Along with the Income Tax, you may notice cesses called Education Cess and Secondary and Higher Education Cess are levied, not on the income directly, but on the tax payable amount.
According to the recent budget announcement, Education Cess and Secondary and Higher Education Cess are charged at 2% and 1% respectively. It is charged on all the tax payers irrespective of individuals, corporate etc.,
Education Cess was introduced in 2004-05 and Secondary and Higher Education Cess was introduced in 2007-08.
As the name implies, the amount collected through Education Cess is used to cover the costs of government sponsored programs to improve the quality and accessibility of education.
As per the Government report, Rs. 20,165 Crore was collected via Education Cess in the period April to January in FY 15-16.
- The proceeds of Education Cess are primarily spent on Sarva Shiksha Abhiyan (SSA) aimed at providing free and compulsory education to children between ages 6 and 14.
- It is utilized majorly in mid day meal scheme.
- This money is used for starting government aided schools and colleges.
- Government may use this money to fund IIT s and IIM s all over the country.
- The fund is also used in special schemes like Rashtriya Madhyamik Shiksha Abhiyan which aimed at improving accessibility of secondary education among youths and children.
Taxes on which Education Cess is imposed,
- Income Tax
- Corporation tax
- Customs Duties
- Union Excise Duties
- Service Tax