Sec Hr Edc Cess

The Finance Act 2007 has introduced an additional

surcharge, called the "Secondary and HigherEducation

Cess", for the purposes of the Union . The rate of this

surcharge is one per cent of income-tax and surcharge

(not including the EducationCess on income-tax).

This additional surcharge is to be levied in cases

•

where tax has to be deducted at source,

•

advance tax is to be computed

•

or income-tax is to be charged in certain cases during

financial year 2007-2008.

Effective date of applicability

The budget is passed before the first instalment of

advance tax becomes due, hence there is no confusion as

to the rates. The problem happens in deducting tax at

source , which starts from 1 April itself.

This situation has given rise to the question as to whether

the "Secondary and HigherEducationCess", is applicable

for the Tax Deduction At source between April 1, 2007

and the presidential ascent to the Finance Act 2007.

• If you carefully go through the provision and interpret

the law it is clear that "Secondary and Higher

EducationCess" is applicable w.e.f. 1-4-2007.

• Firstly the explanatory statement to the Finance Bill

2007 is very clear that "Secondary and Higher

EducationCess" is applicable for the Financial year

2007-08, as it is evident from the notes on clauses

which says ” is to be computed or income-tax is to be

charged in certain cases during financial year 2007-

2008.”

• The Finance Bill Chapter II says that the "Secondary

and HigherEducationCess" is applicable for all rates

of taxes for the Assessement year 2008-09. Clause

12 which says: “The amount of income-tax as

specified in sub-sections (4) to (10) and as increased

by a surcharge ……… shall be also increased by an

additional surcharge for purposes of the Union, to be

called the “Secondary and HigherEducationCess on

income-tax”, calculated at the rate of one per cent of

such income-tax and surcharge”

The clauses

mentioned are the rates of taxes which are applicable

for the whole of the financial year.

• If we go back to the history we can find that when the

surcharge was introduced in 2002 Finance Bill, there

was a specific provision that the same is applicable

w.e.f. 1-6-2002. In the current case there is no

mention as to when the "Secondary and Higher

EducationCess" is applicable. When there is nothing

in the contrary the applicability shall be for the whole

financial year.

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