Self-Assessment Tax

What it means

Self-assessment tax is the balance income tax, along with any interest, that you work out and pay yourself before filing your income tax return. It is the amount still due after taking credit for TDS, TCS and advance tax already paid during the year. A return cannot be filed with tax still payable, so this payment closes the gap.

How it works

You compute your total tax for the year, subtract all taxes already paid, and pay the remainder online through the e-Pay Tax facility on the income tax portal (Challan 280, minor head 300 “Self-Assessment Tax”). You then enter the challan details (BSR code, date and serial number) in the taxes paid schedule of your return.

• Interest for late filing: 1% per month on unpaid tax if the return is filed after the due date (section 234A, old Act section).

• Interest for not paying advance tax: 1% per month from 1 April until payment, if advance tax paid was less than 90% of the tax due (section 234B).

• Interest for missing advance tax instalments: 1% per month for 3 months per shortfall on the June, September and December instalments, and 1 month for March (section 234C).

• Advance tax applies only if tax due after TDS is ₹10,000 or more. Resident senior citizens without business income are exempt from advance tax.

Example

Sunita has salary and rental income. Her total tax for the year is ₹1,10,000. Her employer deducted TDS of ₹85,000, and she paid no advance tax. She pays the balance on 31 July.

1. Balance tax = ₹1,10,000 - ₹85,000 = ₹25,000. Since this is above ₹10,000, advance tax was due.

2. Interest under 234B: ₹25,000 x 1% x 4 months (April to July) = ₹1,000.

3. Interest under 234C: on ₹3,750 (15% due by June) for 3 months = ₹112; on ₹11,250 (45% due by September) for 3 months = ₹337; on ₹18,750 (75% due by December) for 3 months = ₹562; on ₹25,000 (100% due by March) for 1 month = ₹250. Total about ₹1,261.

4. Self-assessment tax payable = ₹25,000 + ₹1,000 + ₹1,261 = about ₹27,261.

The portal’s tax computation normally calculates this interest for you.

Key points to remember

• Always pay self-assessment tax before submitting the return, not after.

• Select the correct tax year and the minor head 300 on the challan. A wrong selection needs a correction request with the assessing officer.

• Interest keeps running each month, so delaying payment increases the cost.

• Paying advance tax on time each quarter avoids most of this interest.

• If tax is shown as payable but not paid, the return is treated as defective.