Section 140A of the Income Tax Act, 1961, mandates the payment of self-assessment tax. This section requires taxpayers to pay the remaining tax liability after accounting for any advance tax, tax deducted or collected at source, and any relief or deductions under sections like 90, 91, 90A, 115JAA, or 115JD, before filing their return of income. The tax, along with any applicable interest and fee for delays, must be paid before furnishing the return, and proof of payment must be attached to the return. If the payment falls short, it is first adjusted towards the fee, then the interest, and finally the tax.
In this article, we will explore the specifics of Section 140A, including the calculation of self-assessment tax, the implications of non-payment, and the adjustments made for partial payments. Income tax slabs determine the rate of tax applicable to different income levels, which is crucial for calculating the self-assessment tax under Section 140A.
What is section 140A of the income tax act?
Section 140A of the Income Tax Act, 1961, pertains to the self-assessment tax that taxpayers in India must pay when they file their income tax returns. This section mandates that any tax due, as indicated by the return, must be paid before the return is filed. The amount payable includes the balance tax after accounting for any advance tax paid, tax deducted at source (TDS), and any tax relief under relevant sections for taxes paid abroad. This provision ensures that taxpayers fulfil their tax liabilities promptly, thus streamlining the tax collection process and minimising defaults.
Provisions of section 140A of self-assessment
- Calculation of tax payable: Taxpayers must calculate the self-assessment tax based on the total income declared in their return. This includes the total tax liability after considering advance tax payments, tax deducted at source (TDS), and any tax relief under sections 90, 90A, and 91 for taxes paid abroad.
- Inclusion of interest and fees: The tax payable under self-assessment also includes interest under sections 234A (for delay in filing returns), 234B (for default in payment of advance tax), and 234C (for deferment of advance tax). Additionally, any late filing fees under section 234F must be included.
- Payment before filing: The self-assessment tax, along with any interest and fees, must be paid before filing the income tax return. Proof of this payment must be attached to the return to ensure compliance.
- Adjustment of payments: Any payments made by the taxpayer are first adjusted against the late fee, then the interest, and finally towards the tax liability. This ensures that the most urgent liabilities are cleared first.
- Deemed default for non-payment: If the full amount of self-assessment tax, interest, and fees is not paid, the taxpayer is deemed to be in default. This can lead to further penalties and legal actions under the Income Tax Act.
What is self-assessment tax under section 140A?
Self-assessment tax under Section 140A of the Income Tax Act, 1961, is the tax that an individual must pay on their own, based on their income tax return. This tax is calculated on the total income declared in the return after deducting any advance tax, tax deducted at source (TDS), and tax relief for taxes paid abroad under sections 90, 90A, and 91. The purpose of self-assessment tax is to ensure that any remaining tax liability is settled before the income tax return is filed. This prepayment includes any applicable interest and late fees to avoid being considered in default and to ensure timely compliance with tax obligations.
Procedure for self-assessment under section 140A
The process of self-assessment under Section 140A involves a series of steps to ensure accurate tax calculation and timely payment. Here is a detailed guide along with a table for clarity:
1. Calculate total income:
Determine the total taxable income for the financial year by summing up all sources of income such as salary, business income, capital gains, etc.
2. Determine tax liability:
Calculate the tax liability based on the applicable income tax slabs and rates for the financial year.
3. Adjust for payments:
Deduct any advance tax paid, tax deducted at source (TDS), and any tax relief claimed under sections 90, 90A, and 91 for taxes paid abroad from the total tax liability.
4. Include interest and fees:
Calculate interest under sections 234A (for delay in filing returns), 234B (for default in payment of advance tax), and 234C (for deferment of advance tax). Add any late filing fee as per section 234F.
5. Pay balance tax:
Pay the balance self-assessment tax using online banking, challans, or other accepted methods. Obtain the payment receipt as proof.
6. File income tax return:
Ensure the self-assessment tax payment is completed before filing the income tax return. Attach the proof of payment to the return.
| Step | Action |
| 1 | Calculate total taxable income |
| 2 | Determine tax liability based on income tax slabs |
| 3 | Deduct advance tax, TDS, and tax relief |
| 4 | Add interest under sections 234A, 234B, 234C, and fees under section 234F |
| 5 | Pay balance self-assessment tax and obtain receipt |
| 6 | File income tax return with proof of payment attached |
This structured approach ensures compliance with Section 140A, avoiding penalties and facilitating a smooth tax filing process.
Tax liability for self-assessment under section 140A of the income tax
Under Section 140A of the Income Tax Act, taxpayers in India are required to conduct a self-assessment of their tax liability before filing their income tax return. This involves calculating the total income from all sources, applying eligible deductions, and determining the tax payable based on the applicable tax slab. The self-assessment tax is the amount remaining after accounting for any advance tax payments and TDS (Tax Deducted at Source). This tax must be paid in full before filing the return to avoid interest charges and penalties. Paying the self-assessment tax ensures compliance with tax regulations and prevents legal complications. For more information, visit the Income Tax India website.
What if you don't pay self-assessment tax in full?
Failing to pay self-assessment tax in full can lead to several consequences under the Income Tax Act. Here’s a detailed look at what might happen:
Interest and penalties
- Interest under section 234A: If there is a delay in filing the income tax return, interest will be levied on the unpaid tax amount.
- Interest under section 234B: If 90% of the assessed tax is not paid by the end of the financial year, interest will be charged on the outstanding amount.
- Interest under section 234C: For deferment of advance tax instalments, interest will be levied on the unpaid amount for each deferred period.
Additional penalties
- Section 271F: A penalty of up to Rs. 5,000 may be imposed if the tax return is not filed within the due date.
- Prosecution: In extreme cases, continuous failure to pay tax can lead to prosecution under Section 276C of the Income Tax Act, which includes rigorous imprisonment for a term ranging from 3 months to 2 years, along with a fine.
Reduction in refund
- Adjustment against refund: If there is any tax refund due, the unpaid self-assessment tax can be adjusted against it, reducing the amount refunded to the taxpayer.
Legal and financial consequences
- Legal notices: The Income Tax Department may issue legal notices demanding payment of the outstanding tax along with interest and penalties.
- Increased tax burden: The longer the delay in paying the self-assessment tax, the higher the interest and penalties, increasing the overall tax burden.
Impact on credit score
- Credit Rating: Continuous non-payment of taxes and penalties can impact your credit score, affecting your ability to get loans or credit facilities in the future.
Conclusion
Section 140A of the Income Tax Act ensures timely payment of taxes through self-assessment, reducing the tax burden at the final assessment stage. It mandates taxpayers to pay any outstanding tax, along with applicable interest and fees, before filing their return. Compliance with this section is crucial to avoid penalties and interest on unpaid taxes, ensuring a smoother tax filing process.
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