- E-Filing of Income Tax Return: E-filing has been made mandatory for most tax payers. This has facilitated speedy filing of Income Tax Return and completion of assessments. This has also resulted in faster refund processing.
- Online Payment of taxes or eTax: 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 bank and then receiving the acknowledgement of the same. The platform enables easy payment of Income Tax and TDS by all tax payers with net banking facility.
What is e-Tax Payment System?
Understanding Income Tax rules, procedures, computation of tax liability and payment of same has 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 is involved in filing hard documents, collating them and then standing in a long queue to submit an Income Tax Return or a Challan of payment of tax.
However, with technology and digitization, tax management has transformed. The government over the years has taken efforts 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 line with the efforts to digitalize the Income Tax Procedures, eTax or electronic payment of tax has been developed and successfully implemented. eTax has now become an easy, speedy and a preferred way of payment of all taxes.
Income Tax Management has been moved to digital platform on the following fronts:
How Does e-Tax Works?
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 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 assesse to the Income Tax return filing website. All information related to tax paid, return filed, assessment of return etc. are linked to the PAN. Tax Information Network (TIN) of the Income Tax department is the portal offers 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 assesses, be it corporate or non-corporate, who have business income and make payments in the form of salary, professional or technical charges need 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. Tax Information Network of the Income Tax department is the portal for submission of application for obtaining a TAN.
- E-payment of Taxes: Tax Information Network of the Income Tax department is the key facilitator for payment of taxes online. E-Payment System is the online service provided for payment of direct taxes by the tax payers. The facility is available to all assesses having a valid PAN/TAN and a net banking facility. The challans are provided online, which need to be filled. Post which payment of taxes is made and 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. 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 which is 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, there are 30 authorized banks which include Public sector banks like State Bank of India and its associates as well as Private Sector Banks like ICICI and HDFC Bank.
How to Choose the Right Challan for Income Tax Payment?
The next step is to select the appropriate challan for 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. While in case of salaried individuals, the tax is deducted at source by the employer, self-employed individuals have to pay their own taxes. Further, any tax on income from fixed deposit, house property needs to be paid over and above the tax deducted at source. Also, the Income tax Act provides for payment of Advance tax during the year.
Who pays the 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 the 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. That is 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. Assessment Year for Financial Year 2016-2017 would be 2017-18.
- Other Information like address, email ID and mobile number needs to be entered.
- 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 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 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 taken 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 which basically mentions the date and challan no.
The amount paid by the assesse 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 on which payment is paid 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: While Income Tax is paid via challan No. /ITNS 280, Challan No. /ITNS 282 is used for the payment of securities transaction tax, wealth tax, gift tax, commodities transaction tax, etc. The procedure for filing the challan and making the payment is similar to that of 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. 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 filing 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 an 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. 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’. Under ‘nature of payment, the deductor needs to select the head under which tax is deducted. That is 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 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 thru 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 to 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 bank’s site.
On confirmation of 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 TD 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 so deduct 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 Filing 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 Installment based)
- Details of amount to be paid/credited along with TDS amount and date of tax deduction.
- For making payment online, 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, speedy credit of tax to the payers account, accessibility and easier maintenance of tax data by the Income Tax Department as well as the tax payer.