What is self assessment tax?

Across the duration of a tax year, a tax return reveals how much you received and from what sources. Annually, most company owners must file a tax return, transmit it to HMRC, and pay their taxable income by midnight on the 31st of January. If you're not sure whether you need to file a Self Assessment tax return, read my article on what is self assessment tax.

What is self assessment in income tax?

The tax amount in addition to advance tax and TDS due by the income tax assessee is known as self-assessment tax. When completing an income tax return, we generally calculate the income and tax due. However, in some situations, taxes paid as TDS or advance tax by you misses the mark of the total estimated tax payable due to an error in calculation. Self-assessment tax is the balance tax that you must pay to the tax authorities in order to clear your tax burden.

Salaried person’s self-assessment tax:

The tax on salary is calculated by the employer in the event of you as a salaried employee. Your employer is responsible for tax deductions (TDS) from your wage and depositing it with the government. If the tax due is correctly calculated and TDS is paid on time, salaried individuals have no tax burden.

In the following conditions, however, it is relatively typical for salaried individuals to have a tax duty.

• If you as a salaried individual have income other than salary (for example, investment income from a house or interest from fixed deposits) and do not record it while calculating TDS, you will be subject to penalties.

• If you have moved employment and the new company did not take part in the old employer's income while computing TDS.

Reason to pay the self-assessment taxes:

Other forms of income are usually subject to self-assessment tax. It's possible that you'll forget to include a certain source of income when making your advance tax payment, or that TDS will be taken at a lesser rate. Salaried people frequently encounter such situations. Assume you are a salaried employee. Your company has deducted TDS from your salary, as they do every year. However, you made Rs.50,000 on a freelancing project and failed to notify the company. As a result, no tax has been collected from this revenue.

What is self assessment tax should be clear to you now.