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What Is The Difference Between Tax And Cess?


Often the terms tax and cess come across and as a lay-men there can be a case to understand the similarity and the difference between the two, so here is made a simple attempt to make you understand the two 'tax' and 'cess'.

Tax more broad a term as against cess and cess is an amount charged as % on tax amount payable: The tax and cess differ on the ground that tax is a more broader term which applies to the individual's income in case of direct taxation while cess is an amount payable on the tax amount computed for a given individual.

What Is The Difference Between Tax And Cess?

Cess to promote particular govt targeted scheme: Cess is introduced to promote a particular scheme which the govt feels needs attention as in the present case, in the Union Budget 2018, the earlier education cess and secondary and higher Education has been replaced by the 4% health and educational cess to promote the healthcare needs of the rural population in India.

Revenue amount collected through both the sources goes into some specified fund: Both the amount charged from an individual do account for the exchequer's revenues which find their accumulation in a separate fund conceived for the purpose. For instance, all of the taxes collected by the govt be it direct or indirect are moved to specified funds constituted in accordance with the Article 266 (1) of the Constitution of India.

From here the funds are allocated or deployed for different projects as per the Budget.

On the contrary, funds mopped up through the cess route are to be diverted for that sole purpose only.

Types of taxes and cess: Tax range from direct to indirect tax and now after the GST has subsumed some dozen taxes there are primarily income tax and corporation tax charged to individuals and companies. While cess from time to time is being introduced to cater to a particular scheme such as the earlier Krishi Kalyan scheme and Swacch Bharat cess and now the educational and health care cess.


It is to be noted that tax and cess do not vary a great degree in meaning and purpose and ultimately is a source of revenue for the Indian govt who provides a host of services to its citizens and charges for the same by levying taxes and cess.

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