# Rates of Tax, Surcharge and Cess — Structure of Tax Liability
The tax payable by any person is built up in a fixed sequence. Memorise this computation ladder — every income-tax problem ends here.
## The Tax-Liability Ladder
| Step | Particulars | Amount |
|---|---|---|
| A | Basic Tax (on total income at applicable slab/rate) | XXXX |
| B | Add: Surcharge | XXX |
| C | Sub-total (A + B) | XXXX |
| D | Less: Rebate u/s 87A / Marginal Relief | (XXX) |
| E | Sub-total (C − D) | XXXX |
| F | Add: Health & Education Cess @ 4% | XXX |
| G | Gross Tax Liability (E + F) | XXXX |
## 1. Income Tax (Basic Tax)
- Charged on every person at the rates prescribed for the year by the Annual Finance Act or the Income-tax Act, 1961, or both.
## 2. Surcharge
- An additional tax over and above income tax, computed as a percentage of the basic income-tax component.
- Applies only when total income exceeds specified thresholds (it is income-slab driven).
## 3. Health and Education Cess (HEC) — high theory-question probability
- Levied at 4% on the (income tax + surcharge) combined.
- Applies to all assessees — individuals, HUFs, AOPs, BOIs, artificial juridical persons, firms, local authorities, co-operative societies and companies.
- Purpose: to fund quality health services and education.
## Sequence rules to remember
- Surcharge is computed on basic tax, then rebate u/s 87A and marginal relief are deducted, and only then is the 4% cess applied on the net figure.
- Cess is always the last addition — never compute cess before adjusting rebate/marginal relief.