Health and Education Cess
Health and Education Cess is a 4% levy on income tax plus surcharge. It funds health and education programs. Every taxpayer pays it. There's no exemption based on income or regime.
What is Health and Education Cess?
The cess was introduced in Budget 2018, replacing the older 3% Education Cess and the 1% Secondary and Higher Education Cess. It is computed at 4% of (income tax + surcharge), not on income directly. Unlike surcharge, which kicks in only above ₹50 lakh, cess applies to every taxpayer including someone with ₹3 lakh of taxable income. Even a salaried person with just ₹2,000 of tax liability ends up paying ₹80 of cess. The cess is collected by the Centre and earmarked for education and health programs, particularly to cover schemes like Ayushman Bharat. It applies under both old and new tax regimes.
Example
Ramesh's income tax for FY 2025-26 is ₹1,20,000. He earns under ₹50 lakh, so no surcharge. Cess: 4% of ₹1,20,000 = ₹4,800. Total tax: ₹1,24,800.
How Health and Education Cess is used
Payroll TDS engines apply 4% cess on the computed tax every month before deducting from salary. It shows up as part of the total TDS line on the payslip.
Health and Education Cess FAQs
Is cess applied on income or on tax?
On tax. It is 4% of (income tax + surcharge), not 4% of taxable income.
Can I claim cess as a deduction?
No. Cess is part of your tax liability. There is no separate deduction for it.
Does the new regime have cess?
Yes. Cess applies under both old and new regimes.