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How is Advance Tax different from Self-assessment Tax?

April 6th, 2009 by
  • Paying income tax is tedious enough. To top it, there are various heads under which the tax payment is made. Two of these heads are:
    1. Advance tax
    2. Self-assessment tax (tax you have to pay while filing your returns)

    Let’s look at an example:
    Ankit is a professional. He earns income through his sole proprietorship business. The income is earned throughout the year and there is also some tax deduction at source on the payments received.

    Ankit has made a payment of Rs 40,000 as advance tax in March this year. Earlier in December, he paid Rs 30,000. These two payments were advance tax payments.

    Ankit has already made payment towards advance tax. Will this mean there is no self-assessment tax to be paid by him at the end of the year?
    Payment of advance tax is a requirement that cannot be avoided. This tax is paid in advance by estimating the income that will be earned during the year. When you have to pay more than
    Rs 5,000 as tax, payment of advance tax becomes compulsory. Penalty for not paying the advance tax: The IT department charges an interest.

    Not just professionals but salaried people also need to do this kind of working to ensure that there is no tax outstanding.

    If you are a salaried person there is tax deduction at source (TDS), which takes care of the tax payments for your salary. At the same time, there will be additional liabilities for income like interest on deposits, bonds and even capital gains which might require you to pay advance tax.

    Can there be a situation where more additional tax has to be paid and how will he come to know of this payment?
    Advance tax has to be paid in several installments in September, December and March. That is, you need to estimate your income and pay tax every quarter, and the entire tax that is due would have to be paid by March 15.

    As far as Ankit is concerned, even though he’s paid two installments of advance tax amounting to Rs 70,000, he’ll know if he’s paid adequate tax only after the financial year is complete.

    Use Income Tax Calculator

    Is there a specific date for payment of the self-assessment tax and how does one tackle this situation?
    If the actual income of Ankit is higher than the estimated and the total tax liability comes to Rs 80,000, he will have to pay an additional Rs 10,000 as self-assessment tax. This is the tax paid before filing the income tax return.

    Calculate self-assessment tax: The difference between the tax paid and the tax payable becomes the self-assessment tax to be paid.

    You can figure out the self-assessment tax figure when you make the final income tax calculation. There is no specific date for paying this tax but it has to be done before you file your income tax return so that no further amount of tax remains to be paid.

    No related posts.

    24 Comments

24 Responses to “How is Advance Tax different from Self-assessment Tax?”

  1. rdx1312 said on

    Very nice explanation with example. Thank you very much!

  2. Subhrajyoti Chakraborty said on

    Hello Sir,
    In the year 2007 I switched my job. At the end of financial year I found I had to pay some ‘x’ amount. But through TDS ‘y’ amount has been paid.( y < x). I paid the (x-y) amount through self assessment tax. But recently I got a letter from IT department that for that assessment year(2008-09), u/s 234B and 234C I have to pay some 4.5K. could you please clarify why I need to pay this.
    Thanks,
    Subhra.

  3. Really good explanation. It has clarified the entire concept.

  4. Excellent. How do I pay self assessment tax online as I am based out of country. If I can do it online what challah do I use and do credit cards work? Thanks

  5. Nirmal Patel said on

    Nicely explained the title of this post.

  6. GOOD & CLEAR EXPLANATION EASILY UNDERSTANDABLE WITHOUT ANY DOUBT

  7. im a salaried person. all my tax liabilities r done through TDS by employer. one particulat year, i have a short term capital gain of around 15000/- from equity based MF redeem for which it makes a tax liability of around 2250/- that i need to pay as self assessment tax. i have not paid any advance tax on this income. my question is can i pay self assessment tax after march of the FY concern, i.e. in the AY concerned without any penalty. my secone question is if i dont run after every penny to calculate exact, can i pay a little more, say 2300/- instead of 2250/-. will IT department not accept it. one more question if i enter short term capital gain and short term capital loss in the same year by same amount in the same instrument like equity based MF or equities itself, can i avoid filing ITR-2. can i assume that i dont have any income other than salary and restrict to ITR-1. regards.

  8. WHAT IS DIFF BETWEEN SEIF ASSESMENT TAX & ADVANCE TAX

  9. kapil karira said on

    THANKS FOR UR HELP

  10. Aravind said on

    In the same year i have swithced 2 companies.TDS deducted but still i need to pay some amount to IT dept.Could you please guide me the process to pay tax.

  11. Ashima Mittal said on

    Really useful!

  12. Excellent explanation!

  13. very good explanation. Thank you sir.

  14. rajalakshmi said on

    fine,excellent explanation thank u

  15. Pinaz Dodiya said on

    Very nice explanation thank u sir….

  16. Arshad Khan said on

    In last Assesment year i had paid Rs.10000 as self ass. tax in march 2010.where as while filing my returns in June 2010 i found out after calculation that i paid Rs 8700 extra as Self Ass.tax, but after receiving the letter from income tax there was no mentain of the Rs 10000 paid by me & they asked me to pay an amount of Rs 1300. Will I be getting back my extra amount paid from the I T dept.and how.

  17. manoj sharma said on

    i want take to knowledge of how to calculation rate provision for income tax & deferred tax libilites 2011-2012 for compnies, entery in account

  18. shailesh said on

    sir last finential year i earned 150000 lakh through tutions and from various sources but i did not fill the return because i had not PAN CARD that time. Can i fill the current and last time terun both and is there any penalty for that………………….

  19. Manoj Krishna said on

    In the same year i have swithced 2 companies.TDS deducted but still i need to pay some amount to IT dept.Could you please guide me the process to pay tax.Which challan i have to submit?what is the last date of online Tax payment?Is this tax come under category of Self assessment tax?

  20. Anjali Sharma said on

    Such a nice explaination . Thanks a ton

  21. jyothsna said on

    Nice explanation thanks a lot

  22. nicely explained..without confusion..thank you

  23. BHARAT kUMBHAR said on

    I have searched a lot, But I found nowhere a clear explanation like this. Thanks sir.

  24. Om Prakash Verma said on

    Clearly defined, really helpful, thanks a lot

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