Direct tax is the major source of revenue for the government which includes Income Tax. Any taxpayer earning income more than the basic exemption limit in a financial year has to pay income tax. They should calculate their self assessment tax by reducing TDS and Advance tax from their total tax liability.
What is Self Assessment Tax?
The meaning of self assessment tax is any pending tax liability at the end of the financial year after calculating total taxable income and subtracting deductions & taxes paid. Taxpayers should pay their taxes in order to finish the return filing process. In case that the necessary sum is unpaid, the return filing process is ruled invalid, which has unfavorable consequences such as interest, penalty, etc.
There is no due date for the payment of this tax. However, it is always a good practice to pay the tax and proceed with ITR Filing.
Who has to pay Self Assessment tax?
It can be applicable to those taxpayers who fall under any of the below cases:
- Less advance tax is paid
- TDS was not deducted or deducted at a lesser rate as compared to the actual rate applicable
- If a salaried individual changed jobs and the employer did not take into account the salary from the previous employer while calculating TDS
- In case of salaried individuals, other sources of income where tax is not paid and has not been declared to the employer
For example, let’s say Shreya makes 4 lakh rupees from her salary. In addition to her salary income, she also has an interest income of INR 1,20,000, which she did not disclose to the employer.
|Total Taxable Income||5,20,000|
|Total Tax Payable (as per the old regime slab rate)||16,500|
Note: Since Shreya’s total income exceeds INR 5 lakh, she is not qualified for a rebate under Section 87A.
How to calculate and pay self assessment tax?
Let’s understand the calculation using the below formula:
|Total income of the taxpayer||XX|
|Tax on total income||(a)|
|Less: Advance Tax||(b)|
|Less: Tax Rebate/relief||(d)|
|Tax payable (a – (b+c+d) )||XX|
|Add : Interest Payable (u/s 234A, 234B 234C)||XX|
|Self Assessment Tax||XX|
Self Assessment Tax Payment
The taxpayer has to pay the income tax through challan 280 via any of the below methods:
What is the difference between self assessment tax and advance tax?
The Advance Tax is part payment of your tax liability before the end of the Financial Year. As per the Income Tax Act, every assessee whose tax liability for a Financial Year exceeds INR 10,000 has to pay advance tax on an installment basis. There is an interest penalty in case the Advance tax is not paid before the end of the financial year.
Self Assessment Tax is what the assessee pays after the end of the financial year. Before filing the income tax return, every assessee should calculate the tax liability. If there are any outstanding tax dues to be paid then it is to be paid first before filing Income Tax Return.
There is no due date associated with the payment of tax. However, if you fail to pay this tax, you will receive a notice or intimation from ITD along with interest or penalty.
The tax payment is reflected in the IT portal and AIS.
IT Portal: Log in to the IT portal. Go to ‘My Account’ and click on ‘View Form 26AS’. You will be able to view all types of tax credits there.
AIS: Log in to the IT portal. Go to ‘Services’ and click on ‘AIS’. Select the relevant AY to view the tax credits.
In the case of salaried individuals, TDS is deducted from their salary and deposited to the government by their employer. So as far as salary income is concerned, they are not required to pay self assessment tax.
Advance tax is a ‘Pay as you earn’ tax, so it is required to be paid during the financial year in four different instalments in case your Taxable Liability is more than INR 10,000 for the financial year which stands true for you.
The due dates for advance tax installments are:
If you are eligible to pay advanced tax but have not paid advance tax, the penalty will be applicable u/s 234B and 234C.
Let us know if you have any further questions!
Hi Team, I had assumed that I will be able to pay advanced tax before March because I thought I could go for presumptive tax filing. But now it looks like I cannot opt for a presumptive taxation scheme. So does it mean that I did not pay the advanced quarterly tax that I was supposed to pay?
If yes, what is the penalty in every case or are there some exceptions to avoid this interest penalty?
Thanks in advance!
You will be charged an interest penalty under section 234C for the delay/non-payment of advance tax during the year @1% per month on the shortfall amount. Additionally, under Section 234B a penalty interest is imposed on the taxpayers in case the advance tax payment is less than 90% of assessed tax liability during the year.
You can avoid interest u/s 234B by paying at least 90% of your assessed tax liability by March 15, 2021.
Hope this helps!
I have LTCG of more than 7 lakhs from the equity for this year. Is there a way to reduce my tax liability? Also, do I have to pay the tax in advance? If I fail to do so, what will be the penalty/interest percentage I have to pay during my tax filing in 2020?
Hey @ViraajAhuja47, you can set off against non-speculative business loss like F&O for the current year. Long-term capital losses for the previous as well as the current year. Yes, you are required to pay advance tax in case your tax liability is more than INR 10,000 for the FY. The penalties for non-payment of advance tax are:
Non-payment of Advance Tax u/s 234B 3: Interest at 1% in case the taxpayer fails to pay 90% of the tax liability in the same FY
Delay in Payment of Advance Tax u/s 234C 1: if there is a delay in tax payment than interest @ 1% is applicable.
Tax paid on or before 31/03/2021 will be considered as advance tax for FY 2020-21. So a trader can determine the profits between 15th March to 31st March and pay the tax on 31st March, there will be no interest levied.
Hope this helps!
Tax audit is applicable when:
You can use this tool to determine if tax audit is applicable to you:
It is always a good practice to file your ITR and report all your financial transactions to avoid notice from the Income Tax Department. Especially after the SEBI and CBDT’s data partnership. If your total income is below the basic exemption limit, you won’t have any tax liability.
Do I have to pay Advance Tax if the TDS for the year is sufficient to cover tax liabliltiy?
Does Dividend on equity shares attract separate Advance Tax or is it just another source of income?
You are liable to pay advance tax if your total outstanding tax liability for the financial year after TDS is above INR 10,000.
To calculate your advance tax liability you need to add your estimated income for the financial year from all sources including - Salary, House Property, Capital Gains, Business & Profession and other sources.
Next, subtract all eligible deductions, expenses, and Tax Credit available to you.
Now, if your outstanding tax liability is above INR 10,000, you need to pay advance tax to avoid penalty u/s 234B and 234C.
Hope this answers your query
You can also use the advance tax calculator to know your advance tax liability under the old and new tax regime
When I pay the advance tax through the ZERODHA-QUICKO platform, does it get saved/stored? For example I have paid for Q1. so when I have to pay for Q2, will this be automatically calculated?
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