Understanding Income Tax rules and procedures, computation of tax liability and payment of the same have always been considered a difficult and complex topic. Traditionally, tax management involved a lot of paper work, documentation, form filling and assistance of an expert. Also, a lot of time and energy went into filling paper documents, collating them and then standing in a long queue to submit an Income Tax Return or a Challan for the tax payment.
However, tax management has undergone a sea change due to technology and digitization. Over the years, the government has been striving to develop the Income Tax Management System with the help of technology and has been fairly successful in streamlining the procedure – right from filing of returns to updating Assessment Orders online.
In order to digitalize the Income Tax payment procedures, the system of electronic payment of tax (e-Tax) has been developed and is being successfully implemented. e-Tax has now become an easy, speedy and a preferred way of tax payment.
Income Tax Management has moved to digital platform on the following fronts:
- E-Filing of Income Tax Return: E-filing has been made mandatory for most tax payers. This has facilitated speedy filing of Income Tax Returns and completion of assessments. This has also resulted in faster refund processing.
- Online Payment of Taxes or e-Tax:The government has developed an online platform for the payment of Income Tax. This new system intends to replace the old system of filing hard copy of Income Tax Challans, submitting the same to banks and then receiving the acknowledgment of the same. The platform enables easy payment of Income Tax and Tax Deducted at Source (TDS) by all tax payers through net banking facility.
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e-Tax login Portal
For online payment of tax, a taxpayer needs to visit the portal of the Income Tax department at https://onlineservices.tin.egov-nsdl.com/etaxnew/tdsnontds.jsp. Also, to avail the facility of online payment of tax, a taxpayer should be using the net-banking service of authorized banks.
e-Tax Online Payment Process
E-payment of tax can be done from any location and any time. Under this method, the tax payer not only instantly pays the amount through the bank account, but also receives the receipt instantly. Below are the steps to be followed for the online payment of tax:
Step-1: To pay taxes online, login to https://onlineservices.tin.egov-nsdl.com/etaxnew/tdsnontds.jsp
Step-2: Select the relevant challan – ITNS 280, ITNS 281, ITNS 282, ITNS 283, ITNS 284 or Form 26 QB demand payment (only for TDS on sale of property), as applicable.
Step-3: Enter PAN/TAN (as applicable) and other mandatory challan details like accounting head under which payment is made, address of the tax payer and the bank through which the payment is to be made, etc.
Step-4: On submission of the data, a confirmation screen will be displayed. If PAN/TAN is valid as per the ITD PAN/TAN master, the full name of the taxpayer as per the master will be displayed on the confirmation screen.
Step-5: On confirmation of the data so entered, the taxpayer will be directed to the net-banking page of the bank.
Step-6: After the login to the net-banking site with the user id/password provided by the bank, enter the payment details.
Step-7: On successful payment, a challan counterfoil will be displayed, containing CIN, payment details and the name of the bank through which e-payment has been made. This counterfoil is the proof of the payment made.
How does e-Tax work
The payment of e-Tax is facilitated by the Tax Information Network (TIN) of the Income Tax department and managed by NSDL (National Securities Depository limited e-Governance Infrastructure limited).
Tax Information Network (TIN) of the Income Tax department is the portal that provides online facilities for all tax-related issues and the same are elaborated below:
- Permanent Account Number (PAN): PAN is a unique 10 digit alpha numeric number. Every person assessable under the Income Tax Act needs to obtain a PAN, which needs to be quoted in all forms, challans and communications with the Income Tax department. PAN is also the login of the assessee to the Income Tax return filing website. All information related to the tax paid, return filed, assessment of return etc. are linked to the PAN. The TIN of the Income Tax department provides online application for a PAN, reprinting of the PAN or applying for any amendments to the PAN.
- Tax Deduction and Collection Account Number (TAN):The assessor, be it corporate or non-corporate, who gets income from a business and makes payments in the form of salary, professional or technical charges, needs to deduct Tax at Source (as prescribed by the Income Tax Act) before making the payments. The amount deducted needs to be deposited with the Income Tax department. Any person making such deductions needs to obtain a TAN, which is a unique identification number. The application for obtaining a TAN is submitted on the TIN of the Income Tax department.
- E-payment of Taxes:The TIN of the Income Tax department is the key facilitator for online payment of taxes. E-Payment System is the online service provided for payment of direct taxes by the tax payers. The facility is available to all assessees having a valid PAN/TAN and a net banking facility. The challans are provided online, which need to be filled. Post the payment of taxes, acknowledgement is received instantly.
- Electronic Return Acceptance and Consolidation system: (ERACS):It is a web-based interface between the tax payer and the Income Tax department. It enables payment tax deducted/collected at source and filing for quarterly and annual return for the same (AIR- Annual Information Return).
- Online Tax Accounting System (OLTAS):Income Tax department maintains a database of tax paid by all tax payers. OLTAS helps in centralizing the information of tax collected through various branches across of the country.
Thus, ‘e-tax’ falls under the purview of TIN. the introduction of e-tax has reduced the amount of paper work and time involved in the tax payment procedure. The tax payer can pay all the taxes, be it Income Tax, Wealth Tax or the Tax deducted at Source, by choosing the right challan available under ‘e-payment’ option in the ‘Services’ TAB of the website. E-Payment System is the online service provided for payment of direct taxes by the tax payers.
Currently, online payment is promoted by 30 authorized banks, including public sector banks like State Bank of India and its associates as well as private sector banks like ICICI and HDFC.
How to choose the right challan for Income Tax payment
The next step is to select the appropriate challan for the payment of tax. The information below would help you select the right challan:
Payment of Income Tax: This is the most relevant challan used by tax payers. In case of salaried individuals, the tax is deducted at source by the employer, but self-employed individuals have to pay their own taxes. Further, any tax on income from fixed deposit and house property needs to be paid over and above the tax deducted at source. Also, the Income Tax Act provides for the payment of Advance Tax during the year.
Who pays tax?
Any individual or corporate whose income is subject to tax under the Income Tax Act.
Pre-requisite for payment of Income Tax
The tax payer needs to have a PAN and a net banking account. He needs to compute his tax liability under the Act and then make the payment under the appropriate category (Self-Assessment Tax, Advance Tax, etc.)
Procedure to pay Income Tax
Challan No./ITNS 280 is used for payment of Income Tax by both Companies and Individuals. The tax payer has to click on the challan and fill in the relevant information as follows:
- Choose the kind of entity paying that tax – whether the Income Tax has been paid by companies or an individual/entity.
- Enter the Permanent Account Number of the tax payer.
- Enter the Assessment Year. For Financial Year 2016-2017, Assessment Year will be 2017-18.
- Enter other information like address, email ID and mobile number.
- The tax payer then needs to select the Type of Income Tax he/she intends to pay like Self-Assessment Tax, Advance Tax, Tax on regular assessment, etc.
- The name of the assessee, as per the Income Tax database, is displayed and the tax payer needs to confirm the same before making the payment. It is therefore, necessary to enter the PAN accurately and double check the same.
- The tax payer then selects the bank through which he/she would make the payment.
- On selecting the payment option, the tax payer is guided to the bank portal to login to his/her net banking account. Enter the amount and confirm the payment.
- The tax payer can enter the amount payable under various heads like basic tax, surcharge, penalty etc. through the bank site.
On confirming the payment, the bank would debit your account. A Challan Identification Number (CIN) is generated that mentions the date and challan no. The amount paid by the assessee to the Income Tax department is updated in the Income Tax department’s database and the credit for the same is reflected in the tax payer’s Form 26AS. Form 26AS is a form in which the total tax credited to the tax payer’s account is reflected. There is generally a week’s time lag between the date when the payment is made and the date on which it is gets reflected in 26AS.
Thus, the portal is user-friendly and the payment can be made anytime through your net banking access.
Payment of taxes other than Income Tax: Income Tax is paid via challan No. /ITNS 280, while Challan No. /ITNS 282 is used for the payment of securities transaction tax, wealth tax, gift tax, commodities transaction tax, etc. The procedure for filling the challan and making the payment is similar to that of the payment of income tax. The pre-requisite of holding a PAN and net banking account exists.
Payment of Tax Deducted at Source: Section 192 of the Income Tax Act provides deduction of tax from source on payment of salary or wages. In case of salary, the tax is deducted at source by the employer, whether corporate or an individual. The Income Tax Act further provides deduction of tax at source on other payments like contractors, rent, interest earned on fixed deposits, professional technical services, royalty charges etc.
Who needs to deduct tax at source?
As per the Income Tax Act, all companies and non-corporate individuals carrying out business/profession (which are subject to audit under section 44AB) need to deduct TDS as prescribed under the Act. The person who deducts tax is called the deductor and the person to whom payment is made post deduction of tax is the deductee.
What is to be done with the tax deducted?
The deducted taxes need to be paid by the deductor to the Income Tax department before the 7th day of the subsequent month in which the tax is deducted.
Pre-requisite for payment of Tax Deducted/ Collected at Source
Following are the pre-conditions before payment of TDS :
- The person deducting the tax should have a valid 10 digit TAN.
- Before filling the challan, it is important to compute the amount of TDS payable under various heads like salary, rent, professional services, contract, etc.
- A separate challan has to be filled for Tax Deducted at Source under each category.
Also, separate challans need to be filled for tax deducted at source against payment made to companies and tax deducted at source for payment made to non-corporate.
Procedure for payment of TDS
Challan No. / ITNS 281 is to be filled by the deductor. The deductor can either be a corporate or a non-corporate. The deductor needs to fill in the following details in the challan:
- Choose whether tax deducted/collected at Source is for a company or non-company. This means that the tax deducted on payment to companies and non-companies needs to be paid separately by the deductor.
- TAN of the tax deductor.
- Enter the Assessment and Financial year in which the TDS is deducted. The Assessment Year for Financial Year 2016-2017 will be 2017-18.
- Enter other basic information like the address, email ID and mobile number.
- Tax deductor needs to select the type of payment – whether TDS/TCS is payable by tax- payer or is being paid after a regular assessment by the Income Tax department
- Tax deductor then needs to select the ‘nature of payment,’ when the deductor wil select the head under which the tax is deducted – whether the tax is deducted on the payment of salary (92), rent (94I), payment of interest on securities (193) or payment of profession fees (94J). Each type of payment is given a specified code along with a description. The tax deductor needs to select an appropriate nature of payment under which the tax is deducted. Please note that the deductor has to submit different challans for different ‘nature of payments’.
- The name of the assesse as per the Income Tax database is displayed and the tax payer needs to confirm the same before making the payment. It is therefore necessary to enter the TAN accurately and double check the same.
- The tax deductor then selects the bank through which he would make the payment.
- On selecting the payment option, the tax payer is taken to the bank portal where he/she needs to login through his/her net banking login and password, enter the amount and confirm the payment.
- Provision to enter the amount under various heads like basic, surcharge, penalty, interest, etc. is provided on the site of the bank.
On confirmation of the payment, the amount is deducted from the tax deductors’ account and a challan specifying the TAN, Challan Identification Number (CIN), the date of payment, amount and nature of payment is reflected.
The amount paid by the deductor gets updated in the Income Tax database. The amount is then credited to the deductee’s account and appears as a credit in Form 26AS. After a quarterly TDS return, the credit to the deductee is filed by the deductor specifying individual names, PAN and the deducted amount.
Payment of TDS by individual buying a property but not having a TAN: As per the Income Tax Act, section 194AI, any person/entity who buys an immovable property worth Rs. 50 lacs and above needs to deduct tax at source @1% before making the payment to the seller.
The tax deducted is deposited to the Income Tax department within 7 days from the end of the month in which tax is deducted. The buyer needs to submit Form 26QB and pay the tax amount.
Procedure for filling form 26QB
The form is available in the e-payment section of TIN of the Income Tax department.
The form can be filled online and the following details need to be mentioned:
- Financial Year and Assessment Year of transaction.
- Type of payment. In this case, it is TDS on Sale of property.
- Status of the Seller – whether the seller is a ‘Resident’ or Non-Resident.’
- PAN of the buyer. Once the PAN is entered, the category of transferor (individual, corporate etc.) is auto reflected along with name as per the database of the Income Tax department. Similar details of the transferee that is the seller are entered and name has to be confirmed.
- Other details like address, email and mobile.
- The details of property bought like address.
- Date of agreement, total value of consideration, payment type (Complete or Instalment based)
- Details of amount to be paid/credited along with TDS amount and date of tax deduction.
- For online payment, the buyer needs to select the e-tax payment as the mode of payment and select the bank through which he/she intends to make the payment.
Thus, the buyer can make payment of TDS online and receive a copy of 26QB and issue a Form 16B to the seller of the property, confirming the credit of tax to the seller’s account.
E-payment options are also available for payment of taxes under the Income Declaration Scheme of the Government of India Challan No. / ITNS 281. Thus, the e-payment of Income Tax and Tax Deducted at Source has enabled paper less management of tax payments, accessibility and easier maintenance of tax data by the Income Tax Department as well as the tax payer.