Why is Cess and Surcharge levied separately?


The Constitution of India grants the power to the Union to raise revenue by levying cess. Article 270 of Constitution of India states that the Government can collect tax in the name of cess for generating revenue but it shall be earmarked for specific purpose only. It further states that the Union Government does not have to share the revenue so collected with the States. The only mandate is to use it for the stated purpose.

What is Cess?

Cess is an additional tax collected for the purpose of creating funds that earmarked for a specific purpose. The funds so collected can be used for a definite purpose only, the one for which it is created.

You must have noticed that the cess is segregated based on rates and bears a name that defines the reason for which it is collected. For instance, Education Cess @ 1%, Secondary and Higher Education Cess @ 2%, Krishi Kalyan Cess @ 0.5%, Swacch Bharat Cess @ 0.5% etc. All the names specify a specific cause for which the collection is made. The money so collected will be used for that specific purpose only.

All the above mentioned cesses have now been abolished. The only active cess is Health and Education Cess charged at the rate of 4%.

The health and education Cess as the name suggests is for promoting the health and education sector only. All the funds collected from this cess will not be used for any other purpose and used only for the purpose of health and education.

Why is cess not a part of the income tax slab rates?

Income tax slabs are to collect income tax on the income earned by an individual. The revenue collected from income tax goes to the Consolidated Fund of India. From this fund, the money can be allocated to develop various sectors of the economy depending upon the focus of the budget.

On the other hand, cess is also a part of the Consolidated Fund of India but it is levied for a specific purpose. The tax is collected for that particular purpose. If the purpose is fulfilled or ceases to exist, the cess can be withdrawn.

It is not made a part of the income tax slab rates because there may be certain sectors which need priority and more importance over the rest. By earmarking the fund for that particular purpose, it is ensured that the funds will not be diverged anywhere else. The particular sector or cause for which the funds has been raised by means of tax collection will be secured.


What is Surcharge?

Surcharge is the additional tax payable over & above the normal tax. It is a conditional tax wherein if you meet the condition you become liable to pay such additional tax. Generally the condition is dependent on the income earned. A threshold limit that states any person earning beyond the limit shall have to pay an additional tax on the income earned.

It is levied on all taxpayers. And the limit varies based on the category of the assessee.

In our country, under the current tax provision, individuals earning an income of above Rs. 50 Lakhs & corporations earning above Rs. 1 crore, shall become liable to pay surcharge.

To find out the exact surcharge rates, refer this article on Surcharge.

Why does surcharge not form a part of income tax slab rates?

Like mentioned above, surcharge is charged separately and does not form a part of the income tax slab rates.

The intention of the law in levying surcharge is to tax the privileged ones who fall in the high income bracket. It is shifting the burden of tax from the poor class to the high end of the society.

In simple words, it is to take collect more from the people who are earning good and use it for the upliftment of the less privileged.  

So, if it forms a part of the tax slab rates, all the people falling under different income bracket will have to suffer the burden of it and hence it will defeat the purpose.

Also, if it is added in a particular bracket of income level then a part of his income will get exempt from such additional charge.

Karan is CA by Qualification with the rare distinction of being awarded All India Rank 22. He is also the founder of this website and loves to help people with their Tax Queries.