not make any claim as regards non-taxability of write back of provision of Rs.10 lakh, during the course of assessment proceedings before the A.O.

However, the claim was made as an additional ground before the CIT(A). The CIT(A) rejected the claim of the assessee.4.1 Aggrieved, the assessee has raised this issue before the Tribunal. The learned AR has relied on the remand report submitted by the A.O. (remand report dated 21.10.2019) (refer page 87 to 89 of the paper book submitted by the assessee).4.2 The learned Departmental Representative supported the order of the CIT(A).4.3 We have heard rival submissions and perused the material on record.

The Assessing Officer in the remand report has clearly stated that the claim of the assessee is correct. The relevant portion of the remand report reads as follows:- “In the return of income for the A.Y.2010-11, assessee has write back the provision and offered to tax.

However, A.Y.2009-10, then AO has disallowed those expenses as provision on salary and added back to income. Now, Assessee is claiming that as the provisions on salary were added to Total income in previous year assessment proceedings, the relief may be given for A.Y.2010-11, so as to avoid double taxation.

As per assessment records of A.Y.2009-10 & 2010-11, it was observed that assessee claim is correct.” 4.4 In view of the remand report, it is clear that for the current assessment the assessee had added back the provision on salary and offered the same as income.

In the meanwhile the A.O. for assessment year 2008-2009 had disallowed the said expenses as provision and added back the same to income, which tantamount to double taxation of provision of additional salary. Since the A.O. in the remand report has clearly stated that the assessee’s claim is correct, we direct the A.O.

to delete a sum of Rs.10 lakh from the taxable income for the relevant assessment year, since the same had suffered tax in previous assessment year, namely, A.Y.2009-2010. It is ordered accordingly.4.5 In the result, ground 2 is allowed. Allowability of education cess paid as a tax deductible expenditure (Ground 3) 5. The above ground relates to the claim of deduction of education cess including secondary and higher educational cess as deduction while computing the total income.5.1 We have heard rival submissions and perused the material on record.

The Kolkata Bench of the Tribunal in the case of Kanoria Chemicals & Industries Ltd Vs. Addl.
CIT (ITA No.2184/Kol/2018 dated 26.10.2021) had held that the education cess is an additional surcharge levied on income tax and hence it partakes the character of income tax.
Accordingly it held that the education cess is not allowable as deduction.

The Tribunal also noted the judgment rendered by Hon’ble Bombay High Court in the case of Sesagoa Ltd.117 Taxmann.com 96 and by Hon’ble Rajasthan High Court in the case of Chambal Fertilisers & Chemicals Ltd. Vs. JCIT (ITA No.52/2018 dated 31.7.2018), wherein it was held that the education cess is allowable as deduction.

However, the Tribunal observed that the judgment rendered by Hon’ble Supreme Court in the case of CIT Vs.K. Srinivasan (1972) 83 ITR 346 was not brought to the notice of the Hon’ble High Courts. The Tribunal had expressed the view that the decision rendered by Hon’ble Supreme Court in the case of K. Srinivasan (supra) shall prevail on this issue and accordingly held that the education cess is not allowable as deduction.5.2 Following the above said decision of Kolkata bench of Tribunal in the case of Kanoria Chemicals & Industries Ltd (supra), we hold that payment of education cess including secondary and higher education cess is not allowable as deduction.

Therefore, we reject ground 3 raised by the assessee.6. In the result, the appeal filed by the assessee is partly allowed. Order pronounced on this 11 th day of May, 2022.
View complete answer

How much is education and health cess?

What is health and education cess at 4%?

Budget 2022| Clarification on ‘health and education cess’ to end conflicting interpretation of tax law: Experts

Tax experts have said that the clarification by finance minister that health and education cess cannot be treated as a business expenditure would bring the curtains down on a long-pending tax problem that was the result of conflicting interpretation of the law by some high courts.
Though the clarification takes effect retrospectively and will require some companies to pay additional taxes for the years they claimed the cess as an expenditure, tax professionals have welcomed the move by the finance ministry.
The cess, levied at 4 percent of the tax payable, is imposed as an additional surcharge on taxpayers for funding select government welfare programmes, specifically primary and secondary education, and health infrastructure.
In the memorandum explaining the provisions in the Financial Bill, 2022, the government has said that corporates can’t claim a deduction for taxes paid as cess.

Rajiv Chugh, partner, EY welcomed the step, saying it provides much-needed clarity. “In view of the decision of Hon’ble Supreme Court in the case of CIT vs. K Srinivasan (1972) 83 ITR 346, the government has clarified and said that the intention of the legislation was to always show the cess as a tax, and that amount payable is not a tax deduction,” Chugh said.

The government has also brought in an amendment to the income-tax Act that restricts companies from doing so and retrospectively seeks to tax all instances of education cess being claimed as deduction.
A tax deduction lowers a person’s or an organisation’s tax liability by lowering their taxable income.
The amendment will take effect retrospectively from April 1, 2005, and will accordingly apply from the assessment year 2005-06.

The education cess was introduced in the budget for 2004-05 by finance minister P Chidambaram. The cess was initially meant to finance primary education under the Sarva Shiksha Abhiyan. Subsequently, it was raised to provide resources for secondary education and to augment the health infrastructure.

“A controversy had emerged vis-à-vis claim of deduction of education cess as allowable business expenditure. The judiciary had provided conflicting views thereon. This specific amendment (which has been made with retrospective effect) demystifies the legal position and will curb the litigation surrounding the issue,” said Himanshu Parekh, partner, tax, KPMG in India.

“If a taxpayer pays income tax on profits of the business, the tax can’t be a deductible expenditure while computing the profits. It has now been clarified that a surcharge or cess which is levied on income tax takes the same colour as income tax and, hence, it would not be deductible for tax purposes,” he said.

The story so far
Multiple court cases have been fought by companies against the government, with notable plaintiffs being Sesa Goa Ltd and Chambal Fertilizers and Chemicals Ltd.
The litigants have also secured wins at the Bombay High Court and Rajasthan High Court, both of which upheld their claim that claiming a deduction was legal.
Both high courts had relied upon a Central Board of Direct Taxes Circular dated May 18, 1967, which held that ‘education cess’ can be claimed as an allowable deduction while computing the income chargeable under the heads ‘profits and gains of business or profession’.
Subsequently, tax tribunals in various judgments have followed the reasoning in the high court rulings, and have allowed a deduction on account of payment of cess.
Government rebuttal
However, the government has said that cess is imposed not only by the central government through the Finance Act for a financial year but also by various state governments.
“It is pertinent to mention that in the referred circular of CBDT, there is no reference to the ‘Cess’ imposed by the Central Government through Finance Act for a particular year,” the budget memorandum.
“This CBDT circular needs to be seen from the perspective that ‘Education Cess’ imposed by Finance Act 2004 and subsequent Acts and then designated as ‘Education and Health Cess’ are actually tax in the form of additional surcharge, as stated clearly in each of the relevant Finance Act imposing such Cess,” it said.

Parekh added that there are very few retrospective amendments made by the government in recent years. “Over the past few years, the government has been extremely reluctant to bring in retrospective amendments; however, this amendment will have retrospective effect from April 1, 2005,” he said.

Impact on corporates Chugh, who leads EY India’s policy advisory and speciality services, said not all companies have tried to claim a deduction on the education cess. “If the issue of claiming education cess deduction was clear, everyone would have claimed it. But in reality, only a few companies claimed it, especially those who could take the technical argument forward that cess is not in the nature of tax and deduction was allowed by various tribunals/high courts,” he said.

Chugh added that the issue has had little impact on corporations, in general. “Presently, education cess is levied at 4 percent (earlier 2 percent or 3 percent, as applicable) and is calculated on the amount of tax and surcharge payable. Therefore, generally, it translates to a relatively low amount,” he said.
View complete answer

How do I remove a health and education cess at 4%?

Health and Education Cess vide Budget/Finance Act 2018 – In the Budget 2018, Finance Minister Arun Jaitley proposed various programmes to meet the education and health needs of Below Poverty Line (BPL) and rural families such as improving the quality of education, teachers, digital initiatives, quality education to tribal children, infrastructure improvement in education, flagship national health protection scheme, set up of more Government hospitals and colleges, Galvanizing Organic Bio-Agro Resources Dhan etc.

In order to fund the education and health proposals announced in Budget 2018 as above, a cess was increased by another 1%. Accordingly, the ‘Secondary and Higher Education cess’ was discontinued and ‘Health and Education Cess’ at 4% on tax (including surcharge) was introduced. The finance minister estimated an additional collection of Rs 11,000 crores with an increase of cess by 1%.

Finance Budget 2018 was approved in both parliament houses and received President’s assent on 29 March 2018 and was enacted. Hence, Health and education cess will now be levied from the financial year 2018-19.
View complete answer

What is the rate of education cess?

Education Cess Calculation – In order to calculate education cess, let’s assume that a person who earns Rs 8 lakhs annually invests around Rs 30,000 in purchasing a life insurance policy and later contributes around Rs 40,000 into the PPF account. This person also contributes money towards opening a Sukanya Samriddhi account by investing Rs 20,000 and Rs 30,000 for purchasing a pension policy/scheme.

Hence, he invests a total amount of Rs 1 lakh on an annual basis that brings the total amount taxable to Rs 7 lakhs. On the basis of the investments that he has made, the taxation amount that he’ll be paying is Rs 65,000. Hence, the amount of educational cess that he will be paying on the tax would be: Primary Education Cess: Rs 1,300 levied at the rate of two percent of the amount of tax that needs to be paid (i.e.

Rs 65,000).

Secondary and Higher Education Cess: Rs 650 at the rate of one percent of the amount of tax that needs to be paid.Thus, the education cess that needs to be paid in total shall be Rs 1,950 and the amount of income tax that would be due for the person would be Rs 66,950.But, it must be noted that the education cess needs to be paid only the tax amount that is due and if the income comes under non-taxable slab of the IT taxation slab, then you don’t need to pay the cess amount.

View complete answer

Grady A. Lowry