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    Taxation Law Notes

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    Shivam Tiwary
    Cess is a tax on tax that is levied by the Indian government on the total tax liability and is used for a specific purpose. Surcharge applies to individuals with income over 50 lakhs and can be used by the government for any purpose. The key differences are that cess is used for a specific purpose while surcharge is not, and cess applies to the total tax liability while surcharge applies to the tax payable. An assessment year is the year in which income earned in the previous year is taxed, so the previous year is when income is earned and the assessment year is when it is taxed.

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    Taxation Law Notes

    Uploaded by

    Shivam Tiwary
    190 views3 pages
    Cess is a tax on tax that is levied by the Indian government on the total tax liability and is used for a specific purpose. Surcharge applies to individuals with income over 50 lakhs and can be used by the government for any purpose. The key differences are that cess is used for a specific purpose while surcharge is not, and cess applies to the total tax liability while surcharge applies to the tax payable. An assessment year is the year in which income earned in the previous year is taxed, so the previous year is when income is earned and the assessment year is when it is taxed.

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    Taxation law notes

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    Cess is a tax on tax that is levied by the Indian government on the total tax liability and is used for a specific purpose. Surcharge applies to individuals with income over 50 lakhs and can be used by the government for any purpose. The key differences are that cess is used for a specific purpose while surcharge is not, and cess applies to the total tax liability while surcharge applies to the tax payable. An assessment year is the year in which income earned in the previous year is taxed, so the previous year is when income is earned and the assessment year is when it is taxed.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    190 views3 pages

    Taxation Law Notes

    Uploaded by

    Shivam Tiwary
    Cess is a tax on tax that is levied by the Indian government on the total tax liability and is used for a specific purpose. Surcharge applies to individuals with income over 50 lakhs and can be used by the government for any purpose. The key differences are that cess is used for a specific purpose while surcharge is not, and cess applies to the total tax liability while surcharge applies to the tax payable. An assessment year is the year in which income earned in the previous year is taxed, so the previous year is when income is earned and the assessment year is when it is taxed.

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    © All Rights Reserved
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    of 3

    Taxation law notes

    1.1 concept of -tax, cess, surcharge; types of taxes: direct taxes, indirect taxes(GST)
    What is Cess?
    In simple terms, a cess is a tax on tax. The Indian Government levies it on the tax liability,
    including surcharge, and is used for a specific purpose. For example, the Indian Government
    collects a cess on education and utilises it specifically for that purpose alone, that is,
    education. Moreover, this cess applies to all taxpayers.
    Further, cess taxes go to the Consolidated Fund of India. It is vital to note that a cess must be
    applicable for that purpose alone for which it is charged.
    Example of Cess
    Here is an example to demonstrate how cess works.
    For an education cess of 3%, where the personal income tax is 30%, a cess is applicable on
    this personal income tax amount of 30%. Hence, this total tax rate goes up to 30.9% (30%
    income tax + (3% of 30% income tax)).
    Types of Cess
    There are various types of cess levied in India. They are:
    Infrastructure Cess on motor cars
    Krishi Kalyan Cess on Service Value
    Swachh Bharat Cess
    Education Cess
    Cess on Crude Oil
    Cess on Exports
    Road and Infrastructure Cess
    Duty on Tobacco and Tobacco Products
    Health and Education Cess on Income Tax
    After the Kerala floods, the State Government imposed a 1% Calamity Cess. It was the first
    state to do so. Remember that a cess is not a permanent revenue source for the Government.
    Once the purpose for which the cess is levied is completed, it is removed.
    What is Surcharge?
    A surcharge applies to those persons whose income is more than Rs. 50 lakhs. This money is
    not collected for any specific cause but can be used for any reason as the Union Government
    sees fit. Interestingly, it applies to the tax payable and not the total income. This collection
    also goes to the Consolidated Fund of India and can be used for any purpose.
    Example of Surcharge
    A significant source of government income is a surcharge on income tax. For example, a
    surcharge of 10% on the income tax rate of 30% raises the tax burden to 33%.

    Similarities between Cess and Surcharge


     The Central Government levies both cess and surcharge.
     Both are collected and taken into the Consolidated Fund of India.
     State Governments cannot share any of these

    What is Tax and its Types?


    A tax is a mandatory fee or financial charge levied by any government on an individual or an
    organization to collect revenue for public works providing the best facilities and
    infrastructure. The collected fund is then used to fund different public expenditure programs.
    If one fails to pay the taxes or refuses to contribute towards it will invite serious implications
    under the pre-defined law.
    Types of Taxes

    1.2 Definition Income


    Assessment year [Sec. 2(9)]
    Assessment year means the period of twelve months Starting from April | of every year and
    ending on March 31 of the next year. For instance, the current assessment year 1995-96
    commenced on April 1, 1995 and will end on March 31, 1996. The period of assessment year
    is fixed. Income of previous year [see para 2] of an assessee is taxed during the following
    assessment year at the rates prescribed for such assessment year by the relevant Finance Act.
    Previous year [Sec. 3]
    Income earned in a year is taxable in the next year. The year in which income is earned is
    known as previous year and the next year in which income is taxable is known as assessment
    year. In other words, it can be said that income earned during the previous year 1994-95 is
    taxable in the immediately following assessment year (ie.,1 995-96).

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