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Overview

Advance Tax and Self-Assessment Tax

Advance Tax and Self-Assessment Tax are mechanisms under the Income Tax Act, 1961, for taxpayers to pay taxes on their income during or after the financial year. Advance Tax is paid in installments during the year when income is earned, while Self-Assessment Tax is paid when filing the Income Tax Return (ITR) if the tax liability exceeds the advance tax paid and TDS (Tax Deducted at Source). These provisions ensure the timely collection of taxes and reduce the burden of lump-sum payments.

Importance

Advance Tax :

1. Avoidance of Penalties : Prevents interest charges under Section 234B and Section 234C for non-payment or underpayment of taxes.

2. Timely Revenue for the Government : Ensures steady tax collection throughout the year.

3. Cash Flow Management : Distributes the tax liability into manageable installments.

4. Mandatory for High Earners : Required for taxpayers whose tax liability exceeds ₹10,000 annually.

5. Legal Compliance : Essential to comply with income tax laws for businesses, professionals, and salaried individuals with other income sources.

Self-Assessment Tax

1. Completes Tax Filing : Necessary to file ITR if outstanding tax liability exists.

2. Avoid Delays : Ensures the ITR is submitted without rejection for incomplete tax payments.

3. Penalty Avoidance : Avoids penalties under Section 234F for late payment.

4. Accurate Tax Settlement : Ensures the taxpayer clears all outstanding dues before filing.

5. Final Tax Adjustment : Covers any shortfall in taxes after considering advance tax and TDS.

Who Needs to Pay?

Advance Tax :

1. Individuals, Professionals, and Businesses : Taxpayers with income not subject to full TDS, such as business profits, rent, or capital gains.

2. Salaried Individuals : Required if income from sources like interest, rent, or capital gains exceeds ₹10,000 and is not fully covered by TDS.

3. Freelancers and Consultants : Professionals earning income from projects or contracts.

Self-Assessment Tax :

1. All Taxpayers : Applicable when the tax liability at the time of filing ITR exceeds the advance tax paid and TDS deducted.


Documents Required

For Individuals



Features

Features & Benefits of Advance Tax and Self-Assessment Tax

Instalment-Based Payments
Advance Tax allows splitting the liability into quarterly instalments.
Prev Next
Final Tax Settlement
Self-Assessment Tax ensures the complete discharge of tax obligations before ITR filing.
Prev Next
Online Payment System
Payments can be made easily through the Income Tax Department’s e-filing portal.
Prev Next
Error-Free Calculations
Tax calculators and Form 26AS help ensure accuracy.
Prev Next
Penalty Avoidance
Timely payments prevent penalties under Sections 234B, 234C, and 234F.
Prev Next

Advance Tax and Self-Assessment Tax

Applicable for All Taxpayers
Covers individuals, businesses, and organizations with taxable income.
Prev Next
Integrated Process
Advance Tax and Self-Assessment Tax are linked to ITR filing for seamless compliance.
Prev Next
Transparent Reporting
Provides a clear trail of payments for tax credit claims.
Prev Next


Comparison Between Advance Tax and Self-Assessment Tax

Feature Advance Tax Self-Assessment Tax
Purpose Tax payment during the financial year Tax payment after the financial year
Applicability For taxpayers with liability > ₹10,000 annually For taxpayers with pending tax liability during ITR filing
Instalments Quarterly payments Single payment before ITR filing
Penalty for Non-Payment Interest under Section 234B and 234C Interest under Section 234A


Frequently Asked Questions

What is Advance Tax?

Advance Tax is the payment of income tax in installments during the financial year instead of a lump sum at year-end.

Who is required to pay Advance Tax?

Any taxpayer with a tax liability exceeding ₹10,000 annually after considering TDS and reliefs.

What is Self-Assessment Tax?

Self-Assessment Tax is the tax paid by taxpayers to clear any outstanding dues at the time of filing their Income Tax Return.

What happens if Advance Tax is not paid on time?

Interest under Sections 234B and 234C is charged for non-payment or underpayment of advance tax.

Can salaried individuals be required to pay Advance Tax?

Yes, if they earn additional income from sources like rent, capital gains, or interest that is not fully covered by TDS.

How is Self-Assessment Tax paid?

It can be paid online through the Income Tax Department’s e-Payment Portal using Challan No. ITNS 280.

What is the penalty for not paying Self-Assessment Tax?

Interest under Section 234A is charged for late payment of Self-Assessment Tax.

Can Advance Tax and Self-Assessment Tax be adjusted against TDS?

Yes, TDS deductions are first adjusted before computing Advance Tax or Self-Assessment Tax liability.

Is it possible to claim a refund for excess tax paid?

Yes, excess tax paid can be claimed as a refund when filing the ITR.

What is the difference between Advance Tax and TDS?

Advance Tax is paid by taxpayers directly, while TDS is deducted at the source of income by the payer.

Advance Self-Assessment Tax

Overview

Advance Tax and Self-Assessment Tax

Advance Tax and Self-Assessment Tax are mechanisms under the Income Tax Act, 1961, for taxpayers to pay taxes on their income during or after the financial year. Advance Tax is paid in installments during the year when income is earned, while Self-Assessment Tax is paid when filing the Income Tax Return (ITR) if the tax liability exceeds the advance tax paid and TDS (Tax Deducted at Source). These provisions ensure the timely collection of taxes and reduce the burden of lump-sum payments.

Importance

Advance Tax :

1. Avoidance of Penalties : Prevents interest charges under Section 234B and Section 234C for non-payment or underpayment of taxes.

2. Timely Revenue for the Government : Ensures steady tax collection throughout the year.

3. Cash Flow Management : Distributes the tax liability into manageable installments.

4. Mandatory for High Earners : Required for taxpayers whose tax liability exceeds ₹10,000 annually.

5. Legal Compliance : Essential to comply with income tax laws for businesses, professionals, and salaried individuals with other income sources.

Self-Assessment Tax

1. Completes Tax Filing : Necessary to file ITR if outstanding tax liability exists.

2. Avoid Delays : Ensures the ITR is submitted without rejection for incomplete tax payments.

3. Penalty Avoidance : Avoids penalties under Section 234F for late payment.

4. Accurate Tax Settlement : Ensures the taxpayer clears all outstanding dues before filing.

5. Final Tax Adjustment : Covers any shortfall in taxes after considering advance tax and TDS.

Who Needs to Pay?

Advance Tax :

1. Individuals, Professionals, and Businesses : Taxpayers with income not subject to full TDS, such as business profits, rent, or capital gains.

2. Salaried Individuals : Required if income from sources like interest, rent, or capital gains exceeds ₹10,000 and is not fully covered by TDS.

3. Freelancers and Consultants : Professionals earning income from projects or contracts.

Self-Assessment Tax :

1. All Taxpayers : Applicable when the tax liability at the time of filing ITR exceeds the advance tax paid and TDS deducted.


Documents Required

For Individuals



Features

Features & Benefits of Advance Tax and Self-Assessment Tax

Instalment-Based Payments

Advance Tax allows splitting the liability into quarterly instalments.

Final Tax Settlement

Self-Assessment Tax ensures the complete discharge of tax obligations before ITR filing.

Online Payment System

Payments can be made easily through the Income Tax Department’s e-filing portal.

Error-Free Calculations

Tax calculators and Form 26AS help ensure accuracy.

Penalty Avoidance

Timely payments prevent penalties under Sections 234B, 234C, and 234F.

Applicable for All Taxpayers

Covers individuals, businesses, and organizations with taxable income.

Integrated Process

Advance Tax and Self-Assessment Tax are linked to ITR filing for seamless compliance.

Transparent Reporting

Provides a clear trail of payments for tax credit claims.



Comparison Between Advance Tax and Self-Assessment Tax

Feature Advance Tax Self-Assessment Tax
Purpose Tax payment during the financial year Tax payment after the financial year
Applicability For taxpayers with liability > ₹10,000 annually For taxpayers with pending tax liability during ITR filing
Instalments Quarterly payments Single payment before ITR filing
Penalty for Non-Payment Interest under Section 234B and 234C Interest under Section 234A


Frequently Asked Questions

What is Advance Tax?

Advance Tax is the payment of income tax in installments during the financial year instead of a lump sum at year-end.

Who is required to pay Advance Tax?

Any taxpayer with a tax liability exceeding ₹10,000 annually after considering TDS and reliefs.

What is Self-Assessment Tax?

Self-Assessment Tax is the tax paid by taxpayers to clear any outstanding dues at the time of filing their Income Tax Return.

What happens if Advance Tax is not paid on time?

Interest under Sections 234B and 234C is charged for non-payment or underpayment of advance tax.

Can salaried individuals be required to pay Advance Tax?

Yes, if they earn additional income from sources like rent, capital gains, or interest that is not fully covered by TDS.

How is Self-Assessment Tax paid?

It can be paid online through the Income Tax Department’s e-Payment Portal using Challan No. ITNS 280.

What is the penalty for not paying Self-Assessment Tax?

Interest under Section 234A is charged for late payment of Self-Assessment Tax.

Can Advance Tax and Self-Assessment Tax be adjusted against TDS?

Yes, TDS deductions are first adjusted before computing Advance Tax or Self-Assessment Tax liability.

Is it possible to claim a refund for excess tax paid?

Yes, excess tax paid can be claimed as a refund when filing the ITR.

What is the difference between Advance Tax and TDS?

Advance Tax is paid by taxpayers directly, while TDS is deducted at the source of income by the payer.

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