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On all tax payments, including Income Tax, Service Tax and VAT, the Government collects an additional amount, ostensibly to pay for a fund that invests in India's educational sector. This consists of two components:
- Educational Cess, amounting to 2% of the tax calculated
- Secondary and Higher Educational Cess, amounting to 1% of the tax calculated
This cess, in effect, increases your tax rate by 3% of the tax paid. The only reason it is separately calculated and indicated is to demonstrate the specificity of its use on part of the Government.