Tax Alerts cover significant tax news, developments and changes in legislation that affect Indian businesses. The issue relates to transition of accumulated credit of Education Cess (EC), Secondary and Higher Education Cess (SHEC) and Krishi Kalyan Cess (KKC) into the Goods and Services Tax (GST) regime.

What is e cess?

An education cess is an additional levy that is applied on the basic tax liability by the Government to generate additional revenue to fund primary, secondary and higher education. Apart from individuals, even corporations are required to pay this cess every year at rates determined during the annual budgets.

How is 4 cess calculated?

Health and Education cess at the rate of 4 per cent will be added to the income tax liability in all cases. Therefore, your net taxable income will be Rs 15, 40,000 (Rs 16 lakh minus Rs 60,000). The income tax liability in the new tax regime will be calculated on Rs 15.40 lakh.

How is cess calculated?

An invoice has been issued for INR 10000. In this case cess amount will be INR 1000 which is higher than the quantity multiplied by the Cess Amount per Unit Factor, hence system will consider INR 1000 as Cess Amount. Suppose, Cess % is 5%, Cess Amount per Unit Factor is INR 1000 and Cess Factor Quantity is 1.

Why cess is charged on income tax?

Cess is a form of tax and an additional levy by the Central Government to raise funds for specific purpose. Cess is resorted to only when there is a need to meet specific expenditure for the Public welfare and to be discontinued once the objective is met.

What is the purpose of cess?

The cess is imposed on all taxpayers in India who pay taxes. If any tax is generated on income, regardless of the amount, he must pay a tax on that tax as well. Cess is paid to the Consolidated Fund of India, but it can only be used for particular purposes.

How much is the 2020 standard deduction?

In 2020 the standard deduction is $12,400 for single filers and married filing separately, $24,800 for married filing jointly and $18,650 for head of household.

Can a SHEC be used for service tax?

However, the situation was not made clear as regards EC and SHEC charged on Inputs, Input Services and Capital goods, for payment of Service tax.

Which is the exemption under section 87a of Income Tax Act?

Section 87A provides exemption on tax payment to a RESIDENT INDIVIDUAL. As per this provision, if an individual’s taxable income is upto Rs. 5 lakhs then he will get the benefit of Rs. 12500 or the amount of tax whichever is lower.

Are there any tax exemptions under section 115bac?

Individual or HUF opting for taxation under the newly inserted section 115BAC of the Income Tax Act shall not be entitled to the following exemptions/deductions: The standard deduction, the deduction for entertainment allowance and employment/professional tax as contained in section 16;

What are the heads of income for tax purposes?

As per section 14, all income shall, for purposes of Income-tax and computation of total income, be classified under the following heads of income: Income from Other Sources.