Every taxpayer whose income is more than the basic exemption limit is required to pay Income-tax on his income. In India, Income-tax is charged as per the slab rates which are provided by Finance Ministry every year.
What is Tax Deduction at Source (TDS)?
When a taxpayer receives certain incomes viz. salary, commission, interest, rent, etc., some percentage of income (say 10%) is kept aside as Income-tax by the payer. This kept aside amount is paid in the account of Central Government. In short, the taxpayer receives the income after deduction of tax hence this tax is known as ‘Tax deducted at source’.
Following are certain payments on which TDS deduction is required and its applicable rates:
Nature of Payment |
Section No. |
Rate of TDS |
Cut off Amount |
Salary |
192 |
Applicable Slab Rates |
— |
Withdrawal from Employees Provident Fund Scheme |
192A |
10% |
Rs. 50,000/- |
Interest on Securities |
193 |
10% |
Rs. 5,000/- for interest on debentures |
Dividends |
194 |
10% |
Rs. 5000/- |
Interest other than interest on securities |
194A |
10% |
|
Winnings from Lottery or crossword puzzles |
194B |
30% |
Rs. 10,000/- |
Winnings from horse races |
194BB |
30% |
Rs. 10,000/- |
Payment to contractors or sub-contractors |
194C |
Where the receiver is – a) Individual/ HUF:- 1% b) Other Persons:- 2% |
|
Insurance commission |
194D |
10% |
Rs. 15,000/- |
Payment of Life Insurance Policy |
194DA |
5% |
Rs. 1,00,000/- |
Payment to the non-resident sportsman or sports association or entertainer |
194E |
20% |
— |
Payment in respect of National Saving Scheme |
194EE |
10% |
Rs. 2,500/- |
Commission on lottery tickets |
194G |
5% |
Rs. 15,000/- |
Commission or brokerage (other than insurance commission or sale of lottery tickets) |
194H |
5% |
Rs. 15,000/- |
Payment of rent |
194-I |
|
Rs. 2,40,000/- |
Payment of rent |
194-IB |
5% |
Rs. 50,000/- |
Purchase of Immovable property |
194-IA |
1% |
Rs. 50,00,000/- |
Royalty, fees for technical or professional services |
194J |
|
Rs. 30,000/- |
Compensation for compulsory acquisition of immovable property |
194LA |
10% |
Rs. 2,50,000/- |
What is Advance Tax?
The taxpayer estimates his annual in advance and thereby total tax liability. Tax is required to be paid in the financial year in which income is received and hence it is also called a “pay-as-you-earn” scheme.
In the case of salaried taxpayers, tax on salary is deducted and paid by the employer. So, the advance tax would be payable only if they have any other income besides salary and which is not reported to their employer. Further, Advance–tax is mandatory only if the net tax liability for the financial year (after considering TDS and tax relief) is Rs. 10,000/- or more.
There are some due dates for the payment of advance tax.
The due date for payment |
Amount of advance tax to be paid |
On or before 15th June |
At least 15% of tax liability |
On or before 15th September |
At least 45% of tax liability less earlier instalment |
On or before 15th December |
At least 75% of tax liability less earlier instalments |
On or before 15th March |
100% of tax liability less earlier instalments |
Some important rules about Advance Tax:
- If the tax liability in the previous financial year is less than Rs. 10,000/- then taxpayer need not to pay advance tax in the current financial year. E.g. – Mr Ravi's total tax liability for the financial year 2020-21 is Rs. 8,650/-. Hence, Mr Ravi is not required to pay any advance tax instalment for the financial year 2020-21.
- Advance tax is payable on capital gains. However one cannot estimate the exact capital gain advance so as to pay his advance tax instalment. Hence, if a taxpayer is having any capital gain after the due dates of advance tax instalment, then such tax liability shall be paid in the remaining instalments.
- The Assessee who is carrying business and opting for a presumptive taxation scheme have to pay its Advance Tax in one instalment by 15/03/2021.
Who are exempted from paying Advance-tax?
Exemption for payment of Advance-tax is applicable to the following:
- Senior Citizen who does not have any Income from Business.
- Others have Tax Liability less than Rs 10,000/- after considering TDS and Tax Relief on Income.
How do I pay this Advance-tax?
You can visit a nearby Nationalized Bank and make payment of Advance Tax.
Advance Tax can be paid online also. To know how to pay Advance Tax online, click here
How do I show Advance tax details in my Income-tax return?
You are required to give challan details to your employer before the end of the Financial Year so that he will consider it in your Form-16 and deduct TDS accordingly. If you miss it, you can further declare it while filing your Income-tax return in the Advance Tax section under Tax Paid option.
Estimate your Advance Tax liability by using our Advance Tax Estimator tool.
What is Self Assessment Tax?
Assessment, in simple terms, means estimation and calculation of income and taxes thereon. The taxpayer is required to consider all the incomes viz. salary income, capital gains, business/professional income, interest, dividend etc. earned by him during the year. After that, all the eligible deductions shall be subtracted so that he will get taxable income. The taxes paid by the taxpayer earlier viz. advance tax, TDS (tax deducted at source) shall be deducted. And final tax payable is calculated as per the applicable rates. A taxpayer needs to pay this tax before filing his Income-tax return. All this is done by the taxpayer himself. Hence, this tax is known as Self-assessment Tax.
To know how to pay Self Assessment Tax online, click here
What is Tax Collected at Source (TCS)?
TCS is the Tax Collected at Source by the seller (collector) from the buyer/ lessee (collectee/ payee). The goods are as specified under section 206C of the Income Tax Act, 1961.
Following are the specified goods on which tax is collected at source under section 206C of the Income Tax Act.
- Minerals, being coal or lignite or iron ore
- Parking Lot, Toll Plaza, Mining and Quarrying
- Bullion if consideration exceeds Rs. 2 lakhs or Jewellery if consideration exceeds Rs. 5 lakhs. (Or on any amount which is received in cash) etc.
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