The health and education cess is 4% of the income tax payable, after the section 156 rebate and after surcharge. It is not 4% of your salary, and it is not a separate scheme you pay into with its own form.
It is applied at the end. If section 156 wipes the slab tax, the cess on that tax is zero too. If marginal relief cuts the tax to a smaller number, cess is 4% of what remains. The relief does not stretch to cover the cess. The Finance Bill 2026 memorandum says cess has no marginal relief. That single sentence explains a lot of “why is the bill ₹1,000 more than the relief?” questions.
The same 4% sits on capital-gains tax under sections 196, 197 and 198. A 12.5% long-term rate is a little higher once cess is included, before any surcharge. Finfod’s calculators show the cess as its own line so the 12.5% and the 4% stay visible. Do not add them into a new slab.
You do not pay cess as a separate challan on a normal return. It is part of the tax on the return. An employer withholds it inside TDS. A refund, if the withholding was too high, includes the cess that was withheld with the tax.
A worked example
New regime, salary ₹15,00,000. Slab tax ₹93,750. No surcharge. Cess ₹3,750. Bill ₹97,500. The cess is 4% of ₹93,750.
New regime, salary ₹13,00,000, where marginal relief applies. Tax after the rebate and before cess is ₹25,000. Cess is ₹1,000. Bill ₹26,000. If the relief had covered cess, the bill would have stopped at ₹25,000. It does not.
New regime, salary ₹60,00,000. Cess is ₹59,730, charged on slab tax plus surcharge, not on the slab tax alone. The income tax calculator keeps that order. The capital gains calculator adds the same cess to a special-rate gain.
Mistakes people make
- Multiplying salary by 4%.
- Subtracting cess before the rebate.
- Expecting marginal relief to wipe the cess on the last slice of income.
- Adding cess twice, once inside a “13%” headline and again as a line.
- Treating cess as optional because it is called a cess and not a tax. On the return it is part of the amount due.
The section
The 4% health and education cess is charged by the Finance Act, on income tax and on surcharge. The memorandum to the Finance Bill 2026 says it has no marginal relief. Section 156 (this was section 87A) is applied before it. The slab guide shows the order.
Questions
Is cess 4% of my salary?
No. It is 4% of income tax after the rebate, including surcharge. On salary of ₹15,00,000 in the new regime the slab tax is ₹93,750 and the cess is ₹3,750.
Does the rebate remove cess?
It removes cess on tax it wipes. Salary of ₹12,75,000 has a bill of ₹0 and cess of ₹0. On a marginal-relief case the tax before cess can be ₹25,000 and cess is still ₹1,000.
Is cess charged on capital gains?
Yes. A 12.5% long-term tax is a little more once 4% cess is added. On the equity example the extra tax, cess included, is ₹22,750, against ₹21,875 before cess.
Sources
Figures checked 28 Oct 2026.