# Health & Education Cess and Marginal Relief

## Health & Education Cess

Rate: 4% on (Income Tax + Surcharge).
Applicable to all assessees on the entire tax payable.

## Concept of Marginal Relief

Applicable to all assessees.
Applicable only where surcharge is applicable.
Operates when income slightly exceeds the threshold for surcharge / rebate.

### Trigger Condition

> Marginal relief is granted when:

> Increase in Tax (due to crossing threshold) > Increase in Income (above threshold)

The relief ensures the additional tax does not exceed the additional income above the surcharge threshold.

### Formula

Tax payable = Tax at threshold + (Income − Threshold)

## Old Regime Surcharge Slabs (relevant thresholds)

₹50L → 10%
₹1 Cr → 15%
₹2 Cr → 25%
₹5 Cr → 37%

## New Regime Surcharge Slabs (Sec 115BAC)

₹50L → 10%
₹1 Cr → 15%
Above ₹2 Cr → 25% (max surcharge capped at 25%)

Worked example

### Example 1

Example (Marginal Relief at ₹50L): Income = ₹50,10,000. Tax (with 10% surcharge) without relief = much higher than tax at ₹50L. Apply marginal relief: tax (excl. cess) capped at [Tax on ₹50L without surcharge + ₹10,000]. Then add 4% cess.

### Example 2

Example (87A Marginal Relief, New Regime): Income = ₹12,05,000. Slab tax = ₹60,750. Income exceeds threshold by ₹5,000. Tax payable after marginal relief = ₹5,000 + 4% cess.

⚠️ Common exam mistakes

Calculating cess on tax BEFORE adding surcharge — cess is on (Tax + Surcharge).
Applying marginal relief even when surcharge is not triggered (other than 87A new regime case).
Forgetting that under new regime, maximum surcharge is capped at 25%, not 37%.
Not applying cess after computing marginal relief — cess is always added at the end.

Reference:

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