Self Assessment Tax: What Is It and How Is It Calculated?

Self-assessment tax, also known as ‘SAT’, is a system under which taxpayers can compute and report their own tax liabilities to the Indian government. This type of tax is applicable where taxpayers have multiple sources of income, such as: 

• Rental income

• Self-employment income

• Income from investments and businesses 

  

It is the balance tax that you must pay on the income during a financial year. You need to assess this tax after taking advance tax and TDS into consideration. Self-assessment tax is computed and paid by the taxpayer before the filing of the ITR. Now that you know what a self-assessment tax is, let’s find out why one should pay this tax. 

Self-assessment tax (SAT) generally applies when you furnish income tax returns under Sections 115WD, 115WH, 139, 142, 148, 153A, and 153BC. If the taxes that you have paid during the financial year missed any key inclusions, you can include them in this final tax payable.  

 

Suppose you are a salaried employee. Every year, your employer deducts TDS from your salary. However, if you earned ₹10,000 for a freelancing project and missed informing, the tax on this income won't get deducted.

 

In such cases, self-assessment tax comes to your rescue. It helps you compare your total tax liabilities with the tax already paid so you can pay the balance. Although there is no specific due date for self-assessment tax, it's advisable to pay it as soon as possible. This will help you avoid any penalties for late payment.

Before your self-assessment tax payment, you need to determine your total income for the financial year from all the sources. 

 

Next, you should identify any deductions or allowances you may be eligible for. These may include the expenses related to your self-employment charitable donations, or pension contributions. 

 

After calculating your total income from all sources and identifying the applicable allowances or deductions, follow the steps below:

1. Deduct all the tax exemptions and deductions, such as the investments made u/s 80C, 80D, and several other deductions

2. Compute the tax applicable on the due amount according to the tax slab rates. This is your total taxable amount

3. Use the following formula to compute the self-assessment tax: [(X+Y) - (A+B+C+D)]

 

where

X = Total taxable amount

Y = Interest according to Sections 234A/234B/234C

A = Tax relief u/s 89/90/90A/91

B = MAT (Minimum Alternative Tax) credit u/s 115JAA or 115JD

C = TCS/TDS

D = Advance tax 

 

You must note that the interest u/s 234A of the Income Tax Act, 1961, will be paid in case of late filing of the ITR. Sections 234B and 234C will only be applicable in case of late advance tax payment.

 

Here is an example of how you can calculate it:

Here’s how you can pay the self-assessment tax online:

1. Navigate to the official Income Tax Department website (https://www.incometax.gov.in/iec/foportal/)

2. Sign in to the page, tap on the option ‘e-Pay taxes’ option

3. Choose the option ‘New Payment’, followed by the option ‘Income Tax’, and click on the ‘Proceed’ button

4. Under the option ‘type of payment’, choose ‘Self-assessment Tax’

5. Select the appropriate assessment year for which the self-assessment (SA) tax payment has to be made

6. Enter the relevant tax amounts in the required categories and proceed to complete the SA tax payment

7. You can download a challan once you complete the payment process

Form 26AS is a consolidated Annual Information Statement containing details of your tax liabilities in a particular financial year. These will include information about TDS, TCS, advance tax, refunds, tax deductions along with self-assessment tax. 

 

If there is any tax credit mismatch or your ITR does not reflect self-assessment tax, you can verify if your paid tax is available in this form. The corresponding amount in your Challan must match the amount shown on Form 26AS. 

Follow the steps given below to check your tax liabilities in Form 26AS:

1. Login to the official e-filing portal

2. Click on the ‘View Form 26AS (Tax Credit) link in the ‘My Account’ menu

3. Go through the disclaimer and click on ‘Confirm’ to get redirected to the TRACES website

4. Select the Assessment Year and choose the ‘HTML’ option to view Form 26AS online

5. Enter the verification code and click on the ‘View/Download’ option

 

You will now be able to view the tax which your employer or any other third party deducts under different sections. A message ‘Tax Credits Do Not Match’ will appear if there is any discrepancy in amounts reflected in the challan and Form 26AS.

You can make self-assessment tax payments offline by following these simple steps:

1. Visit the Income Tax Department website (https://incometaxindia.gov.in/)

2. Select the ‘Downloads’ option and click on the ‘Challan’ category

3. Choose the ‘PDF Format’ option for ITNS-280 to download the challan and print it

4. Fill up the form with relevant details and visit the appropriate bank branch to make the payment