Health & Education Cess: How the 4% Cess Is Calculated
Why Health & Education Cess is 4% of tax after applicable relief, rather than 4% of taxable income.
- Published
- Published
- Updated
- Updated
- Reading time
- 6 min read
- Applicable Financial Year
- FY 2025–26
- Applicable Assessment Year
- AY 2026–27
- Last verified
This article is for education and general information. See the Financial Disclaimer before using it for an important decision.
The 4% rate applies to tax, not taxable income
Health & Education Cess is calculated at 4% on income tax plus surcharge where surcharge applies. It is not 4% of taxable income.
The ArthaSiddhi calculator stops at ₹50 lakh and does not model surcharge. In its supported examples, the cess base is therefore income tax after the applicable Section 87A rebate or marginal relief.
Example: ₹13 lakh under the new regime
For ₹13,00,000 of taxable ordinary income, the engine calculates slab tax of ₹75,000. Marginal relief has ceased at this point, so tax after relief remains ₹75,000. Cess is 4% of ₹75,000, or ₹3,000—not 4% of ₹13,00,000.
| Slab tax | Rebate | Marginal relief | Tax after relief | 4% cess | Final estimate |
|---|---|---|---|---|---|
| ₹75,000 | ₹0 | ₹0 | ₹75,000 | ₹3,000 | ₹78,000 |
Why calculation order matters
Applying cess before rebate or marginal relief would overstate the supported result. The engine first calculates slabs, then relief, and only then cess.
Frequently asked questions
Is cess 4% of taxable income?
No. It is 4% of income tax plus surcharge where applicable, after applicable relief in the supported calculation sequence.
Does the calculator include surcharge in the cess base?
No. Surcharge is outside scope and income input is capped at ₹50 lakh.
References
Authoritative sources used for facts that may change over time.
- Finance Act 2025 — amendment of section 87A — Income Tax Department (accessed 2026-08-18)
- Salaried Individuals for AY 2026–27 — Income Tax Department (accessed 2026-08-18)
- Memorandum explaining the provisions of the Finance Bill, 2025 — Ministry of Finance (accessed 2026-08-18)
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