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ARN. No. KLI/23-24/E-BB/1201
Features
Ref. No. KLI/22-23/E-BB/999
Self-assessment tax is the final amount you owe in income tax after subtracting any taxes already withheld from your income.
Paying taxes is an essential aspect of financial responsibility, ensuring the smooth functioning of a nation’s economy. Among the various taxes, self-assessment in income tax is critical as it represents the final amount of income tax owed after accounting for all tax deductions and advance payments made throughout the year.
Deducted from your income sources like salary and investments, along with any advance tax payments, this tax ensures you accurately meet your full tax obligations. Understanding what is self assessment in income tax, how to calculate and pay it is vital for taxpayers to avoid penalties and ensure smooth tax return filing.
Self assessment tax is the final amount of income tax you owe after considering the tax already deducted from your income sources throughout the year. Throughout the financial year, a portion of your income tax might already be deducted at source (TDS) by your employer or bank (TCS) for certain transactions. You might also pay advance tax annually to estimate your total tax liability.
The self assessment tax is the remaining balance you must pay after subtracting the TDS, TCS, and advance tax you already paid from your total tax liability.
There are two main reasons why you should pay your self assessment tax:
In India, filing an income tax return is mandatory if your taxable income exceeds a certain limit set by the government. If you owe taxes after considering the tax deducted at source (TDS) and any advance tax payments, then paying the self assessment tax ensures you meet your legal tax obligations. Not paying these taxes can result in penalties and interest charges.
You cannot complete your income tax return filing without paying any outstanding self assessment tax. This means any delay in paying what you owe can lead to delays in finalizing your tax return. This can be inconvenient and potentially cause problems if you need your tax return for other purposes, like applying for a loan.
Calculating your self assessment tax in India involves following these steps:
To calculate self assessment, first step is to compile all your income sources for the financial year. This will include salary income, interest income, rental income, capital gains, and income from any other business or profession. You can find most of this information on the income tax documents provided by your employer, bank, and other institutions.
It is also necessary to research and identify all the tax deductions and exemptions you are eligible for under the Income Tax Act. Some of the common deductions are under section 80C (investments, PPF, etc.), section 80D (medical expenses), and others for housing loan interest, education loan repayments, etc.
Now, it’s time to add up your income from all sources mentioned in step 1. You must subtract the allowable deductions and exemptions identified in Step 2 from your gross total income to give you your taxable income.
If you want to determine your tax liability, you have to refer to the income tax slab rates applicable for the relevant financial year. Then, you can apply the relevant tax rate to your taxable income to calculate your total tax liability. The tax slab rates can be found online, or you can consult a tax professional for guidance.
To calculate your TDS and advance tax, subtract the Tax Deducted at Source (TDS) already deducted from your income sources throughout the year (reflected in Form 16) and any advance tax you might have paid.
If the result from the above step is a positive value, that’s your self assessment tax liability. This means you owe the government this remaining amount after considering the TDS and advance tax paid.
You can conveniently pay your self assessment tax online in India through the Income Tax Department’s e-filing portal. Here is a step-by-step guide:
Go to the official website of the Income Tax Department.
On the homepage, under the ‘Services’ section, look for the option ‘e-Payment’ and click on this link.
The portal offers two options:
You will need to provide the following details:
Enter the exact self assessment tax amount you calculated earlier.
Select your preferred method of online payment. The portal typically accepts options like net banking, debit card, and credit card.
Carefully review all the entered details for accuracy. Once confirmed, proceed to submit the payment.
Upon successful payment, you’ll receive a confirmation message or download a challan (payment receipt) for your records. Keep this document for future reference.
To download the Self Assessment Tax Challan online, follow these steps:
Advance tax is a proactive measure to pay taxes throughout the year, while self assessment tax is a final settlement of any outstanding tax due at the end of the financial year. Let us take a look at the detailed differences between these two:
| Feature |
Self Assessment Tax |
Advance Tax |
| Definition |
The remaining tax liability you owe after considering tax deducted at source (TDS) and advance tax paid during the year. |
Tax payments are made in installments throughout the financial year based on your estimated yearly income. |
| Payment Timing |
Paid after the end of the financial year but before filing your income tax return. |
Paid in installments during the financial year (typically 3 installments) on specific due dates. |
| Calculation |
Calculated based on your actual income for the entire financial year. |
Based on an estimate of your income for the financial year. |
| Purpose |
Settles your final tax liability for the year. |
Pays your tax liability throughout the year to avoid a large lump sum payment at the end. |
| Penalty for Non-Payment |
Attracts penalty and interest charges if not paid before filing your return. |
No penalty for underpayment, but interest is charged on the shortfall between advance tax paid and actual tax liability. |
| Applicability |
This applies to taxpayers whose total tax liability after TDS exceeds a certain limit set by the government. |
This applies to taxpayers whose estimated tax liability for the year exceeds a certain limit set by the government. |
Self assessment tax plays a crucial role in tax filing, ensuring that any outstanding tax liability is settled before submitting your return. Taxonomies can fulfill their legal obligations and avoid penalties by understanding the steps to calculate and pay this tax. Additionally, recognizing the difference between self assessment tax and advance tax helps in better financial planning throughout the year. By staying informed and proactive, taxpayers can ensure a smooth and compliant tax filing experience, contributing to their financial health and the broader economic system.
1
Anyone who has income that isn’t taxed at source, such as self-employed individuals, freelancers, or those with rental or investment income, needs to file a self assessment tax return.
2
You can file a self assessment tax return online through the tax authority’s official website by filling out the required forms and submitting the necessary documentation.
3
Missing the deadline can result in penalties and interest on the outstanding tax amount. The exact penalties depend on how late the return is filed.
4
Partial payment of self assessment tax can reduce the interest on the unpaid amount, but penal interest may still apply to the remaining balance.
5
Self assessment tax is paid after the end of the financial year when computing the final tax liability, while advance tax is paid during the financial year in installments based on estimated income.
6
Yes, self assessment tax can be paid offline by visiting designated bank branches and filling out the necessary challan forms.
Amit Raje is an experienced marketer who has worked in various Fintechs and leading Financial companies in India. With focused experience in Digital, Amit has pioneered multiple digital commerce in India. Now, close to two decades later, he is the vice president and head of the D2C business department. He masters the skill of strategic management, also being certified in it from IIMA. He has challenged his challenges and contributed his efforts in this journey of digital transformation.
Prasad Pimple has a decade-long experience in the Life insurance sector and as EVP, Kotak Life heads Digital Business. He is responsible for developing user friendly product journeys, creating consumer awareness and helping consumers in identifying need for life insurance solutions. He has 20+ years of experience in creating and building business verticals across Insurance, Telecom and Banking sectors
Pay 10,000/month for 10 years, Get 1,65,805/Year* for next 15 years.
ARN. No. KLI/23-24/E-BB/1201
Features
Ref. No. KLI/22-23/E-BB/999
The information herein is meant only for general reading purposes and the views being expressed only constitute opinions and therefore cannot be considered as guidelines, recommendations or as a professional guide for the readers. The content has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Recipients of this information are advised to rely on their own analysis, interpretations & investigations. Readers are also advised to seek independent professional advice in order to arrive at an informed investment decision. Further customer is the advised to go through the sales brochure before conducting any sale. Above illustrations are only for understanding, it is not directly or indirectly related to the performance of any product or plans of Kotak Life.
