Self Assessment Tax

5paisa Research Team Date: 21 Nov, 2023 05:08 PM IST


Want to start your Investment Journey?




Self Assessment Tax is an important tax that needs to be handled carefully. It applies to individuals responsible for taxation, such as self-employed people or anyone else who receives income outside of PAYE (Pay As You Earn). This type of tax is paid directly by the taxpayer and covers various types of income. Understanding the basics of Self Assessment Tax is important to ensure you are paying your taxes correctly. This article will be providing you with an overview of what Self Assessment Tax is and how it works. With this knowledge, you can ensure you make the most of your tax obligations.

What is Self Assessment Tax?

Self Assessment Tax meaning is the tax individuals and businesses must pay on their income. It is a type of direct taxation, which means taxpayers are liable for it regardless of their personal or business circumstances. The main components of this taxation system include:

●    Filing an annual self-assessment tax return.

●    Paying any taxes due through the self-assessment tax challan.

●    Making self-assessment tax online payments if necessary.

This tax applies to all individuals and businesses, regardless of the type or size of their income.
Moreover, there is no specific rate of taxation for Self Assessment Tax. 

Self assessment tax 300 is applicable on any income received above the basic exemption limit of Rs. 2,50,000 for financial year 2020-21 .

Instead, it is calculated based on the income earned in a particular tax year. This means that the amount payable can vary greatly from one individual to another, depending on their circumstances.

The Need for Income Tax Self Assessment Tax Payment

Income tax Self Assessment Tax payment is vital to ensure that individuals and businesses pay their taxes accurately and on time. Failure to pay the correct amount of tax can lead to hefty fines, penalties, or even criminal charges.

A self assessment tax example in INR can help to illustrate how this payment system works. For example, if an individual’s taxable income is ₹200,000 and the applicable tax rate is 30%, then the Self Assessment Tax payable would be ₹60,000. This amount must be paid through the self-assessment tax challan or online payments before 31st March each year.

Calculation of Self Assessment Tax

The calculation of Self Assessment Tax is relatively straightforward. Generally, it includes the total income earned in a particular tax year, less any allowable deductions or tax credits. This amount is then multiplied by the applicable rate of taxation to determine the total Self Assessment Tax due for that year. 

A self assessment tax calculation example is provided below:

For example, if an individual earns a total of Rs. 10 lakhs in the tax year and is eligible for a deduction of Rs. 1 lakh, their taxable amount will be Rs 9 lakhs (10 lakhs - 1 lakh). If this individual falls into the 30% tax bracket, their Self Assessment Tax due would be Rs 2.7 lakhs (9 lakhs x 0.3).

How to pay self assessment tax online?

Once you have calculated the Self Assessment Tax due, several methods exist to pay it. The easiest and most efficient method is through self assessment tax online payments. To make an online payment, follow these steps:

Step 1: You should visit the Income Tax e-filing portal and then log in to your account.

Step 2: Click the ‘e-Pay’ tab and select ‘Self Assessment Tax’ from the dropdown menu. 

Step 3: Enter the amount of tax due and select your preferred payment method (debit/credit card, net banking).

Step 4: Once you have chosen a payment option, fill in any required details and submit the form.

Step 5: You will receive a confirmation of the successful transaction and an e-receipt for your records.

Step 6: Your Self Assessment Tax payment will then be processed, and the amount will be deducted from your account.

It is important to remember that Self Assessment Tax payments must be made within the specified period to avoid any penalties or interest charges. Furthermore, individuals who cannot make the online payment can use the self assessment tax challan instead. This challan can be obtained from a designated bank or Income Tax office and should be submitted with the applicable fees within the prescribed deadline.

Results of Incorrect Self Assessment

Incorrect or late payments of Self Assessment Tax can lead to serious consequences for individuals and businesses. This can include heavy fines, interest charges, and even criminal prosecution in certain cases. In addition, non-compliance with the law may also result in a penalty on the individual’s tax filings for future years. Therefore, taxpayers must ensure that they are familiar with the taxation system and payment processes to avoid any unnecessary issues.

Difference between Self Assessment Tax Vs. Advance Tax

Self Assessment Tax

Advance Tax

Payable every year once the tax return has been filed

Payable quarterly in advance for estimated income

Based on actual or projected profits from business/employment activities

Based on gross salary and other incomes

Can be adjusted with any available deductions or refunds when filing tax returns.

Non-refundable - taxpayers will not receive any adjustment or refund at the end of the year

Required to pay online using self assessment forms after calculating the amount due

Required to estimate taxes for estimated income and submit it quarterly through cheque, draft, or online banking

Required to pay within a specified period

Can be paid in installments throughout the year but must reach the full amount before the end of the financial year


Self Assessment Tax is an important part of the taxation system, and individuals and businesses need to understand their obligations when filing tax returns. 

By correctly calculating, paying, and understanding Self Assessment Tax section on time, taxpayers can avoid penalties or interest charges while ensuring they remain compliant with tax laws. With this knowledge, individuals will be better equipped to make informed tax and payment decisions.

More About Tax

Open Free Demat Account

Be a part of 5paisa community - The first listed discount broker of India.


Frequently Asked Questions

No, partial payment of Self Assessment Tax is not accepted and will result in interest and penalties being imposed. Furthermore, taxpayers must pay the full amount due within the specified time period to avoid any legal or financial repercussions.

Self Assessment Tax is payable on a yearly basis and is based on actual or projected profits from business/employment activities. In contrast, advance tax is paid quarterly in advance for estimated incomes such as salaries and other sources of income. Advance tax is non-refundable, whereas Self Assessment Tax can be adjusted with any available deductions or refunds when filing tax returns.

Form 26AS is a consolidated statement of taxes deducted at source (TDS) and taxes the taxpayer pays. It provides an overview of all tax payments, including any Self Assessment Tax paid for the financial year. This can be used to check if all the due taxes are accurately reflected in Form 26AS before filing the tax return.

No, Self Assessment Tax must be paid in full within the specified period. If a taxpayer cannot pay in one lump sum, they are advised to contact their local Income Tax Office or authorized bank for further assistance.

Yes, taxpayers can pay Self Assessment Tax offline by submitting challan 280 (available at designated banks) and cash or cheque payment to the applicable Income Tax Office.