Surcharge and Cess – Difference Between Cess and Surcharge
By BYJU'S Exam Prep
Updated on: September 11th, 2023
The difference between cess and surcharge is that 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. Various Cess and Surcharges are there, such as Crude oil Cess, Swachh Bharat Abhiyan Cess, etc. Cess is aspired to public welfare, whereas Surcharge seeks to tax high-earning people.
Difference Between Cess and Surcharge PDF
The Union Government in India collects revenue by levying various taxes on its citizens. Cess and Surcharge might seem very similar when it comes to understanding this taxation system. Though both Cess and Surcharge add capital to the government’s remuneration, these are different in many aspects. Here, we will discuss the differences between Cess and Surcharge based on various factors, including types and relevant examples.
Table of content
Difference Between Cess and Surcharge
One of the most important difference between Cess and Surcharge is that Cess is collected from each citizen, whereas Surcharge is collected from citizens falling in specific criteria. Let us see the comparison of Cess and Surcharge in the table below.
Cess vs Surcharge
|
Surcharge and Cess |
|
|---|---|
|
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%. |
Surcharges can vary between 10%, 15%, 25%, and 37%. |
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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. |
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Cess tax goes to the CFI, but its use is restricted. |
The Surcharge also goes to the CFI, but its usage is not restricted. |
Surcharge and Cess
Both Cess and Surcharge are important revenues collected by the Government of India. Finance minister Arun Jaitley introduced the Cess tax in the 2018 Union Budget. Those individuals in India who earn more than Rs. 1 crore annually must pay a 15% Surcharge, separate from their tax obligations.
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 for it has been collected.
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 however it deems fit.
- All the Surcharge collected initially goes to the consolidated funds of India, i.e., CFI.
- Personal and corporate income tax are two of the major Surcharges collected in India.
Conclusion:
Key Difference Between Cess and Surcharge
The key difference between Cess and Surcharge is that Cess is a fixed tax, and Surcharge is variable and levied upon a specific set of citizens, unlike a cess tax. Cess is calculated over and above the base tax charge of the taxpayer, whereas the Surcharge is imposed on the payable tax and not the total income.
