The Constitution of India grants the power to the Union to raise revenue by levying cess. Article 270 of the Constitution of India states that the Government can collect tax in the name of cess for generating revenue, but it shall be earmarked for a specific purpose only. It further states that the Union Government does not have to share the collected revenue with the States, and the only mandate is to use it for the stated purpose.

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What is Cess?

Cess is an additional tax collected for the purpose of creating funds earmarked for a specific purpose. The funds so collected can be used for a definite purpose only, for which it is made.

You must have noticed that the cess is segregated based on rates and bears a name that defines the reason for which it is collected. For instance, Education Cess @ 1%, Secondary and Higher Education Cess @ 2%, Krishi Kalyan Cess @ 0.5%, Swacch Bharat Cess @ 0.5% etc. All the names specify a specific cause for which the collection is made. The money so collected will be used for that specific purpose only.

All the above-mentioned cesses have now been abolished. The only active cess is Health, and Education Cess, charged at the rate of 4%.

The health and education Cess, as the name suggests, is for promoting the health and education sector only. All the funds collected from this cess will not be used for other purposes and only for health and education.

Why is cess not a part of the income tax slab rates?

Income tax slabs are to collect income tax on the income earned by an individual. The revenue collected from income tax goes to the Consolidated Fund of India. From this fund, the money can be allocated to develop various sectors of the economy depending upon the focus of the budget.

On the other hand, cess is also a part of the Consolidated Fund of India, but it is levied for a specific purpose. The tax is collected for that particular purpose. If the purpose is fulfilled or ceases to exist, the cess can be withdrawn.

It is not part of the income tax slab rates because there may be specific sectors that need priority and more importance over the rest. Earmarking the fund for that particular purpose ensures that the funds will not be diverted anywhere else. The specific sector or cause for which the funds have been raised using tax collection will be secured.

What is Surcharge?

A surcharge is an additional tax payable over & above the normal tax. It is a conditional tax wherein you become liable to pay such additional tax if you meet the condition. Generally, the condition is dependent on the income earned. A threshold limit that states any person earning beyond the limit shall pay an additional tax on the income earned.

It is levied on all taxpayers. And the limit varies based on the category of the assessee.

In our country, under the current tax provision, individuals earning an income of above Rs. 50 Lakhs & corporations earning above Rs. 1 crore shall become liable to pay the surcharge.

Why does surcharge not form a part of income tax slab rates?

As mentioned above, a surcharge is charged separately and does not form a part of the income tax slab rates.

The law intends to levy a surcharge to tax the privileged ones who fall in the high-income bracket. It is shifting the burden of tax from the poor class to the high end of society.

In simple words, it is to collect more from the people who are earning a good and use it to uplift the less privileged. 

So, if it forms a part of the tax slab rates, all the people falling under different income brackets will have to suffer its burden, and hence it will defeat the purpose.

Also, if it is added in a particular bracket of income level, then a part of his income will get exempt from such additional charge.