In India, tax collection is one of the most important and difficult tasks that is carried out by the Income Tax Department in India. In fact, among developing countries, India has one of the lowest rates of tax collection in the world and there is scope for a lot of improvement in terms of tax collection and to facilitate this, various measures are taken including Challan 280 to help improve tax collection.
Looking at our statistics, the current situation looks quite bleak. India's tax-to-GDP ratio is only 16.6%, much below the applicable rate for the average emerging market economy, which usually average around 21%. This rate is lower than even half of the average ratio for OECD (Organization for Economic Co-operation and Development) nations which is currently have an average tax to GDP ratio of 34%. While one of the key factor behind this apparently dismal performance in India is the exclusion of a wide base of the population from the taxation slabs through various exemptions, the other and more worrisome, is the less than responsible behavior of the eligible taxpayers.
Every citizen should remember that payment of correct and timely taxes is a very crucial element for a country’s progress. The money so collected by the government is used for development of infrastructure, education, health, defense and similar crucial sectors.
Sources of Tax Collection
There are three ways of tax collection:
- Payments made voluntarily by persons with the designated banks. For instance – Self-Assessment Tax and Advance Tax.
- Taxes deducted at source (TDS) on behalf of the taxpayer by the person making the payment to him/her.
Taxes collected at source (TCS) on behalf of the taxpayer at the time of incurring an expense.
Challan No./ITNS 280 is required to be filled out for Income Tax Payment. This is applicable for all types of income tax payments such as Self-Assessment Tax, Advance Tax, Regular assessment tax, surcharge, tax on distributed income or distributed profits.
Modes of Income Tax Payments
There are two ways through which income tax can be paid. One is through the online route i.e. logging to the website TIN NSDL Website and the other is depositing the same at any of the designated bank branch via cash, cheque or demand draft.
Irrespective of the mode of payment opted for by an individual, Challan No. /ITNS 280 needs to be filled in by the depositor.
Tax Information Network (TIN) is an initiative by the Income Tax Department of India (ITD) for the modernization of the current system for collection, processing, monitoring and accounting of direct taxes using information technology.
TIN is a repository of nationwide Tax related information, and has been established by the National Securities Depository Limited (NSDL) on behalf of the IT Department.
E-Payment enables payment of taxes by the taxpayers through the medium of internet. In order to benefit from this facility, the taxpayer needs to possess a banking account with online access features through any one of the authorized banks empanelled with the IT Department. The webpage for paying the TIN-based tax online is TIN NSDL webpage.
- The tax payer needs to visit the TIN NSDL website and open the link - https://onlineservices.tin.egov-nsdl.com/etaxnew/tdsnontds.jsp
- From the various challan options available, after logging into the TIN account, he/she needs to click on the Challan No. / ITNS 280 (Payment of Income Tax and Corporation Tax) mentioned under the sub heading “Non-TDS / TCS”
- Tax Applicable: The applicable tax amount can be levied on two types of income. If it is being levied on a company, then the first radio button i.e. (0020) Income Tax on companies (Corporation Tax) needs to be selected. In case the tax is being paid by any other assessee such as Partnership Firms, individuals, LLP, etc. then the second option (0021) Income Tax (other than companies) needs to be selected.
- The tax payer needs to provide the PAN details. It is imperative that the taxpayer checks this detail carefully as a wrong PAN input will lead to the tax being deposited against some other account. In case, the PAN as entered by the user is not available in the Income Tax Department’s database, then one cannot proceed with the payment of tax.
- Assessment Year: This refers to the year in which the assessee is paying the tax for the income that he/she would have earned in the previous financial year. Many times, taxpayers get confused with the terms – Financial Year and Assessment Year.
Simply put, financial year is that time period in which the income is earned and assessment year is the year after the end of the financial year and in which the tax needs to be paid. So, if the income was earned anytime between April 2015 and March 2016, then the financial year (FY) would be 2015-16 and Assessment Year (AY) would be 2016-17.
- Full Name: This field is not open for input by the taxpayer. It is displayed based on the PAN details entered earlier and as available in the database of the Income Tax Department.
- Address: There are certain fields pertaining to the address information of the assesse wherein filling out the information is voluntary such as Flat/Door/Block No., Name of premise/village/building, Road/Street/Lane, Area/ Locality. However, information on city, state and pin code needs to be mandatorily entered.
- Contact Details: Details such as Email ID and Mobile No., though not mandated by the IT Department, are useful fields and should be filled out. This enables the IT Department to get in touch with the taxpayer quickly, in case of any issues or queries.
Type of Payment: Here the taxpayer needs to select from one of the following options, depending on the nature of the tax.
- Advance Tax
- Self-Assessment Tax
- Tax on Distributed profits
- Tax on Distributed Income
- Tax on Regular Assessment
For instance, if the tax being deposited is for the same financial year, calculated on basis of the estimated income, the taxpayer should select the option for Advance Tax. While, if the tax is being deposited after the end of the financial year, when a demand has been raised by the IT Department, it would be tax on regular assessment.
- Bank Name: The assessee needs to select the name of the bank through which he/she wants to make the payment. The list of banks is shown via a dropdown menu and the taxpayer needs to select the applicable one from there.
- Amount of Tax to be paid: This information is not to be mentioned in Challan 280 and would need to be furnished in the bank’s website.
- Once all the mandatory fields have been properly completed, users need to click on the “Proceed” button given at the end of the page. This would lead to a verification page wherein all the details provided will be displayed once more for confirmation.
- If any changes need to be made, then they will need to use the “Edit” functionality.
- Once it has been confirmed that all details mentioned on the form are correct, the taxpayer can click on the “Submit to Bank” option which will in turn lead the user to the bank’s website.
- After logging into the bank’s website, the taxpayer would need to mention the amount of tax that needs to be paid as well as surcharge and education cess, if any.
- On submitting these details, the user can click on ‘Calculate Tax” button wherein the aggregate amount of tax (Inclusive of education cess, surcharge, penalty, etc.) is displayed.
- Post successful payment of the amount, a challan counterfoil is displayed on the screen to the taxpayer. This challan contains details like CIN (Challan Identification Number), amount paid in tax, date of payment, etc. It is a wise decision to save a copy of this acknowledgement receipt either by saving it digitally or preserving its printed copy. The CIN is an important detail as it can be used by the tax payer for any future correspondences with the IT Department as well as during Income Tax returns. However, there are times when the user fails to save a copy of this receipt or misplaces the same. In that case, most of the banks offer the facility of regenerating the Challan for the e-Payment of Direct Taxes through TIN-NSDL website.
The IT Department offers a facility to taxpayers wherein they can check and confirm the status of their challan as well as verify if the payment made by them (Using the online Challan No./ITNS 280) has reached the concerned authorities i.e. the IT Department.
Users can login to the NSDL website using the link - https://tin.tin.nsdl.com/oltas/servlet/QueryTaxpayer.
Here in the taxpayers can check the status of their challan via various options
- CIN Based View
On providing the details such as CIN (Challan Identification Number), BSR Code of Bank’s branch, challan tender date and challan serial number, the taxpayer can track online the status of their challans. If the user mentions the amount of tax paid, he/she will also get a confirmation if the amount entered is correct or not.
- TAN Based View
By providing the TAN details and the Challan Tender Date range within a particular financial year, the taxpayer can view the following details:
- Major Head Code with description
- Minor Head Code
- Nature of Payment
Also, if the tax payer provides the amount against a particular CIN, the system will also confirm whether it is the same as the amount uploaded by the bank.
However, users should keep in mind that it takes couple of days for the payment to be reflected on this link.
If the taxpayer encounters any issues, he/she can reach out to:
- NSDL website while entering non-financial data then contact the TIN Call Center
- While entering the financial details at the net-banking webpage of your bank, then one should contact the concerned bank for assistance.
This system is extremely beneficial as the taxpayer is not required to personally visit the bank to make the payments. Also, the payment can be done electronically at one’s convenience- in terms of time as well as location. Lastly, as the taxpayer gets the Challan Identification Number (CIN) online immediately subsequent to the payment, he/she is able to track the online the status of the payment (whether it has been deposited correctly with the concerned authorities) and can also use the same while filing the income tax returns.
The government realizes the fact that internet penetration is not very high in our country. According to the industry reports, only one-third of the total population has access to the internet. The penetration is especially poor in our rural areas. Hence, only relying on online mechanisms, though more convenient, for both the taxpayers and the authorities, would marginalize a large section of our society.
Hence, the IT Department has retained the offline method of tax payments. Under this method, taxpayers need to download the Challan No. /ITNS 280 Form from the website of the Income Tax Department. They need to furnish the required details in the form (Similar to the online form) such as, PAN, the Assessment Year, residential address, contact details, e-mail ID etc. Along with the duly completed form, taxpayers need to take the amount of tax payable and physically go to any of the designated bank’s branch and make the payment towards income tax through cash, cheque or demand draft. The bank will issue a stamped counterfoil which will act as a proof of the payment made by the taxpayer.
Physical Forms or payments made through the offline mode usually work out a bit differently as compared to the online method, however,
As per the new Challan Correction Mechanism, the following fields in the tax payments, which have been made on or after 1st of September 2011, can be correctly updated by the concerned bank branch:
- Assessment Year
- Major and Minor Head Code
- Total Amount
- Nature of payment
The timelines for the correction request to be raised by the taxpayer is as mentioned below:
- TAN / PAN, Assessment Year and Amount: 7 Days from challan deposit date
- Other fields such as Major / Minor Head / Nature of Payment: Within 3 months from the challan deposit date.
The banks have a time frame of 7 days, from the date of receiving such correction requests from the taxpayer, to make these changes.
These changes in challan payment information can be made by the banks subject to the following guidelines:
- Any corrections or changes in “Name” is not allowed:
- Any combination of correction involving changes in “Minor Head” along with “Assessment Year” is not permitted.
- PAN/TAN correction is permitted only if the name as per the challan is same as the name mentioned in the new PAN/TAN.
- The change of amount will be allowed only when the amount corrected is same as the amount actually received by the bank and deposited with the government authorities.
- Correction is permitted only once for a particular challan. However, where the first request for correction is made only for the “amount” field, a subsequent request for correction will be permitted for updating in other permittable fields.
- Part acceptance of correction requests is not allowed.
- The taxpayer needs to submit in duplicate, the request form for correction to the concerned bank branch along with a copy of the original copy of the challan or counterfoil.
- A copy of the taxpayer’s PAN card also needs to be furnished.
- For correction requests made by taxpayers (except individuals), the request form needs to be accompanied with the original authorization containing the seal of the non-individual taxpayer.
Correction by Assessing Officers (Applicable for online as well as offline mode)
After the window for correction available with banks for challan correction has expired, the taxpayer can raise a request for correction to the concerned Assessing Officer. Taxpayers can get information about their assessment from the website of the Income Tax department by providing their respective PAN details. (https://incometaxindiaefiling.gov.in/e-Filing/Services/KnowYourJurisdictionLink.html)
Using information from Challan 280 for filing of returns
Report payment information
After one has made the tax payment using Challan 280, he/she needs to report this information on the Income Tax Return as well.
Changes introduced by the Government
The government, in order to simplify the process of tax payment and ensure a higher degree of convenience for the taxpayer, has made many changes in the process of payment as well as revised the challan forms to make the process even more streamlined.
With effect from 1st June, 2004 the IT Department has introduced a new system for which it is immensely beneficial to the common tax payer. Instead of the complicated four copy challan forms, the taxpayer was given only a single copy of the simplified Challan that needed to be filled out. This new and revised challan could be filled out much faster. Secondly, changes were introduced which made it possible to receive an acknowledgement for taxes paid through the banks immediately after the payment. Lastly, taxpayers were no longer required to attach copies/acknowledgment of challan while filing the returns. They could simply mention the CIN details in the income-tax return.