#6 - What Is EDUCATION CESS | INCOME TAX CALCULATION EXAMPLE | FinCalC {VIDEO}

Cess is a type of Tax which is also referred as Tax on Tax. 
It is the Tax you pay on your calculated Tax. 
In India, cess is usually referred as Education Tax. 

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Let us now see how this Cess will be applicable while Calculating Income Tax, with the help of example. 
Let's say your total income in Financial year 2019-20 is Rs. 6 Lacs. 
In the previous video, we have seen that Standard Deduction of Rs. 50,000 will be applicable in case you are an Employee or Pensioner, and this will reduce your Taxable Income to Rs. 5 Lacs 50,000. Taxable Income is the Income on which we calculate our Income Tax. 

If there are no investments made in Financial Year 2019-20, Income Tax will be calculated on Taxable Income of Rs. 5 Lacs 50,000. So based on the Tax Slab rates for Financial Year 2019-20: 
- 5% Tax will be applicable on income between Rs. 2 Lac 50,000 to Rs. 5 Lacs, which is equal to Rs. 12,500. 
- 20% Tax will be applicable on income between Rs. 5 Lacs to Rs. 5 Lacs 50,000, which is equal to Rs. 10,000. 
- 30% Tax Slab is not applicable in this case, since the income is not above 10 Lacs 
- After calculating Tax based on all Slab rates, cess of 4% will be applicable on this Income Tax, which is equal to Rs. 900, thus making your total Income Tax as Rs. 23,400. 

You can also download our Free Android App FinCalC, to calculate and check details of your Income Tax. The link to download our App is in the description section. 

In one of our previous videos, we have seen how you can make use of maximum Tax rebate of Rs. 12,500, by getting your taxable Income to below Rs. 5 lacs. 
So instead of paying Income Tax and cess of Rs. 23,400, you can make appropriate Investments to get your Taxable Income to below Rs. 5 Lacs and avoid any Income Tax to be paid. 

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