Cess is calculated by applying a fixed percentage to your income tax liability, not your total income. It is an additional charge used to fund specific government initiatives like healthcare and education.
For example, the current Health and Education Cess is 4%. To compute it, calculate your total income tax, then apply the 4% rate to that amount. The resulting cess is added to your tax liability to arrive at the final amount payable.
Here is a detailed example:
Income Tax Payable (Rs.)
|
Cess Rate (%)
|
Cess Amount (Rs.)
|
Total Tax Payable (Rs.)
|
50,000
|
4
|
2,000
|
52,000
|
1,00,000
|
4
|
4,000
|
1,04,000
|
2,00,000
|
4
|
8,000
|
2,08,000
|
For example, if your income tax is Rs. 50,000 and the cess rate is 4%, the cess amount will be Rs. 2,000 (50,000 × 4/100). Adding this to the income tax results in a total tax liability of Rs. 52,000. This method ensures the government collects targeted funds for specific public welfare schemes.