Cess on income tax is a flat 4% health and education cess added on top of your income tax and any surcharge. If your tax after rebate is ₹50,000, cess adds ₹2,000 and the bill becomes ₹52,000.
It is not a separate tax return or a separate payment. It sits in the same computation, the same challan and the same TDS. Every taxpayer that pays income tax pays it: individuals, HUFs, firms, companies and trusts. If your tax is nil after the rebate, cess is nil too. Start with the slab overview if you first need the tax figure itself.
Quick facts
Rate
4% of income tax plus surchargeName
Health and education cessWho pays
Every taxpayer with tax payableOrder of working
Slab tax, less rebate, plus surcharge, less marginal relief, then cessLevied by
The annual Finance ActBusiness deduction
Not allowed as an expenseWhen tax is nil
Cess is also nil
What is cess in income tax
A cess is an extra levy whose money is meant for a stated purpose. For income tax, the purpose is health and education, which is why it is called the health and education cess. It is charged as a percentage of the tax, not of income. That difference matters: 4% of tax is a small slice, while 4% of income would be large.
The rate is 4% for FY 2025-26 and for tax year 2026-27. It applies under both the old and new regimes and at every income level. The cess is levied through the yearly Finance Act, so the Income-tax Act, 2025 did not change it.
Education cess on income tax: how it changed
| Years | Levy | Rate on tax plus surcharge |
|---|---|---|
| Up to FY 2017-18 | Education cess 2% plus secondary and higher education cess 1% | 3% |
| FY 2018-19 onward | Health and education cess (single levy) | 4% |
| FY 2025-26 | Health and education cess | 4% |
| Tax year 2026-27 | Health and education cess | 4% |
People still call it education cess because the older levy carried that name. Any computation for FY 2018-19 or later should use 4%.
Order in which cess on income tax is worked out
- Find total income after deductions.
- Apply the slab rates and any special rates, such as 20% on short term gains under 111A.
- Subtract the rebate (87A for FY 2025-26, section 156 for tax year 2026-27) if you qualify.
- Add surcharge where income crosses ₹50 lakh, then apply marginal relief at the threshold if it helps.
- Charge 4% cess on the result.
Because cess comes last, it also rises with surcharge. A person in the 25% surcharge band pays cess on a figure that already includes that surcharge.
Two worked cess figures
Taxable income ₹18,00,000, new regime. Slab tax: ₹20,000 + ₹40,000 + ₹60,000 + 20% of ₹2,00,000 (₹40,000) = ₹1,60,000. No rebate, no surcharge. Cess 4% = ₹6,400. Total payable ₹1,66,400.
New regime, taxable income ₹60,00,000. Slab tax is ₹3,00,000 for the first ₹24 lakh and 30% of ₹36,00,000 (₹10,80,000) = ₹13,80,000. Surcharge 10% = ₹1,38,000, giving ₹15,18,000. Marginal relief does not help at this level. Cess 4% of ₹15,18,000 = ₹60,720. Total ₹15,78,720.
The tax calculator shows the cess line for your own figures.
Cess in TDS and advance tax
For salary, your employer works out the yearly tax including cess and spreads it over the months, so cess is already inside salary TDS. On most other payments to residents, such as rent, fees or contract bills, TDS is a flat rate with no cess added. On payments to non-residents, the TDS rate is raised by surcharge where it applies and then by 4% cess.
Advance tax instalments and self assessment tax are worked on the total liability, so include cess when you estimate them.
Is cess deductible as a business expense
No. Income tax, surcharge and cess are all treated as tax, and tax on income cannot be claimed as a business expense. The Finance Act, 2022 made this clear with retrospective effect after a few tribunal rulings had allowed it. A firm or company that booked cess as an expense must add it back when computing taxable profit.
Cess mistakes and fixes
| Error | Fix |
|---|---|
| Charging cess on income instead of on tax | Cess is 4% of tax plus surcharge only |
| Using 3% from older tables | Use 4% for FY 2018-19 onward |
| Adding cess before the rebate | Apply the rebate first; if tax becomes nil, so does cess |
| Claiming cess as a business expense | Add it back; it is not deductible |
This is a general explanation of cess rules, not tax advice for you. Each Finance Act can reset the rate, so before you pay, confirm the rate through your chartered accountant or the department's portal.
Sources we checked
- Finance Act, 2025, section 2 (health and education cess)
- Finance Act, 2018, health and education cess
- Income-tax Act, 1961, section 40(a)(ii)
Frequently asked questions
What is the cess on income tax for FY 2025-26?
It is 4% health and education cess, charged on income tax plus surcharge. The same 4% applies for tax year 2026-27.
Is education cess the same as health and education cess?
The old 2% education cess and 1% higher education cess were merged into one 4% health and education cess from FY 2018-19. People still use the old name.
Do I pay cess if my tax is nil after rebate?
No. Cess is a percentage of tax, so if the rebate brings tax to zero, cess is also zero.
Is cess charged on TDS for rent or professional fees?
Not for payments to residents. Cess is added only to salary TDS through the yearly computation and to TDS on payments to non-residents.
Can a business deduct cess paid as an expense?
No. Cess counts as part of income tax and cannot be claimed as a business expense.