Section 266 — Self-assessment. Successor to s.140A of the 1961 Act.
Section 266 is in Chapter XV — Return of Income, which runs from section 262 to section 267.
Sub-section (1) requires that where tax is payable on the basis of a return due under section 263, 268, 280 or 294, after taking credit for the amounts in sub-section (2), the assessee must pay that tax together with any interest and fee for delay in furnishing the return or default or delay in advance tax before furnishing the return, and must accompany the return with proof of payment. Sub-section (2) lists the credits: tax already paid, tax deducted or collected at source, relief under section 157, relief or deduction under section 159(1) or 160 for foreign tax, relief under section 159(2) for tax paid in a specified territory, tax credit set off under section 206, and tax or interest payable under section 391(2). Sub-section (3) fixes the order of appropriation where the payment falls short — fee first, then interest, then tax. Sub-sections (4) to (6) prescribe the base on which interest under section 423 and section 424 is computed and define "assessed tax" for the latter. Sub-section (7) treats the self-assessment payment as paid towards the regular assessment under section 270 or 271 or the assessment under section 294 once made. Sub-sections (8) and (9) make an assessee who fails to pay an assessee in default for the unpaid tax, interest or fee, without prejudice to any other consequence.
It makes payment a precondition of filing rather than a consequence of assessment, so tax on a self-declared income is collected before the return is accepted. The appropriation rule and the default provision give the Department a fixed way of applying part payments and an immediate recovery hook for the balance.
| What | Figure | The condition on it | Where |
|---|---|---|---|
| Order in which a short payment is appropriated | Fee, then interest, then tax | Applies where the amount paid under sub-section (1) falls short of the aggregate of tax, interest and fee payable | Sub-section (3) |
Pay before you file, and file the proof with the return — sub-section (1) makes both parts of the obligation, so a return filed without payment does not discharge it. If you pay less than the full amount, you do not get to choose what it settles: sub-section (3) applies it to the fee first, then interest, and only the balance to tax, which leaves tax outstanding and interest continuing to run. The interest computations in sub-sections (4) to (6) each work off a different base, and the credits allowed differ between them, so the section 423 figure and the section 424 figure are not computed on the same amount. Any unpaid tax, interest or fee makes you an assessee in default with all the Act's recovery provisions available.
An individual's return under section 263 shows tax of Rs. 12 lakh on the total income declared, against Rs. 8 lakh of tax deducted at source, so Rs. 4 lakh is payable, together with Rs. 30,000 of interest and a Rs. 5,000 fee for delay in furnishing the return. All of it must be paid before the return is furnished, and proof of payment must accompany it under sub-section (1)(b). If he pays only Rs. 2 lakh, sub-section (3) appropriates it first to the Rs. 5,000 fee and then to the Rs. 30,000 interest, leaving Rs. 1,65,000 against tax — so Rs. 2,35,000 of tax stays unpaid and sub-section (8) makes him an assessee in default for it, whatever order he intended his payment to be applied in.
At the moment of filing: the tax, interest and fee must be paid before the return under section 263, 268, 280 or 294 is furnished, and proof of payment must accompany the return. You meet it again in a notice treating you as an assessee in default under sub-section (8) for whatever is left unpaid.
the assessee shall be liable to pay such tax together with interest and fee payable under any provision of this Act for any delay in furnishing the return or any default or delay in payment of advance tax, before furnishing the return
See the full 1961 to 2025 concordance.
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