Payment of Taxes & Income Tax Challan

Income tax can paid in three different ways.

1. Payment/ Collection of Tax Deducted at Source
2. Payment of Self Assessment Tax
3. Payment of Advance Tax

And there are two modes a tax payer can pay his share of taxes to the government:

1. Online Deposit of Taxes at the NSDL portal
2. Offline Deposit of Taxes (From the Bank Branch of the tax payer)

Payment of Taxes

Basically, a tax payer can pay his taxes to the department by the way of:

Tax Deducted at Source:

TDS is a form of tax where the seller of goods or services collects an additional percentage of tax along with the receivables from customers, and deposits them to the credit of the income tax department.

For example, if a landlord collects rent from the tenant (Rs 20,000/- per month for eg) then, he would collect Rs 22,000 from the tenant (Rs 20,000/- rent, plus Rs 2,000/- (10% TDS)). Then he would deposit Rs 2,000/- on the behalf of the tenant to the Income Tax Department.

Click here for a detailed insight on TDS. Click here for TDS rates.

Self Assessment Tax:

Self Assessment tax is computed in the Income tax return of the taxpayer.

At the end of the year, the taxpayer summarizes all his sources of income in his return of income and calculates his total tax liability. He also accounts for all the taxes already paid by him or on his behalf, and on this basis calculates a final amount to be paid to the department to pay off his tax liability for the period. This tax is called self assessment tax.

For example, a tax payers prepares the return at the end of the financial year, and calculates that his total tax liability for the period is Rs 1 lakh.

However, he has already paid advance taxes of Rs 20,000/- and Rs 60,000/- is deposited to his credit by his employer as TDS.

Here, the tax payer can adjust his tax liability of Rs 1 lakh with Rs 80,000/- of taxes already paid. Thus, he needs to further pay Rs 20,000/- to the department, which is paid in the form of Self assessment tax.

Note: If in this case, the taxpayer had paid Rs 1,20,000 as advance Tax and TDS, and computed Rs 1,00,000/- tax liability at year end, he can claim a refund for the excess amount paid. This claim of refund is made with the filing of the Income tax return itself.

Advance Tax:

Advance tax is a tax which is deposited by the taxpayer to the Income tax department, without waiting for the end of the year.

Advance taxes ensure that the government is able to collect taxes more uniformly throughout the year.

As per section 208 of the Income tax, every person whose estimated tax liability for the year is Rs. 10,000 or more, shall pay his tax in advance, in the form of “advance tax"

• Exception: A resident senior citizen not having any income from business or profession is not liable to pay advance tax.

Click here for a detailed insight on Advance taxes.

Payment of Tax:

Income tax is paid the way of an Income tax Challan, whether online or offline. Challan is basically the evidence of tax payment, as it contains the details of the taxpayer, and the amount of tax deposited to the credit of the taxpayer.

Offline Payment of Taxes:

In order to pay the taxes offline, a taxpayer should visit his bank, and request for a Income tax challan. He can fill up the challan, and deposit it along with the correct amount of tax with the bank. The bank is basically an agent in this case, and will make the deposit to your credit with the income tax department.

Online Payment of Taxes

In order to pay ones tax liability online, a taxpayer simply needs to visit the NSDL official tax payment portal, select the appropriate challan. After he has filled the challan, he can use either Netbanking or Debit/credit card to make payment to the department.

Click here for the detailed procedure (with video tutorial) for payment of Income Tax online.