Self Assessment Tax: Meaning, Calculation, and How to Pay

Self-assessment in income tax is the amount an individual needs to pay after deducting TDS, TCS (Tax Collected at Source), and advance tax from their tax liability in a financial year. It is payable once the financial year concludes, but prior to filing the Income Tax Return (ITR). Individuals whose income exceeds the threshold limit are liable to pay self-assessment tax in advance.

Self-assessment tax must be paid in the following scenarios:

• If you have missed out on including an income while paying the final advance tax
• If the TDS was deducted at a lower rate or is not deducted at all
• You earned income from sources like freelancing, interest, capital gains, etc., and have not disclosed it earlier

For example, an individual has paid ₹40,000 as advance tax during FY 2024-25. However, when filing his ITR, he discovered an additional ₹5,000 was due. That ₹5,000 is his self-assessment tax, and he must pay it before ITR filing, or risk interest and return defects.

When to Pay Self-Assessment Tax?

One can file a self-assessment in income tax by filling out the Self-Assessment Tax Challan 280. It is important to note that there is no deadline for paying self-assessment tax. However, individuals must pay the self-assessment tax before filing their ITRs to avoid paying interest.

How to Calculate Self-Assessment Tax?

Here are the steps to calculate self-assessment in income tax in India:

• Add the income from all sources, like salary, interest, profession, business profit, capital gains, etc.
• Reduce all allowable deductions and exemptions under various sections, such as Section 80D and Section 80C, etc. Please note that these exemptions are only available under the old tax regime.
• Calculate your tax liability for the financial year according to the slab rates
• Use the following formula to calculate the self-assessment tax amount:

[(A+B)- (C+D+E+F)]

Here,

• A= Total tax
• B= Interest according to sections 234A, 234B, 234C
• C= Tax Relief under sections 90, 90A, 91
• D= MAT credit under section 115JAA
• E= TDS/TCS
• F= Advance tax

You can pay your self-assessment tax online in the following steps:

• Log in to the Income Tax e-filing portal.
• Navigate to the “e-File tab” and select “e-pay tax” from the options.
• On the next screen, go to the “New Payment” option on the right corner.
• Select “Income Tax” from the list of options on the page. Then click “Proceed.”
• From the dropdown menu, choose the correct “Assessment Year” and then select “Self-Assessment Tax (300)” and continue to the next screen.
• Enter the tax amounts on the page.
• Select the payment method to complete the payment. You can choose from Net Banking, Debit Card, Pay at Bank Counter, RTGS/NEFT, and Payment Gateway options.
• After the payment is complete, download the tax payment receipt for future reference.

What Happens If You Pay Wrong Self-Assessment Tax?

If you make a wrong self-assessment of the income and the tax payable, the return will be considered defective. The provisions of the Income Tax Act of 1961 allow taxpayers to make changes and sort the return within 15 days of filing. If the taxpayer does not make the necessary changes, the return will be declared defective.

Self-Assessment Tax Paid not Reflecting in the ITR?

According to the standard process, it typically takes three to four working days for the department to update self-assessment tax payment details. However, if the information is not updated even after this period, the taxpayer can enter the details manually by clicking on the “Add Details” option under “Taxes Paid.” To avoid any hassles, ensure that you enter your Challan Identification Number (CIN) accurately and download your tax payment challan receipt.

The Government of India has introduced several key updates regarding self-assessment tax calculations and compliance in the Union Budget 2025. These updates may simplify tax filing, ensure better compliance, and streamline tax payment options.

Here’s a look at these updates:

• Income tax and exemption limits have been revised under both the old and new tax regimes
• The ITR filing deadline has been extended for non-audited taxpayers
• Penalties for unpaid self-assessment tax have been increased
• Individuals earning more than ₹10 lakhs must pay tax online
• Interest rate for late tax payments under section 234A has been revised
• Taxpayers paying self-assessment tax well in advance may receive rebates

Advance tax and self-assessment tax are both paid to the government according to the provisions of the Income Tax Act 1961. Both these types of taxes are liabilities for the taxpayer. However, they differ from each other in the following ways:

All salaried individuals are required to pay self-assessment tax online, as per the provisions of the Income Tax Act, 1961. This process involves a few straightforward steps that help taxpayers comply with the Act's requirements and fulfil their obligations.

Individuals can claim a tax deduction for the premium paid for health insurance in India when calculating their self-assessment tax. It helps to reduce tax liability and secure the health of the taxpayer and their families.

Calculation and payment of self-assessment tax in India enable taxpayers to fulfil their obligation towards the government. Apart from the obligation to the government, an individual also has a responsibility to ensure their own well-being and that of their family. This obligation can be fulfilled by purchasing the best health insurance plan that suits your unique needs.

A reputable and trustworthy provider like TATA AIG offers health insurance online with numerous benefits. We also offer online health insurance plans for senior citizens aged 61 years or older, which include critical illness cover, annual health check-ups, and a range of other benefits. With TATA AIG, you get access to top-class medical facilities in times of health emergencies.