Any pending tax liability at the end of the financial year after calculating total taxable income and subtracting deductions & taxes paid is Self Assessment tax. A taxpayer must pay self-assessment tax before he/she can file an ITR in India.
Who is required to pay the Self Assessment tax?
Every taxpayer whose tax liability for a financial year exceeds taxes paid including TDS and Advance Tax is required to pay Self-Assessment Tax.
Self Assessment Tax in case of salaried individuals?
In the case of a salaried person, tax on salary is calculated by the employer. An employer is responsible to deduct tax (TDS) from your salary income and deposit the same to Government. If the tax liability is correctly calculated and TDS is paid on time then there will be no tax liability for salaried individuals.
However, it is very common to have a tax liability for salaried individuals in the following situations
- If a salaried individual is having income other than salary (for eg. rental income from house property or interest from fixed deposits etc.) and is not reported while calculating TDS
- If salaried individual changed jobs and employer did not take into account salary from the previous employer while calculating TDS
How to calculate the Self Assessment Tax?
Any individuals self-assessment tax liability can be calculated using this formula
There are two ways to pay self-assessment tax:
– Deposit in a bank with self-assessment tax challan or
– Online payment using Net banking facility
If you don’t pay self-assessment tax, you will not be able to file your Income Tax Return. Once you pay your self-assessment tax, you also need to provide counterfoil information in your return.
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 Rs. 10,000 is required 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 is required to 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. This tax is called the Self Assessment Tax.