Cess and Surcharge

As per the recent Budget estimates the divisible pool has fallen below ₹90 per ₹100 collected since 2020-21 due to rising cesses and surcharges and is expected to remain so till 2025-26.

• About Cess: A tax on tax, imposed on total tax liability, including surcharge, for a specific purpose.

o Examples: Infrastructure Cess, Krishi Kalyan Cess, Swachh Bharat Cess, Education Cess, Cess on Crude Oil.

• About Surcharge: An additional charge on income tax, applicable to specific taxpayers (individuals, AOPs, companies).

o No specific purpose, can be used as per the Central Government’s discretion.

• Usage: Used for centrally sponsored schemes and specific national needs, indirectly benefiting states.
• Fund Allocation: Proceeds from cess and surcharge go to the Consolidated Fund of India and are not shared with states.