Can taxpayers claim health & education cess as an allowable expenditure – Budget 2022 proposes retrospective disallowance
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- Last Updated on 28 June, 2022
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Sudeep Das & Ashwath Pai – [2022] 135 taxmann.com 236 (Article)
On the 1st of Feb 2022, the Finance Minister presented the Union Budget 2022, which maintained status quo on the tax rates. However, the Budget has made a huge push for infrastructure, digitization and ease of doing business.
On the direct tax front, there has been a plethora of changes, which can be observed from reading through various changes proposed in the Finance Bill. One such amendment was in respect of disallowance of education cess and surcharge for computing taxable income under the head “Profits and gains of business or profession”(PGBP).
In this article, we have discussed the tax deductibility of health and education cess under the extant law and the proposed amendment. This issue has been particularly ambiguous since while a general understanding has been that taxes paid are not allowable as a deduction, whether a cess, which is collected with a specific identified purpose, and hence not generally at par with income tax, which are paid to the State without any earmarked objective.
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