Health and Education Cess Not Allowed As Business Expenditure
‘Health and Education Cess’ is not allowed as business expenditure. This was clarified by Smt Nirmala Sitharaman, Union Minister of Finance while presenting the Union Budget in the Parliament today.
The Union Finance Minister stated that the income-tax is not an allowable expenditure for computation of business income. This includes tax as well as surcharges.
This is imposed as an additional surcharge on the taxpayer for funding specific government welfare programs, she explained. Noting that some courts have allowed ‘Health and Education Cess’ as business expenditure, which is against the legislative intent, the Union Finance Minister reiterated that any surcharge or cess on income and profits is not allowable as business expenditure.
Health and Education Cess
This form of tax and an additional levy by the Central Government to raise funds for a specific purpose. Cess is resorted to only when there is a need to meet the specific expenditure for the public welfare and to be discontinued once the objective is met.
Rate : Health and Education Cess is levied at the rate of 4% on the amount of income-tax plus surcharge.
This is a different form of tax and while initially it may get credited to the Consolidated Fund of India, it has to ultimately be used for the purpose for which it was collected. For instance, education cess needs to be utilized for education purpose only. Should the amount not be spent for that particular reason, it needs be carried forward and used in the following year. The government cannot use the money for any other reasons.
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