Difference Between Cess and Surcharge

By : Neha Dhyani

Updated : Apr 11, 2022, 8:54

The Union Government in India collects revenue by levying various taxes on its citizens. When it comes to understanding this taxation system, both Cess and Surcharge might seem to be very similar to each other. However, there is some major Difference Between Cess and Surcharge. While Cess is charged on the tax amount for a particular purpose, the Surcharge is applied on the payable tax and can be used for any purpose.

What is Cess?

Cess can be simply understood as a tax on the tax imposed by the Union Government to collect revenue for specific reasons.

  • In India, Cess applies to all the citizens of the country who are taxpayers.
  • It is calculated over and above the base tax charge of the taxpayer.
  • All the collected tax is initially directed to the consolidated funds of India, i.e., CFI.
  • Cess tax must be used for the purpose it has been collected.
  • Finance minister Arun Jaitley introduced the Cess tax in the 2018 Union Budget.

The various types of Cess tax levied in India are -

  • Health Cess
  • Education Cess
  • Tobacco products
  • Road and Infrastructure Cess
  • Export duty Cess
  • Crude oil Cess
  • Swachh Bharat Abhiyan Cess
  • Krishi Kalyan Cess
  • Motor car infrastructure Cess
  • Clean Energy Cess

What is Surcharge?

  • The Surcharge is levied on the payable tax and not the overall income.
  • Only those taxpayers who earn more than Rs 50 lakhs per annum must pay the Surcharge.
  • The Surcharge tax is not collected for any specific reasons.
  • The Union Government can use the Surcharge tax money any way it deems fit.
  • All the Surcharge collected initially goes to the consolidated funds of India, i.e., CFI.
  • Personal income tax and corporate income tax are two of the major Surcharges collected in India.
  • Those individuals in India who earn more than Rs. 1 crore annually are required to pay a 15% Surcharge, separate from their tax obligations.
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Difference Between Cess and Surcharge

Cess

Surcharge

Cess is calculated over and above the base tax charge of the taxpayer.

The Surcharge is levied on the payable tax and not the overall income.

Cess is levied on all taxpayers of the country.

The Surcharge is levied on citizens who earn more than 50 lakhs per annum.

The Cess rate is 4%.

Surcharge can vary between 10%, 15%, 25%, and 37%.

Cess tax is collected to raise funds for a particular cause like education, health, infrastructure, etc.

The government spends the Surcharge as it deems fit according to its requirements.

Cess tax goes to the CFI, but its use is restricted.

The Surcharge also goes to the CFI, but its usage is not restricted.

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FAQs on the Difference Between Cess and Surcharge

Q.1. What is the Difference Between Cess and Surcharge?

The Difference Between Cess and Surcharge is that the Cess is calculated over and above the base tax charge of the taxpayer. It applies to all taxpayers. On the other hand, the Surcharge is levied on the payable tax and not the overall income of those citizens who earn more than 50 lakhs per annum.

Q.2. What is the Key Difference Between Cess and Surcharge?

The Key Difference Between Cess and Surcharge is that the Cess tax is collected to raise funds for a particular cause like education, health, infrastructure, etc. However, Surcharge is spent by the government as it deems fit according to its requirements.

Q.3. Why is it important to Know the Difference Between Cess and Surcharge?

The Union Government in India collects revenue from levying various taxes on its citizens. To understand this taxation system in detail, it is important to Know the Difference Between Cess and Surcharge.

Q.4. When was the Swachh Bharat Cess introduced?

Swachh Bharat Cess was introduced for the first time in 2015.