Both self assessment and advance tax are paid to government of India based on the IT act provisions as applicable to the assessee. Even though both relates to tax liability that is paid to the government, there is a difference and provisions are mentioned under different sections of IT act.
Today, in this article we will be discussing the difference between self assessment and advance tax.
What is advance tax?
As the name suggests, advance tax refers to paying a portion of yearly tax liability in advance. If liability for the year exceeds Rs. 10000 then the assessee has to pay advance tax on or before the due dates as specified.
It’s also known as ‘pay as you earn’ scheme, where assessee pay in the year in which the income is received or earned. If you do not pay it based on the percentage as specified in installments, then you will be charged 1% every month for the amount outstanding for the period.
A salaried person is generally not liable to pay advance tax as employer use to deduct TDS based on the salary income of employee. However, employees will be liable to advance tax if they have any other income and by taking such income in addition to salary, their liability at the end of the year is estimated to exceed Rs. 10000.
What is self assessment tax?
Before filling yearly IT return, assessees are required to calculate their final liability after taking out TDS that is deducted from source of income and advance tax paid during the year.
At the end of the year, if any tax is required to be paid then that has to be paid before filling IT return. Final liability as calculated by you is called self assessment tax. This calculation is the final. After which IT authority is required to check that the assessee has correctly calculated and disclosed his income.