The Health and Education Cess is a 4% charge added to your income tax to fund government spending on health and education. It is the last step in the tax computation: it applies to income tax plus surcharge, after the 87A rebate has been applied. Everyone who pays any income tax pays it, in both tax regimes.

Where it sits in the calculation

1. Compute tax on total income at slab rates
2. Subtract the 87A rebate, if eligible
3. Add surcharge, if income is above the threshold
4. Add 4% cess on the result

For example, if your tax after rebate is Rs 1,00,000 and no surcharge applies, the cess is Rs 4,000 and your total liability is Rs 1,04,000. If your rebate brings tax to nil, the cess is nil too, because 4% of zero is zero.

A short history

It was a 2% education cess from 2004, became 3% (education plus secondary and higher education cess) in 2007, and was reworked into the current 4% Health and Education Cess in 2018. The rate has held at 4% since then, but as with all such figures it is set by the Finance Act.

Frequently asked questions

Can I avoid the cess with deductions?

Only indirectly. Deductions reduce the tax, and 4% of a smaller tax is a smaller cess. There is no way to be taxed and exempt from the cess.

Is cess the same as surcharge?

No. Surcharge is a percentage that rises with income and applies only above Rs 50 lakh. Cess is a flat 4% on everyone who has a tax liability.

Does the cess apply to TDS on my salary?

Yes. Your employer includes the 4% cess when working out your monthly TDS.

The Income Tax Calculator adds the 4% cess automatically in the final step, so you see the all-in figure.