Self Assessment Tax Meaning Calculation and Pay Online
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Self Assessment Tax Meaning Calculation and Pay Online

Insurance Basics & Financial Advice The Indian tax system levies income tax on various sources of income earned by an individual during a financial year. However, there are instances where tax may not be deducted at source (TDS) on certain types of income. Self-assessment tax comes into play in these situations, allowing taxpayers to fulfil their tax obligations.

Self-Assessment Tax - Meaning, Calculation & How to Pay Online

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Self-Assessment Tax

Self-Assessment Tax

The Indian tax system levies income tax on various sources of income earned by an individual during a financial year. However, there are instances where tax may not be deducted at source (TDS) on certain types of income. Self-assessment tax comes into play in these situations, allowing taxpayers to fulfil their tax obligations.

Why Should One Pay Self-Assessment Tax?

There are several scenarios where you might be liable to pay self-assessment tax:

  • Income from Interest: Interest earned on bank deposits may not attract the TDS deduction in case the amount is within the exemption limit.
  • Rental Income: Money received from renting out properties falls under the category of self-assessment tax.
  • Capital Gains: Income received from the sales of other financial assets such as stocks, mutual funds, or the business use of real estate (where the property is held for less than the specified period) may be subject to capital gains tax. This is one scenario where self-assessment may be needed.
  • Professional Fees: Some professionals, such as freelance workers, independent contractors and private tutors, mostly receive their income as a gross amount. They are, thereafter, required to pay tax via self-assessment.
  • Foreign Income: You may earn income from other foreign regions where taxes may not be deducted at source.
  • Mismatch in TDS and Tax Liability: This implies that when the TDS deducted during a financial year is less than your overall tax obligation, self-assessment is used to make up the difference.

How to Pay Self-Assessment Tax Online?

The Income Tax Department of India encourages online payments of self-assessment tax for the convenience and comfort of taxpayers. Here's a simplified guide:

  • Visit the Income Tax portal, the official site of the Income Tax Department, at https://www.Incometax.Gov.In/iec/foportal/.
  • If you haven’t already, sign up and register at the portal with your PAN details. Existing users can use their credentials to log in to the website.
  • Locate the "e-Pay Tax" section on the dashboard.
  • Find and select "Self-Assessment Tax" from the list of available options.
  • Enter the applicable information, like the assessment period, challan type (ITNS 280), and the tax amount payable.
  • Select your preferred payment method, like net banking, debit cards, credit cards, and so on.
  • Follow the on-screen instructions to complete the transaction.
  • Once the transaction is done, download and save the challan for future reference.

How to Calculate Self-Assessment Tax

Calculating your self-assessment tax involves determining your total taxable income and subtracting any tax already deducted at source (TDS). Here's a breakdown of the steps:

  • Gather Income Proof: Collect files reflecting your profits or income from numerous sources during the financial year.
  • Calculate Gross Income: Add up your income from all sources, consisting of salary/business income, interest income, income from property, capital gains, and so on.
  • Claim Deductions: Factor in any eligible deductions allowed under the Income Tax Act. This may include standard deductions, HRA (house rent allowance), health insurance, life insurance, home loan payments, and other applicable investments.
  • Calculate Net Taxable Income: Subtract the claimed deductions from your gross income to arrive at your net taxable earnings.
  • Subtract TDS Deducted: Deduct the total TDS already deducted from your income throughout the year.
  • Self-Assessment for the Remaining Tax Amount: The remaining amount after deducting TDS is what you have to pay through self-assessment.

Frequently Asked Questions

What do you mean by Self-Assessment Tax?

Self-assessment tax is the tax liability you calculate and pay yourself for income sources where tax is not deducted at source (TDS).

Is there any specific date for filing the Self-Assessment Tax?

There's no specific date for filing self-assessment tax. However, it's advisable to pay your taxes before the last date for filing your income tax returns for a particular financial year. This will help you avoid penalties and interest.

Is it necessary to pay self-assessment tax?

Yes, paying self-assessment tax is mandatory if your total tax liability exceeds the TDS deducted from your income.

What is the procedure for filing a Self-Assessment Tax?

While there's no separate "filing" process for self-assessment tax, you need to:

  1. Calculate your self-assessment tax liability, as explained earlier.
  2. Pay the calculated tax amount online through the Income Tax Department's e-filing portal using the steps mentioned in the "How to Pay Self-Assessment Tax Online?" section.
  3. File your income tax return (ITR) by the due date. While filing your ITR, you'll declare the income on which you've paid self-assessment tax.

How is self-assessment tax different from advance tax?

Advance tax is a mechanism to pay tax during the financial year in which the income is earned in instalments based on your estimated tax liability. Self-assessment tax, on the other hand, is the payment of the remaining tax liability after considering TDS deducted and advance tax (if any) paid before filing your income tax return.

Can I pay self-assessment tax offline?

Yes, you can pay self-assessment tax offline by challan ITNS 280 at designated banks authorised to collect tax payments. However, online payment through the e-filing portal is generally faster and more convenient.

Can we avoid paying penalties and interest if we partially pay self-assessment tax?

No, partially paying the self-assessment tax doesn't eliminate penalties and interest on the remaining unpaid amount. It's recommended to calculate your tax liability accurately and pay the entire amount due before the last date for filing your income tax returns. This will help you avoid any late payment charges.

 

Disclaimer:
Our content given in this article is as per the existing provisions, laws and regulations as per the Income Tax Act, 1961 and Income Tax Rules, 1962 issued thereunder. Tax laws are subject to amendments made thereto from time to time. The benefits / guidance mentioned herewith should not be considered as opinion / view of the Company. We request to seek independent view from your personal tax advisor on applicable tax benefits / guidance under the said article.

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