An individual can discharge their income tax liability in either or all of the options mentioned below:
Advance Tax means the payment of tax before the end of the year. An individual has to estimate their total income for that particular financial year and discharge tax liability in four installments during the year itself, i.e., 15%, 45%, 75%, and 100% of the tax liability, which is due by 15 June, 15 September, 15 December, and 15 March of that year.
However, an individual is liable to pay Advance Tax only under the following conditions:
For individuals with salary as the sole source of income, Advance Tax would not be applicable as the entire tax liability would be taken care of by the employer by way of TDS.
Furthermore, no Advance Tax is payable by a senior citizen if their total income does not include income from business or profession.
TDS refers to the portion of a payment that is deducted by the taxpayer before making payment of the net amount to the payee. The TDS rate would depend on the nature of the income earned by the individual. For example, TDS from professional fees would be 10% while that from contractual payments would be 2%. The TDS collected by the taxpayer is required to be deposited with the tax authorities within prescribed time limits.
It is crucial to keep in mind that TDS is only a part payment of tax. The final tax liability would be arrived at based on the slab rates applicable to the individual.
For non-residents, TDS is applicable on any sum paid to them. For example, if a foreign individual receives a certain sum from an Indian company, and such amount is taxable in India, then the Indian company is liable to deduct tax at the applicable rates and deposit the same with the authorities within the prescribed time limits.
In case the Advance Tax paid by the individual and the TDS is not adequate to cover the entire gross tax liability for the year, then the same can be discharged by the individual themselves before the tax return is filed. Such tax paid would be regarded as Self Assessment Tax.
In pursuit of promoting ease of compliance, the interchangeability of Permanent Account Number (PAN) and Aadhaar has been permitted for filing of income tax returns and mandatory quoting in prescribed transactions with effect from 1 September 2019.
Currently, it is mandatory for an individual to obtain an Aadhaar number (unique identification number) and link the same with their PAN (Indian tax registration number) of the individual. It is mandatory to quote the said Aadhaar number in the tax return, or the enrollment ID of the Aadhaar application is required to be quoted on the income tax return.
The requirement of linking of PAN and Aadhar needs to be carried out to avoid inactivation of PAN. A penalty of INR 10,000 is levied in case of non-compliance with provisions of quoting of PAN/ Aadhar.
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