India’s Education Tax: Billions Collected, Promises Broken
Overgrown wild shrubs in Bhagalpur College of Engineering! (Image TRH)
A levy meant to fund schools and colleges has turned into a saga of unspent billions, bureaucratic logjams, and broken promises — leaving oversight bodies fuming and citizens betrayed.
By P SESH KUMAR
NEW DELHI, September 2, 2025 — A special tax to educate India’s children has spiralled into a scandal (or deception) of broken promises and fiscal sleight-of-hand. Over the past six years, the central government amassed billions of rupees through an education cess – extra taxes ostensibly reserved for schools and colleges – yet roughly ₹48,000 crore of it sits unspent.
The result is an energetic tale of funds mismanaged and aspirations deferred. Oversight agencies are fuming, ministries are at odds, and the public is left to wonder why money collected in the name of education never made it to the classroom. It’s worthwhile to probe how a noble pledge to fund learning turned into a cautionary saga of bureaucratic logjams, inter-ministerial tussles, and an alarming breach of public trust.
A Tax on Education, A Betrayal of Trust
The idea sounded simple and noble: levy a small cess (a dedicated tax) on taxpayers specifically to bolster education, ensuring no child is left behind. In 2018, the government introduced a 4% Health and Education Cess (HEC) on income tax, replacing earlier education levies. Half of this money would go into primary schooling, a quarter into secondary and higher education, and the remaining quarter toward healthcare.
It was a pact between citizens and state – pay a little more now, see a brighter educated future tomorrow. In practice, however, it became a bitter lesson in broken trust and opaque accounting.
CAG audits now reveal that nearly two-thirds of the money meant for secondary and higher education never reached its destination. About ₹48,000 crore collected via this cess in the past six years was never spent on education at all.
This staggering figure – roughly 64% of the ₹75,542 crore raised for higher education between 2018-19 and 2023-24 – represents promises unfulfilled on an epic scale. Year after year, budgets swelled with cess revenues, yet schools and universities saw only a trickle of the benefits.
For a government that aspires to universalize secondary schooling by 2030 and raise college enrolment by 2035, such fiscal negligence directly undermines its own National Education Policy goal.
The public paid this tax in good faith, expecting visible improvements in classrooms; instead, critics would say that they got a scandal that has cast doubt on the government’s commitment to its youngest citizens.
CAG & IAAD: Misunderstood Watchdogs or Ivory-Tower Auditors?
Money Collected, Money Withheld
CAG data indicates that Health and Education Cess collections nearly doubled from ₹35,895 crore in 2020-21 to ₹71,159 crore in 2023-24. This meteoric rise created an expanding pool of education-targeted funds that, if properly utilized, could have significantly bolstered schools and universities across India. However, despite this influx of revenue, much of the money remained stuck in government accounts instead of reaching the classroom – highlighting a stark gap between resource mobilization and actual spending.
In government ledgers, the cess money took a labyrinthine path. By law, every rupee collected for education should move from the general treasury (the Consolidated Fund of India) into a dedicated reserve, to be spent on education programs.
Instead, the Finance Ministry played gatekeeper. Of the ₹75,542 crore amassed since 2018-19 for secondary and higher education, only about ₹52,083 crore – roughly 70% – was ever transferred into the designated fund known as the Madhyamik and Uchchatar Shiksha Kosh (MUSK). And even less – just ₹27,524 crore, barely one-third of the total collected – was ultimately released and spent on the ground.
In other words, tens of thousands of crores that taxpayers contributed for education simply never left the central coffers.
A paper trail of excuses accompanied this fiscal bottleneck. For four years, from 2018 through 2021, not a single rupee of the secondary education cess could be touched by the Education Ministry. The reserve fund meant to hold the money wasn’t even operational – allegedly because an accounting procedure hadn’t been approved.
Bureaucratic foot-dragging effectively locked away the education war-chest. It was only in 2022-23 that this fund was finally activated, and even then the problems persisted. Around ₹23,459 crore that should have been moved to the education fund by 2024 was still parked in the general account awaiting transfer.
The Department of School Education, desperate to invest in new schools and programs, was told it couldn’t access ₹10,100 crore of its own earmarked money in 2022-23 because the paperwork wasn’t in order.
Thus, money that had been dutifully collected from the public languished in limbo while classrooms went without support – a textbook case of bureaucratic inertia undermining policy. Nobody asked who exactly was responsible for this mess.
The Reserve Fund Shell Game
While the secondary education fund sat starved and stagnant, the primary education fund saw an odd surplus. The Prarambhik Shiksha Kosh (PSK) – the reserve for elementary education – actually received more money than the cess collected for it, thanks to budgetary juggling. Between 2018 and 2024, roughly ₹1.51 lakh crore was collected for primary education, yet about ₹1.80 lakh crore was transferred to the PSK reserve.
In effect, the government over-credited the primary fund (possibly compensating from general revenues) and fully disbursed those funds in recent years, all while the secondary fund (MUSK) remained underfed. This shell game of shuffling cess monies points to skewed priorities – or at least a perplexing inconsistency in how designated education taxes were handled.
The Comptroller and Auditor General (CAG), India’s national auditor, has repeatedly flagged how these shortfalls and sleights-of-hand defeat the very purpose of a dedicated cess. When cess revenues aren’t transferred to their proper reserve funds, programs end up being funded (or under-funded) from regular budget lines, making a mockery of the “education cess” label.
Such practices, the auditor warned, not only betrayed the intent of taxpayers but also run afoul of constitutional principles that money raised for a specific purpose must be used for that purpose. Despite these warnings, the pattern continued. In fact, officials and experts observing this trend have been scathing.
“Despite CAG of India pointing this out again and again, the finance ministry has not changed this practice. It’s a methodical effort to erode the clear demarcation between [the Consolidated Fund] and the Public Account,” noted one analyst bluntly.
In other words, the Finance Ministry’s habit of holding back cess funds looks less like an oversight and more like a deliberate strategy – keeping money in the general kitty (where it can quietly plug budget gaps or pad fiscal numbers) instead of sequestering it for education as promised.
Underutilisation or Incompetence?
For all the delays in releasing funds, another uncomfortable truth hangs over the Education Ministry: even when money is finally made available, a significant portion often remains unspent.
In 2023-24, for example, only about one-third of the secondary and higher education cess funds that were belatedly released actually got used. Of roughly ₹17,000 crore allocated from the reserve to school education that year, only around ₹6,000 crore was utilized; similarly, out of ₹18,500 crore given to higher education, about ₹6,000 crore was spent.
The Ministry of Skill Development, which received ₹2,333 crore from the education cess reserve, managed to use only ₹1,300 crore. These numbers suggest that even when the funding spigot is turned on, money is trickling, not flowing, into actual education outcomes.
The government’s own reports euphemistically label this as “savings” – but make no mistake, in the social sector savings are not a triumph, they are a failure to spend. Every rupee left idle in an education budget is a school that wasn’t improved, a scholarship that wasn’t awarded, a skill-training that never happened.
The Department of School Education and Literacy, in fact, has been among the worst offenders in recent years, with massive unused balances. In 2020-21, it left ₹22,027 crore of its allocation untapped; by 2023-24 the shortfall was reduced but still a hefty ₹5,148 crore (about 4.7% of its funds) remaining unutilised. The Higher Education Department similarly ‘saved’ ₹1,303 crore in 2023-24, roughly 2% of its budget.
“The ‘savings’ column should be read as ‘non-expenditure’ or failure to spend,” a commentator noted acidly, pointing out that while a household might celebrate spending less, in national education budgets underspending is nothing to celebrate.
Why can’t the Education Ministry spend the money it gets? Specific explanations are rarely offered in detail – officials cite generic reasons like “non-receipt of proposals, operational issues, and unrealistic estimates” for the undershooting.
The pattern, however, has been so chronic that it prompted a stern response from watchdogs. The Public Accounts Committee (PAC) of Parliament – a bipartisan body that scrutinizes government spending – lambasted these persistent lapses.
It even pushed the Finance Ministry to issue an advisory on “realistic budgeting,” essentially pleading with departments not to ask for (and get allocated) more funds than they can actually spend.
Yet, here we are: thousands of crores in education funds returning to the exchequer unspent each year, despite India’s countless needs. The disconnect between grand budgeting and ground execution suggests a systemic incompetence, or at least a troubling lack of urgency, within the machinery that manages education programs.
Promises Broken, Outcomes Missed
Behind every unspent crore, there is a real-world cost. These aren’t just accounting entries – they are meals, schools, and opportunities that children and young adults were supposed to receive but didn’t.
Take the Mid-Day Meal scheme, for instance, rebranded as PM Poshan: in 2023-24 it saw ₹1,912 crore (out of an allocation of ₹9,226 crore) go unused. That translates to millions of plates of food not served to undernourished schoolchildren. Another ambitious initiative, PM Schools for Rising India (PM SHRI) – aimed at modernizing schools – received only ₹332 crore out of a budgeted ₹1,865 crore.
The money was there on paper, but in reality only a trickle reached the schools, leaving the plan to upgrade facilities largely on hold. The flagship Samagra Shiksha Abhiyan, which funds everything from teacher training to textbooks, and Rashtriya Uchchatar Shiksha Abhiyan (RUSA), a key college funding program, have also repeatedly fallen short of their targets, recording persistent underspending year after year.
Every time these schemes undershoot, the students are the ones who lose out – be it in quality of education, infrastructure, or access to learning resources.
It’s not just the core Education Ministry programs. Other departments’ education-related initiatives have suffered from this malaise as well. The Eklavya Model Residential Schools (EMRS) – an important scheme to educate tribal youth in remote areas – left a staggering ₹3,096 crore unused out of ₹5,543 crore allocated.
That’s money that could have built and operated many residential schools for marginalized communities, simply lying fallow. In an even more glaring example, the government budgeted ₹2,000 crore for a new National Research Foundation (NRF) to boost research and innovation – and not a single rupee was spent; the entire amount sat idle., a complete miss for India’s research aspirations.
Similarly, only ₹85 crore out of ₹874 crore set aside for scholarships for minority students was utilized, denying countless students the financial aid that could keep them in school or college. These figures paint a bleak picture: the pipeline from sanctioned funds to actual benefit is clogged, and the consequences are measured in stunted educational outcomes.
Goals like every child in school by 2030 or a substantial rise in college enrolment remain distant dreams when money collected to achieve them doesn’t translate into action on the ground.
Public trust is perhaps the intangible victim of this saga. Citizens were told that an education cess would fast-track improvements in the schooling system and empower the youth. They opened their wallets and paid this tax willingly, trusting that it was for the greater good. What they got instead is a stark feeling of betrayal.
The next time the government invokes a noble cause to raise funds, people will remember how the education cess turned into a slush fund of unkept promises. If money meant for classrooms can vanish into governmental ether or be endlessly stockpiled, it erodes the credibility of any such targeted funding initiatives. In a nation where parents often sacrifice to send their children to school, seeing the government fail to spend the very funds earmarked for education is more than just a policy failure – it feels like a moral failure.
Watchdogs and Whistleblowers
The watchdogs have been barking about these issues for years, and the echoes of their reports are now too loud to ignore. The Comptroller and Auditor General first raised red flags when the new Health and Education Cess was introduced.
In 2019, the CAG noted that there were no clear principles or mechanisms to ensure the cess money would be split and spent as intended. By 2020, after observing zero transfers to the secondary education fund in the initial years, the auditor bluntly concluded that there was “no mechanism to ensure that cess collections would be appropriately utilised”.
These warnings were essentially prophetic – exactly what the CAG feared is what transpired. Despite such alarms, little changed in time. It took until 2022 for the government to operationalize the MUSK fund (five years after it was created in 2017), and by then four years’ worth of education-tax money had already been effectively lost to the cause.
Parliamentary committees too have tried to yank the chain. The Public Accounts Committee, armed with CAG findings and its own investigations, has scolded ministries for persistent underspending and opaque accounting.
As mentioned, the PAC’s push led the Finance Ministry to issue advisories urging more realistic budgeting – essentially telling ministries to either use their funds or stop asking for so much. Even before the HEC era, a parliamentary standing committee in 2018 found that out of ₹1.93 lakh crore collected via the earlier primary education cess (2004–2017), about ₹13,113 crore (nearly 7%) was never utilized for education.
In other words, this is a long-standing syndrome. The difference now is the scale (tens of thousands of crores rupees) and the brazenness of collecting a fresh cess for higher education while letting it gather dust. Every new report from the CAG or PAC comes with sharper language, expressing frustration that past recommendations have been ignored.
They call for more accurate forecasting, stricter accounting separation, and timely utilization of funds – common-sense fixes that seem elusive in the current system. The chorus from these watchdogs is clear: no more excuses – the government must either put the education cess to work or stop hoodwinking the public.
But one critic rightly wondered with justifiable anguish– what is the utility and purpose of CAG’s monotonous pointing out repetitive mischief and PAC issuing ‘stern’ warnings? Where is the strong disincentive to prevent such deceptions or mismanagement?
No More Broken Promises: The Way Forward
The revelations of the Education Cess Scandal are a wake-up call that can no longer be snoozed. It is unconscionable that money collected in the name of educating India’s children lies idle or misdirected while schools scramble for resources and students go without scholarships.
The government must act – and act swiftly – to restore faith. First, there needs to be an urgent push to transfer and deploy every rupee of the accumulated education cess. The thousands of crores sitting in limbo should be immediately released into the programs they were meant to fuel: build those classrooms, train those teachers, fund those research grants, and serve those mid-day meals. This is not just accounting housekeeping; it is fulfilling a promise to the people.
Second, financial governance has to improve. If bureaucratic approval processes stood in the way for four years, then those processes need reform – yesterday. Clear protocols must be set so that a dedicated fund like MUSK is never again left in operational purgatory.
The roles of the Finance and Education Ministries should be recalibrated: the Finance Ministry’s job is to facilitate funding for national priorities, not to quietly squirrel away education money for other uses or for statistical show. The Education Ministry, on its part, must strengthen its planning and absorption capacity. Having funds is one thing; spending them wisely and timely is another.
Investing in administrative capacity, better project management, and accountability for every principal and officer who lets allocated funds lapse will be key. When targets are missed – whether it’s a failed school construction or an unused scholarship budget – there must be consequences and course-corrections, not just hand-wringing.
Finally, transparency and public accountability should be non-negotiable. The government owes citizens a full account of the cess: how much was collected, where it went, and what outcomes it achieved. Regular public disclosures can deter the misuse or neglect of such funds. Civil society and media must continue to shine a light on the spending (or non-spending) of these earmarked taxes.
After all, the essence of this scandal is betrayal of trust, and trust can only be rebuilt with honesty and tangible progress.
India’s development goals hinge on educating its vast young population. The stakes are simply too high to allow this kind of fiscal mismanagement to fester. The education cess was a promise – a social contract that Indians accepted, paying out of their pocket for a better future. It’s time the government kept its end of that bargain. No more hollow excuses, no more “savings” at the cost of children’s futures. The billions collected must now be put to work in classrooms and campuses where they belong. Only then can we turn the page on this scandal and truly invest in the promise that every child’s potential will be nurtured, not neglected.
The public has delivered its part by paying the cess – now the authorities must deliver on theirs, without delay or deception.
(This is an opinion piece, and views expressed are those of author only)
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