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| Don't forget income from other sources |
| Neha Pandey / Mumbai Jul 30, 2010, 00:51 IST |
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By submitting her investment declarations by June 2009 to her employer, Shweta Jaiswal thought she had done her bit. Later, she realised she had an additional tax liability of Rs 30,000 on her other income. “On self-assessment, I came to know that I had to pay a tax on the interest earned on my bank account balance,” said Jaiswal.
Many like Jaiswal think ‘income from other sources’ is either extra earnings or a windfall due to gains from a lottery. But the interest income on your savings account balance, and even the refund amount from the Income Tax (I-T) Department, comes under the same head.
For individuals, this amount needs to be added to their salary and taxed according to the income tax slab. All tax liabilities of over Rs 10,000 have to be disclosed. In case this is not done, one can go for self-assessment. But this would require payment of advance tax.
In the case of Jaiswal, the outstanding amount will be called ‘self-assessment tax liability’. She could either pay the lump sum amount or pay in instalments. Self-assessment taxes can be paid in instalments of 30 per cent, 30 per cent and 40 per cent. The dates: September 15, December 15 and March 15, respectively. Both lump sum or payment through instalments will attract an interest on the tax liability.
This translates into a payment of Rs 9,000 in September, Rs 9,000 in December and the rest Rs 12,000 by March. There will also be an interest of one per cent per month and three per cent for each deferred payment. The sections under which she will be charged are 234B and 234C of the I-T Act.
“According to Section 234B, if you do not pay 90 per cent of your advance tax in a financial year, you are considered a defaulter,” said Homi Mistry, tax partner, Deloitte, Haskins and Sells. And, according to Section 234C, if you do not pay advance tax instalments September 15, December 15 and March 15, you are charged for deferment of payment.
So, if Jaiswal pays the entire lump sum in one go, that is, Rs 30,000 before July 31, she will be charged an interest of one per cent per month starting April 1, 2010 (for four months), as late payment charges. Another three per cent will be imputed for deferring payment instalments since September 2009. As a result, she will pay Rs 31,218 for default and another Rs 900 for deferring payments in 2009. The total comes to Rs 32,181 — an extra Rs 2,181.
If she opts to pay in instalments – 30 per cent, 30 per cent and 40 per cent – in September, December and March, there will be an additional one per cent per month on the first instalment since April 1 to September 15. Again, there will be one per cent per month on the second instalment — from September to December 15. The same will apply for the last payment in March. In addition, there will be a three per cent charge on the entire outstanding of Rs 30,000, which can be paid with any of the instalments.
Typically, one is supposed to pay 90 per cent of the advance tax on self-assessment till March 15 of that financial year. If this is not done, one is charged for deferring the payment and has to pay one per cent tax for the 15-day delay (March 15-31).
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