Section 266 of the Income-tax Act, 2025 — Self-Assessment Tax (Successor to Section 140A)

In plain language

What Section 266 says in plain English

Section 266 of the Income-tax Act, 2025 is the "self-assessment" provision — you must calculate and pay your own tax before you file your return. It is the direct successor to the well-known Section 140A of the Income-tax Act, 1961, and it carries the same core rule into the new law that takes effect from 1 April 2026. In simple words: the Income-tax Department does not send you a bill first. You work out what you owe, pay it, and only then submit your Income Tax Return (ITR) with proof of payment.

• Pay before you file. Any tax due on the basis of your return must be paid, along with any interest and any late-filing fee, before the return is furnished.
• Attach proof. The return must be accompanied by proof of payment (in practice, the challan / BSR code and challan serial number entered in the ITR).
• Self-assessment tax is simply the balance that remains after you subtract everything already paid or credited to you.

Who does Section 266 apply to?

It applies to every assessee who has a balance of tax payable on the return. That includes salaried individuals, business owners, professionals, firms, LLPs, companies, HUFs and trusts. It is triggered whenever a return is required to be furnished under:

• Section 263 — the ordinary return of income (the equivalent of old Section 139).
• Section 268 — a return filed in response to a notice from the Assessing Officer.
• Section 280 — a return called for before completing an assessment.
• Section 294 — returns connected with reassessment / income escaping assessment.

How the self-assessment amount is worked out

Section 266(2) tells you what to subtract from your gross tax liability. You start with the total tax and interest due on your declared income, then reduce it by amounts already discharged:

• Advance tax already paid during the year;
• TDS and TCS — tax deducted or collected at source on your income;
• Relief under Section 157 (relief for salary arrears / advance, the old Section 89);
• Foreign tax relief under Sections 159 and 160 — double-taxation relief where a treaty exists (Section 159(1)) or unilateral relief for specified territories / no-treaty cases (Section 159(2) and 160);
• Tax credit such as MAT/AMT credit and other credits allowed under Section 206; and
• Any tax or interest payable under Section 391(2) in specified situations.

Whatever is left after all these deductions — plus interest under Sections 423/424/425 and any fee — is your self-assessment tax, and that is what you must deposit before filing.

The order in which a short payment is adjusted

Section 266(3) sets a strict waterfall. If you pay less than the full amount due, the money is applied first to the fee, then to the interest, and only the balance to the tax. This matters because it means an underpayment can leave tax outstanding even when you thought you had "paid the tax", which in turn keeps interest running.

Interest that gets added

• Section 423 (old 234A) — 1% per month for late filing of the return. Importantly, if you pay your self-assessment tax on or before the due date, Section 423 interest generally does not bite even if you file a little late.
• Section 424 (old 234B) — 1% per month where advance tax paid is less than 90% of the assessed tax.
• Section 425 (old 234C) — 1% per month for deferment / shortfall in advance-tax instalments.

What happens if you do not pay — "assessee in default"

Section 266 states that if you fail to pay the whole or part of the self-assessment tax, interest or fee, you are treated as an "assessee in default" for the unpaid amount, and all the recovery and penalty machinery of the Act applies. This is "without prejudice to any other consequences" — meaning penalties (e.g., under the penalty provisions for default in payment) can follow on top.

Credit at final assessment

Section 266 also protects you: any self-assessment tax you pay is deemed to have been paid towards your regular assessment once it is completed under Sections 270/271 (or a Section 294 assessment). So you never lose credit for money already deposited — it simply gets adjusted against the final computed liability.

Practical implications for taxpayers

• Compute tax including cess and surcharge before generating the challan; a small under-deposit can trigger a defective-return notice or fresh demand.
• Pay through the e-Pay Tax facility (challan for self-assessment tax) and copy the details into the ITR.
• Paying self-assessment tax by the due date is the single best way to stop Section 423 interest from accruing.
• Reconcile TDS/TCS with your Annual Information Statement (AIS) and Form 26AS before claiming credit under sub-section (2).