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Self Assessment Tax: A Comprehensive Guide to Calculation and Online Payment

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what is self assessment tax
January 17, 2024

Table of Content

 

Nowadays, most taxpayers in India file their income tax returns (ITR) online through a process called self assessment. For AY 2023-24, as many as 8.18 crore ITRs were filed in India by taxpayers, which is 9% higher than the previous year according to the Finance Ministry.

Self Assessment Tax refers to the process of evaluating and paying taxes on one's income, including sources such as business profits, capital gains, and other taxable income. To ensure compliance with tax regulations and avoid penalties, it is crucial to understand the importance of self assessment.

What is Self Assessment Tax and How to Pay it Online?

Self Assessment Tax is the portion of tax paid by individuals on their taxable income that is not subjected to TDS (Tax Deducted at Source) or Advance Tax payments. It enables taxpayers to reconcile their total income, compute tax liability, and pay any outstanding dues.

To pay Self Assessment Tax online, you can visit the income tax department's official website, select the appropriate challan, fill in the required details, and make the payment using net banking or debit card options.

Why Should You Pay Self Assessment Tax?

Paying Self Assessment Tax is crucial as it ensures compliance with the tax laws of our country. Failing to pay your due taxes or underpaying it can lead to penalties, interest charges, and legal consequences. It is essential for fulfilling one's tax obligations honestly and in a timely manner.

Self assessment is one of the easiest ways of filing income tax returns online. You can follow the instructions given on the Income Tax e-filing website to file self-assessment and calculate your outstanding dues by checking Form 26AS or AIS. Furthermore, there is no strict deadline; you have an entire financial year to file your self assessment returns.

Characteristics of Self Assessment Tax

Self Assessment Tax possesses several distinct characteristics.

  • It is payable by individuals, including salaried employees, freelancers, professionals, and business owners.
  • It is calculated on the total income derived from various sources, excluding the amount already subjected to TDS or advance tax payments.
  • It is calculated, filed, and paid by taxpayers themselves and not through an employer or other entities.
  • It must be paid before the annual income tax return filing deadline.
  • It is applicable when your total tax liability exceeds the TDS deducted amount.
  • Interest is levied on delayed payment of Self Assessment Tax.

Does everyone have to pay a Self Assessment Tax?

Self Assessment Tax applies to individuals whose total income surpasses the basic exemption limit, after considering TDS and advance tax payments.

Therefore, if a taxpayer's income exceeds the specified threshold, they are required to pay Self Assessment Tax. But if a person's income is entirely covered by TDS, there is no need to pay Self Assessment Tax. Individuals should consult a tax professional or refer to official tax guidelines to determine their tax liability.

How to Calculate Self Assessment Tax Liability?

To calculate Self Assessment Tax liability, one must estimate their annual income, deduct applicable deductions and exemptions, calculate the tax liability based on the income tax slab rate, and subtract the TDS already deducted. The resulting amount is the Self Assessment Tax payable.

Let’s say you have a gross annual income of Rs. 12 lakh and you can avail deductions worth Rs. 2 lakh in the financial year (including standard deduction). You will have a taxable income of Rs. 10 lakh, upon which tax liability will be calculated.

As per the old tax regime, your tax liability will be 0% of Rs. 2.5 lakh + 5% of 2.5 lakh + 10% of the remaining Rs. 5 lakh. This is equal to Rs. 72,500. Upon this, a 4% cess will be charged, making your total tax liability Rs. 75,400.

How to Pay the Self Assessment Tax Online?

To pay Self Assessment Tax online, follow these steps:

Step 1. Visit the Income Tax Department's official website.

Step 2. Select 'e-payment'.

Step 3. Select the relevant option for Self Assessment Tax payment.

Step 4. Choose the correct challan for Self Assessment Tax (Challan 280).

Step 5. Enter all required details, such as personal information, assessment year, and PAN details.

Step 6. Enter the correct tax amount and select the bank through which you will make payments.

Step 7. Choose the preferred payment method, such as net banking, credit/debit cards, RTGS/NEFT, or e-wallets.

Step 8. Complete the transaction by following the provided instructions.

Step 9. Save the transaction confirmation for future reference.

Note: It is crucial to ensure secure payment platforms and submit accurate information to minimise discrepancies or complications.

Procedure for Offline Payment of Self-Assessment Tax

To make an offline payment, the taxpayer can visit any authorised bank branch and complete the payment process by filling out Challan 280. Cash, cheques, or demand drafts can be used for payment. The bank will provide a stamped counterfoil as proof of payment.

Consequences of Non-payment of Self-Assessment Tax

According to Section 140A(3) and Section 221(1) of the Income Tax Act, failure to pay Self Assessment Tax or underpayment can result in penalty charges, interest, and legal complications. The Income Tax Department has the authority to conduct assessments, recover unpaid taxes, and initiate legal proceedings against non-compliant taxpayers.

How to Know Challan Status?

To inquire about the status of a challan, taxpayers can visit the TIN website and enter details such as BSR code, date of payment, challan serial number, and amount. Then, they need to enter the given CAPTCHA and click on ‘View’.

This inquiry helps ensure that the payment has been successfully processed by the bank and credited to the respective taxpayer's account.

How to Re-print Challan 280?

In case the Challan 280 for Self Assessment Tax payment is lost or misplaced, it can be reprinted by following these steps:

Step 1. Visit the Income Tax Department's official website.

Step 2. Select the 'Reprint Challan' option.

Step 3. Provide the necessary information, such as Permanent Account Number (PAN), and assessment year. Then, input the security code.

Step 4. Click ‘Submit’.

By clicking on the submit button, taxpayers can easily obtain a duplicate copy of their challan.

Form 26AS & Self-assessment Tax

Form 26AS is a consolidated tax statement issued by the Income Tax Department, summarising various sources of income, TDS deducted, advance tax, and Self Assessment Tax payments. When filing income tax returns, individuals must reconcile the details mentioned in Form 26AS with their own records to ensure accuracy and prevent discrepancies or mismatches.

Reasons for Mismatches between the TDS Statement and Form 26AS

Mismatches between the TDS statement and Form 26AS can occur due to various reasons, such as:

  • Delayed filing or processing of TDS returns by the deductor
  • Incorrect details furnished by the deductor while submitting the TDS returns
  • Absence of PAN details in TDS returns
  • Misinterpretation or clerical errors during data entry
  • Duplicate entry or erroneous data in Form 26AS

It is advisable to rectify any discrepancies to ensure accurate tax assessment. Such discrepancies should be rectified promptly by contacting the concerned parties or the Income Tax Department to ensure accurate tax filings.

Differences between Self Assessment Tax and Advance Tax

To differentiate between Self Assessment Tax and Advance Tax, the key distinctions are highlighted in the following table:

Aspect

Self-Assessment Tax   

Advance Tax

Payment date

Paid by taxpayers at the time of filing income tax returns

Paid by taxpayers in advance, before the end of the financial year

Payment Frequency

 Paid annually

Paid in instalments specified by the Income Tax Department

Applicability

Applicable when the total tax liability exceeds the TDS amount         

Applicable when the estimated total tax liability exceeds Rs. 10,000 in a financial year

Filing Purpose

Covering unpaid taxes

Providing an estimate of total tax liability

Interest Charges

Interest is levied on late payments

Applicable if advance tax payments are not made as per the specified schedule

Liability Determination

Calculated by the taxpayer

Estimated by the taxpayer based on advance tax rules

Conclusion

Paying Self Assessment Tax is a responsibility that every taxpayer should fulfil accurately and on time. By understanding its significance, calculating the tax liability, and utilising the online payment options, taxpayers can ensure compliance while avoiding penalties and legal complications.

Frequently Asked Questions on Self Assessment Tax

1. How do I pay my self assessment tax?

Online payment modes such as net banking and debit cards can be used to pay Self Assessment Tax. Meanwhile, offline payments can be made through authorised banks.

2. What is the interest on self assessment tax?

The interest on self assessment tax is calculated at the rate of 1% per month or part thereof, starting from the due date of payment until the actual payment date.

3. What is self assessment tax under Section 140A?

Section 140A is a provision in the Income Tax Act that mandates taxpayers to pay their self-assessment tax before filing their income tax return.

4. What is self assessment under GST?

Self-assessment under GST refers to the process where taxpayers determine their tax liability by themselves, then file returns, and make the tax payments based on the information provided to the tax authorities.

5. How is self assessment tax different from advance tax?

Self Assessment Tax is payable at the time of filing the income tax return, whereas advance tax is paid in instalments before the end of the financial year based on the expected income and tax liability.

6. Can I pay self assessment tax in instalments?

Yes, self assessment tax can be paid in instalments but the same must be paid in full before you file your income tax return.

7. What is the due date to pay the self-assessment tax?

The due date to pay self-assessment tax is the same as the due date to file income tax returns for a given financial year. This date is typically July 31st of the assessment year unless extended by the authorities.

ARN - INT/ED/01/24/7919

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Francis Rodrigues Francis Rodrigues

Francis Rodrigues has a decade long experience in the insurance sector, and as SVP, E-Commerce and Digital Marketing, HDFC Life, manages the online sales channel, as well as digital and performance marketing. He has had hands-on experience in setting up sales channels and functional teams from scratch over a career spanning 2 decades.

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Vishal Subharwal heads the Strategy, Marketing, E-Commerce, Digital Business & Sustainability initiatives at HDFC Life. He is responsible for crafting and ensuring successful implementation of the overall organisation strategy.

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Disclaimer

#Tax assessments are subject to provisions of the Income Tax Act, 1961. Tax Laws are subject to change from time to time.

#The customer is requested to seek tax advice from his Chartered Accountant or personal tax advisor with respect to his personal tax liabilities under the Income-tax law

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