Tax Troubles? We've Got You Covered!
Tax Advisory Services
Get Expert Consultation Now!
  • 2500 Cr. Saved Already!
  • Trusted by 1 Million+
  • 10+ Yr. of Industry Experience
Tax Advisor
linkedin
whatsapp

Self Assessment in Income Tax - What is Self Assessment Tax for Salaried Employee?

Updated on: 16 Jan, 2024 05:49 PM

After evaluating one’s total taxable income, reducing deductions, and the taxes paid, any pending tax liability at the end of the financial year is known as self-assessment tax. It is pertinent to mention that a taxpayer needs to pay self-assessment tax before he or she files an income tax return. This is a regulation that needs to be maintained in the country for all its residents.

Self-assessment tax refers to the process by which individuals and businesses calculate and pay their own tax liabilities to the government. This typically applies to income tax, but it can also include other taxes like capital gains tax, property tax, and more. Here's a guide on how to compute and pay self-assessment tax:

What is self-assessment tax?

Self-Assessment Tax (SAT) is the amount that an assessee (taxpayer) pays on their taxable income after accounting for Advance Tax and Tax Deducted at Source (TDS) for the given financial year. Individuals who are required to file income tax returns are generally liable to pay SAT before submitting their returns. This payment can be made using Challan 280, which is also used for e-filing income tax. Here's a more detailed explanation:

  • Definition of SAT: Self-Assessment Tax refers to the additional tax payment made by taxpayers to cover any remaining tax liability after accounting for Advance Tax and TDS. It is a way for individuals to ensure they meet their full tax obligations.
  • Applicability: Individuals and entities who are obligated to file income tax returns are usually the ones required to pay SAT. This includes salaried employees, business owners, professionals, and other income-earning entities.
  • Payment Method: Taxpayers can pay their Self-Assessment Tax using Challan 280, which is a form that allows for the convenient payment of taxes to the government. This form can be used for both physical and online payments.
  • No Specific Deadline: Unlike Advance Tax, which has specific payment deadlines throughout the year, Self-Assessment Tax is calculated at the end of the financial year. There is no fixed date associated with SAT payments. However, it is crucial to understand that taxpayers must settle their SAT before filing their income tax returns to avoid incurring interest on the outstanding tax amount.
  • Importance of SAT: Self-Assessment Tax plays a vital role in ensuring that taxpayers meet their full tax liability for the financial year. It bridges the gap between the total tax due and the tax already paid through TDS and Advance Tax. Filing SAT and paying the outstanding tax amount is a legal requirement, and non-compliance may result in penalties and interest charges.
  • Completing the Tax Cycle: SAT is an essential step in the overall income tax cycle. After computing their tax liability, taxpayers should account for any additional tax they owe, which could be the result of omitted income, unexpected gains, or TDS discrepancies. By fulfilling this obligation, taxpayers can complete the income tax process accurately.

Characteristics of self-assessment tax

It is important to remember that after a taxpayer has paid their advance tax and if there are any tax dues that need to be paid after the end of the financial year, they have to be paid as self-assessment tax.

A taxpayer, before filing his or her income tax return, is required to pay the self-assessment tax. In the case of salaried taxpayers, the fee is calculated and settled on the taxpayer’s behalf by the employer. If a taxpayer is liable to pay self-assessment tax, they will not be able to file their income tax returns unless they have paid the self-assessment tax. The self-assessment tax needs to be evaluated by the taxpayer on their terms, and then it has to be settled with the government. There are various ways a taxpayer can settle their self-assessment tax, which can be done both offline and online. Both the processes have to be carefully followed, as any discrepancy can lead to significant issues in the return form and processing of the return.


Computing Self-assessment tax

Self-assessment tax is to be calculated by subtracting all available tax credits, that is advance tax, TDS, MAT/AMT, TCS, credit, and relief existing under section 87A/90/90A/91. The taxpayer is required to give self-assessment tax along with the interest and, penalty if any has been levied. There is an additional fee owed from the Assessment Year 2018-19 for the delay in filing the ITR. A late filing payment of Rs 5,000 shall be imposed if the return is filed between August 1, 2018, and December 31, 2018. The fees will be Rs 10,000 if the tax return is filed between January 1, 2019, and March 31, 2019. The late filing fees will be Rs 1,000 for taxpayers whose taxable revenue is up to Rs 5 lakh and for taxable income exceeding 5 lakhs penalty is levied for amount of Rs. 5000. The tax, along with interest and Penalty, needs to be paid before submitting the return, and the particulars of the tax payment are mandatory to be shown in the income tax return form.

For computing the self-assessment tax, a taxpayer needs to follow the steps as listed below closely

PARTICULARS AMOUNT
Tax Payable on Total Income ——-
Add- Interest under Section 234A/234B/234C ——-
Minus- Relief under Section 90/90A/91 ——-
Minus - MAT Credit under Section 115JAA ——-
Minus - TDS/TCS ——-
Minus - Advance Tax ——-
Tax to be paid Total Amount

Partly paid Self-Assessment Tax

In case the tax paid is not in full, the amount which a taxpayer pays should first be adjusted towards the interest payable and the balance towards tax. Let us understand this with the help of an example:

Income Tax 2,00,000
(Add) Interest under Section 234A/B/C 30,000
(Less) TDS and Advance Tax 50,000
Self-Assessment Tax to be paid under Section 140A 1,80,000
Amount paid as Self-Assessment Tax 70,000

How to Calculate the Interest for Computing Self-assessment Tax

Interest to be calculated under section 234 A/B/C.

234A under this section interest is to be charged @1% when return is filed after the due date and there is net tax liability to be paid as a self assessment tax. It is charged from the due date of filing ITR to the actual date of filing ITR.

234B Interest is levied where the taxpayer is liable to pay advance tax and taxes paid by the taxpayer is less than 90% of the actual tax liability.It is levied @1% from 1st April of next financial year to date of filing of ITR.

234C Interest is charged for failure to pay advance tax Installment or short payment of tax.Interest is charged 1% for 3 months for first 3 installments and for last installments it is charged for 1 month only.

To compute the final interest amount interest calculated u/s 234 A/B/C shall be consolidated.


How to pay self-assessment tax online?

The taxpayer can pay the tax online or physically at the authorized banks. Here are the steps for the online amount of Self-Assessment Tax that can be followed:

  • Step 1: Log on to https://eportal.incometax.gov.in/
  • Step 2: Click on the e-File Tab then choose ‘e-Pay Tax’.Step 3: In the Next screen, click on ‘+New Payment’ on the right corner of the screen.
  • Step 3: Once you click on ‘+New payment’ there are multiple options available in the next screen. Please click on Income Tax and proceed.
  • Step 4: Enter Assessment year and type of payment as ‘(300) Self-Assessment Tax’.once you click on the continue button in the next screen we need to provide the input for Tax, Interest, and penalty etc.
  • Step 5: in the next screen please Choose the method of payment ; the taxpayer can pay self-assessment tax by two methods ‘Net Banking’ & ‘Debit Card’ or pay at the bank counter.
  • Step 6: Please choose your bank from the available options of the bank and click on continue.
  • Step 7: On approval of the information that has been inscribed, the taxpayer will be steered to the payment gateway of the bank.
  • Step 8: On making the payment successfully, a challan certificate will be revealed, including CIN, fee particulars, BSR Code, challan serial character, and bank name via which the e-payment has been made.
  • Step 9: The Challan is evidence of tax payment. Download and Preserve the challan print for the forthcoming article.

Offline process to pay self-assessment tax

If the taxpayer is not able to perform tax payments online, then they have the opportunity to pay offline by visiting their bank branch. The taxpayer can follow the actions below to make their return offline.

  • Go to the bank branch and request the relevant tax payment challan form, in this case, Challan 280.
  • Supply the specifications as required in the form. The offline mode is comparable to the one displayed on the online platform, that is, on the Income Tax portal. The features needed in the form are also very much identical.
  • Go to the appropriate bank’s table and present the filled-in Challan 280 form simultaneously with the money. The taxpayer can make a tax payment either in cash up to Rs. 10,000 or cheque. Also, it is simpler to track and retain a document of the payment made by the taxpayer. If the taxpayer wants to make the payment via cheque, name the cheque in courtesy of the “Income Tax Department.”
  • The Bank executive will accept the money and challan from the taxpayer and give them a voucher by cutting off a part of the challan, putting in aspects of payment, and impressing it.

Once the taxpayer has paid their taxes, they should save the slips securely as evidence of payment. After giving the fee, it can exert up to ten days to show in the AIS. The taxpayer's income tax payment should be displayed in AIS as ‘Advance tax’ or ‘Self-assessment tax’ or the kind of tax given.


Challan status inquiry

As soon as the taxpayer has made the tax return, they can verify its state on the TIN-NSDL portal. To verify the state, heed to the listed actions:

  • On the TIN-NSDL portal, tick on 'Services' and choose 'Challan Status Inquiry.'
  • The taxpayer will be taken to a different page. On that new tab, below the 'For Taxpayers' title, select 'CIN-based view.' Identify yourself as a taxpayer, and the taxpayer can utilize only CIN-based aspects to perceive the state of the tax returned by them.
  • The taxpayer will be compelled to communicate a few articles from the challan slip, i.e., the BSR key of the collecting office, challan tender time, and challan serial number. Insert the captcha cryptogram and agree on show.

Considering it takes 5-10 days to refresh the status, it will display any of the three outcomes:

  • No records: This indicates that the bank is yet to transfer the tax refund to the income tax office.
  • Price Matched: This implies that the bank has transferred the tax refund to the income tax office, but the office has yet to confirm it.
  • Accepted by TIN: It implies that the income tax office has obtained the tax payment. It will dispense the date on which the payment was collected.

How to Re-print Challan 280

In case the taxpayer has lost their challan slip, they can download the identical by logging in to their net banking account (if the refund was made by net banking). To download the identical, the taxpayer has to log in to their account via net banking, go to the tax center, and agree on a 'reprint challan' to do the corresponding. On the other hand, if the taxpayer has made the fee offline, either via cash/cheque or online by a debit card, then they are expected to communicate the same to the bank's branch.


Form 26AS & Self-assessment Tax

Usually, each actuality (individual or company) that has subtracted taxes must attribute that value to the administration via banks. Banks need to upload these TDS features into the Tax Information Network (TIN) central system. The deductors, side-by-side, would record quarterly reports to TIN, implementing quarterly TDS items. Based on specific circumstances, the TIN central system coordinates information linked to tax payment before transforming into a comprehensive record for the particular PAN. This is Form 26AS.

Mainly, the Form 26AS report presents an amalgamated picture of the total revenue received by the taxpayer as a deductee from multiple sources. It also involves the TDS/ TCS sum that has been subtracted from their Gross receipts and recognized by the Income Tax Department.


Reasons for mismatches between the TDS statement and Form 26AS

There are numerous circumstances where the TDS Credit in the TDS statement and, accordingly in Form 16 or 16A may diverge from what is accessible in Form 26AS. The most frequent causes for such discrepancy are listed here:

  • Non-fulfilment of the deductor to pledge TDS on time,
  • The incorrect value contained in the TDS return,
  • Incorrect PAN cited in the TDS return,
  • A blunder in the CIN (Challan identification number),
  • The deductor’s PAN/TAN improperly incorporated,
  • Error in the preferred taxable year
  • Imperfections in the TDS return
  • Unfinished details of the taxpayer in the TDS return
  • Mismatch in the TDS cited and the original TDS subtracted

Correcting mismatches: More frequently than not, such mismatches can be associated with the incorrect information furnished in the TDS return. So, kindly request the employer/deductor to file an amended TDS return after performing the essential changes.

The Income Tax department permits the taxpayer to notify the idea of a mismatch on the website in response to a notice posted by the department.

Outcomes of a mismatch: Automated ITR processing of income tax returns has made it more straightforward to distinguish matches in Form 26AS and TDS reports. The income tax website includes links that would give admittance to 26AS, enabling the taxpayer to check and cross-check the features. Therefore, you must make sure that TDS details in TDS reports and Form 26AS match to circumvent the subsequent outcomes:

  • With the pre-fill convenience made possible in the tax portal and services, all the information accessible in the 26AS is instinctively being filled in the ITR. In the case of mismatches, the value pre-filled will mismatch with the original computations.
  • The elimination of records by the deductor will appear if the taxpayer is not receiving credit for taxes subtracted, and this could end up in a tax-owed situation.
  • There will be a setback in preparing the income tax return of that particular taxpayer.
  • Declaration of payment of extra fee subtracted will linger further than required.

Now that you know the importance of self-assessment tax, it is time to go ahead and file your ITR. It might sound complex, but with Tax2win, ITR filing is as easy as a breeze. File your ITR with Tax2win now and get a hassle-free experience.


Frequently Asked Questions

Q- What if the deadline is missed for the payment of advance tax?

If you fail to pay or the amount you’ve paid is less than the mandated 15% of the total liability by the first Installment (15 June), you will need to pay interest. This is computed @ 1% simple interest per month on the defaulted amount for three months.

The same interest penalty will apply if you fail to pay the second Installment (15th September). Failing to pay the third and fourth Installments (15th December and 15th March) would mean paying 1% simple interest on the defaulted amount for every month until the tax is fully paid.


Q- What are the deadlines for sending my Self-Assessment Tax Return?

If you are submitting a paper return, it must reach HMRC by midnight on the 31st of October. If you decide to send your tax return online, it isn’t until midnight on the 31st of January.

You will be charged a penalty if your Tax return isn’t received on time. When you send HMRC a Self-Assessment tax return, you will receive a Self-Assessment statement showing what tax you owe and how to pay. If you have paid too much, it will show how much you will be repaid. If you file your Tax Return online, you can view this before you even receive it in the post.


Q- What forms are included in a Self-Assessment Tax Return?

Self- Assessment Tax Returns are designed to be relatively straightforward, although most people opt to use an accountant. The forms you need to fill in if you are self-employed are as follows:

  • HMRC will send you a tax return- or a letter telling you to file online, every year in April. This relates to the previous tax year; from the 6th April to the following 5th April. If you receive a tax return,
  • HMRC will always send you forms SA100 and SA101. You may also have to file in some supplementary pages, depending on your circumstances

Q- Do I need to complete a Self Assessment Tax Return?

If you do not pay PAYE i.e. are not a permanent employee you’ll need to fill out a self-assessment tax return. Also if you have a second income from overseas income, you’re a landlord or you have income from savings or investments. In a nutshell, if you have any income that HRMC needs to know about you need to fill out a self-assessment form.


Q- Is it necessary to pay self-assessment tax?

Yes, the taxpayer needs to pay taxes before filing a tax return.


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

Self-assessment tax is paid by submitting Challan 280. To pay challan online, visit https://eportal.incometax.gov.in > Click on the e-file Tab> then choose e-pay tax from the drop-down list> click on the “+New payment” tab appearing in the right corner> fill in the required details>make payment and it's done.


Q- What is Form 26AS?

It is a TDS certificate issued on the Traces site for credit of tax deducted in the name of the assessee.


Q- Are there any simple steps for calculating the self-assessment tax?

The simple steps to calculate self-assessment tax are as follows: calculate the taxable amount payable on the individual's total income. Next, increase the tax by the interest payable under Section 234A/234B/234C. After adding the amount, reduce it by relief under section 90/90A.


People also ask

CA Abhishek Soni
CA Abhishek Soni

Abhishek Soni is a Chartered Accountant by profession & entrepreneur by passion. He is the co-founder & CEO of Tax2Win.in. Tax2win is amongst the top 25 emerging startups of Asia and authorized ERI by the Income Tax Department. In the past, he worked in EY and comes with wide industry experience from telecom, retail to manufacturing to entertainment where he has handled various national and international assignments.